Earnings of Steel Industry Improve in Last Fiscal Year, Demand Stagnates This Year

While the majority of Nepal's 16 steel companies saw an increase in operating income in the last fiscal year (FY 2024/25), industry insiders report that demand has stagnated in the current fiscal year. According to credit rating reports published for banking purposes, 13 companies recorded growth in operating revenue. Total operating income rose by 6.65 percent year-on-year to Rs 66.37 billion in the review year.

Data released by Care Ratings, ICRA Nepal, and Infomerics show that despite improvements at most firms, Premier Steel, Mainawati Steel, and Bhagawati Steel experienced a drop in operating income. In the last fiscal year, Hulas Steel Industries, Jay Ambe Steels Pvt Ltd, and Sarvottam Steels Pvt Ltd were the top performers in terms of operating income from sales of TMT bars and iron rods.

Although Hulas Steel Industries posted the highest operating income among its peers, its growth rate was not substantial. According to an ICRA Nepal rating report, the company generated Rs 12.73 billion in operating income in FY 2024/25—a marginal increase of just Rs 20 million from the previous fiscal year's Rs 12.71 billion. Established in 1981, Hulas Steel Industries is one of the country's oldest steel manufacturers.

Read: Why is the Revenue of Steel and Iron Rod Manufacturers Declining?

Recovery After Decline: Some Firms Bounce Back

Some companies that had experienced a decline in income in previous years showed improvement in the last fiscal year. Goenka Steels is one such example. After seeing its operating income fall from Rs 2.26 billion in FY 2022/23 to Rs 790 million in FY 2023/24, the company's revenue rebounded to Rs 1.17 billion in FY 2024/25.

 

Ashok Steel Industries also recorded significant growth in operating income. According to its credit rating report, the company's income increased by Rs 760 million in FY 2024/25. Binaya Jha, the company's general manager, stated, "Sales have increased slightly compared to last year, but production has remained stable." Established in Gadhimai, Bara in 1984, the company manufactures TMT bars and other steel products.

Operating income of Narayani Steels Pvt Ltd, which is backed by the Keyal Group, also rose. The company reported operating income of Rs 2.58 billion in FY 2024/25, up from Rs 1.98 billion in the previous year. "Steel sales have not fluctuated, but there has also been no increase in demand," said Rajesh Keyal, a director at Narayani Steels. "Turnover was similar to last year, and the situation now is almost the same." According to Keyal, the industry is not operating at full capacity. "Our steel plant is only utilizing 60 percent of its capacity," he said.

Demand Stagnant in Current Fiscal Year

Steel entrepreneurs report that despite the improvement seen last fiscal year, the market situation in the current fiscal year (FY 2025/26) is different. According to them, reduced government capital expenditure has slowed construction activities. The Gen-Z agitation on September 8 and 9, subsequent political instability, and the election atmosphere have prevented market demand from picking up.

Data from the Financial Comptroller General Office shows that by February 23 of the current fiscal year, capital expenditure stood at Rs 68.29 billion, compared to Rs 72.50 billion during the same period last year.

Other steel manufacturers also note that the slowdown in the construction sector has impacted production and sales. "From Dasain until the elections [to be held on March 5], there have hardly been any construction activities," said Ujjwal Kumar Shrestha, Executive Director of Panchakanya Group. "Due to the prevailing uncertainty, industries are operating at less than 50 percent capacity. We had anticipated an increase in steel demand this fiscal year, but it hasn't materialized."

Post-Election Expectations

Entrepreneurs hope that if political stability follows the elections, the construction sector will gain momentum, subsequently boosting demand and sales for the steel industry. However, for now, industries remain limited to operating at 50-60 percent capacity. While the financial improvements of the last fiscal year provided some relief, industry leaders state that genuine recovery hinges on the government's capital expenditure and a revival of construction activities.