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Informist, Thursday, Jul. 31, 2025

By Avishek Rakshit & J. Navya Sruthi

KOLKATA/MUMBAI – After witnessing an improvement in net realisations per tonne of sales, which helped Tata Steel Ltd. arrest the loss from falling sales volume during the June quarter, the steel major expects its sales realisations per tonne in India to drop by INR 2,000 on quarter in Jul-Sept. The ongoing quarter coincides with the monsoon when construction activity takes a backseat and demand for construction material like steel and cement is usually affected. During the June quarter, Tata Steel's realisations per tonne of sales had improved by INR 2,600 on a trailing basis.

"As far as the price is concerned, the guidance we are giving for India's net realisations will be about 2,000 rupees less than in Q2 (Jul-Sept) as compared to Q1 (Apr-Jun)," Tata Steel's Managing Director and Chief Executive Officer, T.V. Narendran told sector analysts in a post-earnings investor call on Thursday. "As far as the UK and Netherlands are concerned, it will be flat or slightly higher."

Tata Steel's sales realisations improved in India during the June quarter despite global headwinds. In the UK, steel prices were still below year-ago levels and in Germany, steel prices declined by $100 a tonne after reaching a peak of $770 a tonne in April. In China as well, prices hovered around $450 a tonne.

In the call, Narendran said prices in India were expected to improve after the monsoon season once construction activity resumed. He was also bullish on a good monsoon season in the country, which leads to improved incomes for farmers and eventually translates into an improvement in demand for various goods in rural and semi-urban India.

Wednesday evening, Tata Steel reported a 2.8% on-year decline in its consolidated sales at INR 531.8 billion during Apr-Jun, primarily on account of a 3.7% on-year dip in sales volume at 7.1 million tonnes. Cost-cutting measures and higher prices, however, led the consolidated net profit to more than double to INR 20.8 billion, beating the Street's projection of INR 16.9 billion by a wide margin.

Narendran said Tata Steel benefitted from moderating raw material prices and the cost-cutting measures that the company undertook to improve its profits. In the Jul-Sept quarter as well, Tata Steel may reap the benefit of lower input costs which partially offset the projected fall in its sales realisations.

"As far as cost is concerned, the coking coal costs are expected to be about $10 per tonne lower in each of these geographies (India, UK, and Netherlands) from a consumption point of view. And in Netherlands, the iron ore cost is also expected to be about $7-$8 per tonne lower from a consumption point of view for Q2 compared to Q1," he said.

However, demand from Europe may be impacted negatively owing to tariffs imposed by the Trump administration in the US.

"While the auto industry demand may shrink a bit because of tariffs, because of other things, we are seeing the steel consumption in defense to go up a bit over the next eight, ten years," Narendran said adding that although the automotive industry was a key customer vertical for Tata Steel's operations in Europe, the company was also exploring other avenues of growth.

In the June quarter, although its revenue from its European operations remained flat at INR 195.9 billion, Tata Steel made a pre-tax profit of INR 1.4 billion as against a loss of nearly INR 5 billion in the June quarter of FY25.

Narendran said European governments were concerned about "preserving the steel industry" following the issues the continent faced from Russia in the course of the Russia-Ukraine conflict, and were keen to offer support and safeguards to this sector.

"What we see in Europe is over the last one year, certainly, a lot more interest in preserving the steel (industry) because of the issues that Europe has faced with Russia, which used to be a supplier of substrate. Before that, the more recent focus in Europe to build a defense industry in Europe, and also the focus to try and become self-sufficient in some sense of the term and not depend on other geographies for critical inputs," Narendran said.

INDIAN OPERATIONS 

In its Indian operations, amid the focus to scale up operations in key plants and scale up eco-friendly steel production, Tata Steel is considering testing its production model in its Ludhiana plant to other plants if it is successfully executed.

"Firstly, we are targeting the retail market where our realisations are much higher. We are also looking at setting up these furnaces in places where there is scrap and hence, the scrap processing facility in Rotak and the steel plant in Ludhiana. Thirdly, we are also looking to sell all the steel that we produce within 300 km of where we produce it," Narendran said.

According to the company, such sales will help reduce transportation costs by INR 2,000-INR 3,000 per tonne and also help reduce emissions. Such a move will also help the company take advantage of the Indian government's new policy on giving advantage to green steel producers.

"So, if this model works, we want to replicate this in other geographies as well," Narendran said.

Tata Steel is also considering increasing its reliance of sourcing key raw materials like iron ore from suppliers rather than its captive mines to improve its financial position. "Captive mines make sense if it's from a cost-efficiency point of view, it adds value. It's value-accredited, right? Otherwise, honestly some of the premiums that are being bid it really doesn't make sense to have iron-ore available at that cost," Narendran said, adding that Tata Steel had successfully reduced its captive coal dependency.

"It actually makes sense to import the iron ore. You get better quality iron-ore sometimes (with) lower alumina which is going to be very important for the future. So, we are looking at it from that point of view," he said.

Tata Steel will continue to bid for mines as and when auctions come up, but its decisions will be based on whether such mines would be value-accretive to the company.

At 1434 IST, shares of Tata Steel were down 1.1% at INR 159.68 on the National Stock Exchange.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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