Tata Steel Sees Lower China Exports, Higher Prices

Tata Steel Ltd., India’s second-largest steel producer, is upbeat on prices as Chinese steel exports decline.

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Tata Steel Ltd., India’s second-largest steel producer, is upbeat on prices as Chinese steel exports decline. 

Chief Executive Officer TV Narendran spoke to Bloomberg News in an interview on the sidelines of the B20 Summit in New Delhi.

  • Demand in India remains strong, though Europe will take until next year to pick up, Narendran said.
  • He expects a decision from the UK government ‘in weeks’ on a proposal to fund the transition to greener steel production.
  • The shift to green steel in India will happen only after 2030, he said.
  • Tata Steel intends to resume trimming debt by a billion dollars this year.

The excerpts below are lightly edited for clarity:

Demand outlook?

Consumption in India is strong. Construction is going on though there was some flood-related disruption, auto sector demand is very strong. Most sectors are going to catch up with 2019 numbers which is great.

China has been a bit disappointing. Post the removal of restrictions all of us expected it to bounce back. So did the Chinese steel industry. They started producing more but the recovery didn’t happen. So China was exporting more than they did for the last few years and that was causing some pressure on steel prices internationally. But I think the worst is behind us. Chinese exports have started dropping a bit, so international prices are stabilizing a bit. That is also reflected in coal prices going up a bit.

If you look at Europe, the auto sector is still doing quite okay. Construction activity hasn’t really picked up much. I do see a challenge in Europe for at least this calendar year. The positive thing is last year we were hurt very badly by high gas prices, high electricity prices. All that is coming back to long term levels. So on the cost side we are not under the kind of pressures we were last year. On the demand side, I expect things to get better by next year.

Green steel

We are making good progress (on talks with the UK government toward support for the production of greener steel). Hopefully will find a solution sooner than later. I don’t want to talk specific numbers. Hopefully there will be a decision soon. Hopefully in weeks.

READ: Tata Steel’s Profit Drops 92% on Weak Europe Unit, Pension (1)

There are two aspects to our capacity growth from 20 mtpa to 40 mtpa. Part of it is coming through the recycling route. We’ve already set up scrap recycling facilities; Ludhiana will be a 0.8 million tonne facility. If that model works we will replicate it over the next few years. 

But the big chunk of the growth is still going to come through the blast furnace route because in eastern India we don’t have gas yet. If there was gas available at a price at which is economical and in volumes that helps us, we would have invested in gas-based DRI and steel making would have been greener.

There is movement but I don’t expect investments to be made on the gas-based production route till 2030.

READ: Tata Steel Says It Won’t Reach Emissions Goal With Current Tech

Plan to cut debt

Net debt went up (to about 710 billion rupees or $8.6 billion from a recent low of 500 billion rupees) for two reasons. We acquired Neelachal Ispat Nigam Ltd. last year — that was about 120 billion rupees. Then last year when the coal prices went up the working capital went up very significantly. Now coal prices are settling to longer term levels and the Neelachal has started producing steel. It’s Ebidta positive, that will help reduce the debt.

The ambition for this year is to bring debt down by at least a billion dollars. We are back on that progression for this year.

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