We are focused on completing 5mt
expansion in Kalinganagar as it will financially enhance Tata Steel’s
competitive strength: t Koushik Chatterjee
Tata Steel’s profit
slumped 90 per cent in Q1FY23 but Koushik Chatterjee, executive director
& CFO of the company, tells The Telegraph that margin improvement
in the second half is possible in India. He also talks about energy transition
in the UK and Netherlands, the future of British Steel Pension Scheme, the
deleveraging journey and the benefit from expansions.
■ Tata Steel
faced headwinds both in India as well as Europe, resulting in sharp drop in
profit. How do you expect the third and fourth quarter to play out in terms of
margins?
Tata Steel’s India
business is one of the most competitive in the global steel industry. In the
quarter gone by, we have sold a record 4.73 million tonnes(mt), which also
demonstrates the strength of our distribution and market reach in a challenging
market. So at the operating level we had a good quarter in India.
However, there was a
confluence of adverse factors as we had an opening inventory which had high
embedded costs because of coal imported in the previous quarter; and the price
realisation on steel sales in the market was significantly lower than the
previous quarter. One of the factors behind lower realisations was certainly
the impact of export duty on the industry. The Indian demand conditions are
fairly robust with sectors such as automotive doing well. Post monsoon we
should also see construction activities picking up.
The outlook on
India’s steel demand is good for the next half year and the raw material costs
are range bound. Therefore, we are definitely looking at an improvement in
margins in the second half compared with the second quarter gone by.
In Europe, prices are
going to be softer in the second half compared with the first six months but
with coal prices still around $300 per tonne, the longer-term steel contract
negotiations for 2023 will have to reflect the increased cost base on raw
materials and energy costs.
■ The
lifespan of the blast furnace at Port Talbot will be over by 2025-26. Would TSL
like to have an outcome of the discussion with the UK government for the
transition support before that? What are the options before TSL if the support,
as sought, does not come from the UK government?
There are indeed some
of critical facilities in Port Talbot including one of the blast furnaces which
will be approaching their technical end of life over the next few years and
therefore early decision on the way forward is critical sooner than later.
We are certainly
looking at making a decision with due consideration in a defined time horizon.
■ Analysts
have expressed concern about the British Steel Pension Scheme. Tata Steel took
a non-cash charge of Rs 100 crore, dragging PAT down on a consolidated basis.
Is it a one-off or there could be a recurrence?