Posted on 29 Nov 2024
Steel companies have been under pressure due to steep fall in prices and slowing demand. The development comes when imports have been increasing steadily eating into Indian companies’ market share and putting pressure on prices. TV Narendran, Managing Director & CEO, Tata Steel spoke to businessline on future ahead. Excerpts from the interview:
The demand has been quite strong and continues to grow at 8-9 per cent in line with expected GDP growth of 6.5-7 per cent. However, in the last few months there has been a little bit of slowdown in the automobile sector, though motorcycles is still quite strong and this means the rural economy has come back.
Construction activity was weaker than we thought for the last six months though it was due to monsoon in last three months. The Government had also spent less. We are expecting demand to pick up in second half of the year. Government spending is also expected to pick up.
Construction and auto account for 75 per cent of our demand. Demand is less of an issue. I am more concerned about China imports into India and steel prices which impact margins. Margin compression is more of a worry than demand.
Honestly, China does not export much steel to the US. However, China has trade surplus and exports a lot of stuff to the US. So, there will obviously be higher tariffs on many of those items, which will have an impact on the Chinese economy. China has already announced stimulus few weeks back to protect itself. Some more is expected to be announced shortly.
China is also selling more to other geographies than it does to the US for spreading its risk. The other indirect point where it can impact us is if Europe tries to insulate itself from the US risk by building its own capabilities and spending more on defence. If the Ukraine war ends in the next few months, then it will trigger reconstruction in Europe.
Why the Government hesitant on imposing duty on steel import?
It is under active consideration. Meanwhile, there are reports that some of the South-East Asian countries are investigating imports coming from India. This needs to be addressed immediately. Today, it is steel and it can be any other items tomorrow. China has excess capacity on everything. For instance, the concern in the US and Europe is on electrical vehicles. China was never an exporter of cars till maybe a couple of years back.
Today, China is exporting 5 million cars, which is more than what India produces. They export 100 million tonnes of steel, which is close to what India produces. So that is the extent of capacity in China. As a policy, we need to respond quickly to some of these things, which is what Governments in US, Canada and Europe have done. I think the Indian Government is looking at it.
What is the progress on your UK project?
The project may get delayed by 3-4 months because of the election and change in government. But now it is back on track. Both the blast furnaces have been closed. We have agreed with the unions on a package and over 2,000 people have applied for voluntary redundancy.
Has the number of job cuts reduced?
Yes. The original redundancy plan was 3,000 people. Then based on the Union’s proposal, we decided not to close one plant. So then it became 2,800, out of which we said 2,500 need to go in first 18 months. About 1,800 will go by March. We have already placed orders for the electric arc furnace on Tenova Technologies last month.
We should get all approvals by June and start construction in July. We will draw green power from the Grid. The electric arc furnace should be ready by 2027. The UK government has also cleared duty-free imports of slabs and coils to keep the downstream running till then. In UK, over the next two quarters we will move from negative EBITDA to EBITDA neutral or positive. So, the bleed should stop in UK.
How is talks in Netherlands progressing?
Discussions are going on. Just like in UK, we have submitted a plan and the government is looking at it. They will do a due diligence and appoint independent parties to look at it. There has been a change in Dutch Government also. So, it got delayed by a few months. New government has been formed and got a mandate from the Parliament to negotiate with us. We will hopefully take that to a conclusion in the next three to six months.
Source:The Hindu BusinessLine
