Tata Steel‘s robust profitability in its India operations will help it pursue its growth ambitions even as elevated imports from China are putting pressure on local steel prices, company MD TV Narendran told Nikita Periwal and Anirban Chowdhury in an interview. He said the company plans capacity expansion at Neelachal Ispat to increase long products in its portfolio. Edited excerpts:
What is your assessment of the December quarter given that China has been dumping steel in the country?
In India, we had a strong quarter operationally with a good production run and usage of leaner coals. While steel prices did not go up as much as we had expected, the rise in coal prices was lower, so that was beneficial. We did see some inventory build-up towards the end of December, so domestic sales are likely to be 400,000 tonnes higher in Q4 as compared to Q3.While Europe has been a challenge, the worst is behind us in the Netherlands. We are starting a second blast furnace next week (there) after having operated with one for most of the year. The Netherlands has been Ebitda and cash positive, and will be back in that territory next year. The UK continues to be a challenge, but we do see spreads in Europe improving. Steel prices in Europe have been going up because of the problems in and around the Red Sea and Suez Canal.
How will the surge in imports impact profitability and cash flows when you have a major ongoing capital expenditure?
We have a 20-24% Ebitda margin for our operations in India, and at that level, we are generating enough cash flow to take care of our growth ambition. The concern, though, is that if China continues to export 90 million tonnes like they did last year, it will pressurise international steel prices, and also put a cap on prices in India. While we will be conscious of our balance sheet, as long as the demand in India is growing and our margins are at this level, we can grow.
Once the capex in Kalinganagar is completed, where will funds be allocated in FY25?
Focus over the next 12 months will be to complete and commission the Kalinganagar project, apart from the various sustenance projects. For FY25, we see 700,000 tonnes of additional volumes from the phase-2 expansion of Kalinganagar, with the full benefit coming in from FY26.The big project after this is likely to be Neelachal Ispat and we will be going to the board with a detailed proposal in the next six months. We are also looking at increasing capacity at Meramandali to 6.5 million tonnes from 5 MT and Kalinganagar to 13 MT from 8 MT, but Neelachal will see the first movement.