Tata Steel CEO: The Decline in Prices Is a Greater Concern Than Demand

Steel companies have been facing challenges due to a sharp decline in prices and a slowdown in demand. This situation arises as imports have been steadily rising, eroding the market share of Indian companies and exerting pressure on prices. TV Narendran, Managing Director & CEO of Tata Steel, shared his insights with Businessline on what lies ahead. Below are excerpts from the interview:

Do you expect steel demand to slow down in the coming days?

Steel demand has remained strong and continues to grow at 8-9%, which aligns with the expected GDP growth of 6.5-7%. However, there has been a slight slowdown in the automobile sector in recent months, though the motorcycle segment remains strong, indicating a recovery in the rural economy.

Construction activity was weaker than expected over the past six months, mainly due to the monsoon in the last three months, and lower government spending. We expect demand to pick up in the second half of the year as government spending increases.

Since construction and auto industries account for 75% of our demand, I am less concerned about the demand itself. My bigger concern is the imports of steel from China into India and steel prices, as they impact margins. Margin compression is more of a worry than demand.

Will the US tariff war impact China’s economy?

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China doesn’t export much steel to the US, but it has a trade surplus and exports many other items there. Higher tariffs on those items will affect China’s economy. To protect itself, China has already announced a stimulus and might announce more soon.

China is also diversifying by increasing exports to other regions to spread its risk. If the Ukraine war ends soon, it could trigger reconstruction in Europe, which could impact us indirectly as well.

Why is the government hesitant to impose a duty on steel imports?

The imposition of a duty is still under active consideration. Meanwhile, reports suggest that some Southeast Asian countries are investigating imports from India. This needs immediate attention because steel is just one example—China has excess capacity in many sectors.

For instance, China was not a car exporter until recently but now exports 5 million cars, which is more than India’s total production. China also exports 100 million tons of steel, which is close to what India produces. As a policy, India needs to respond swiftly to these challenges, as the US, Canada, and Europe have done. The Indian government is looking into this.

What’s the progress on your UK project?

The UK project might face a delay of 3-4 months due to elections and a change in government. However, it is now back on track. Both blast furnaces have been shut down, and we have reached an agreement with the unions. Over 2,000 people have applied for voluntary redundancy.

Has the number of job cuts been reduced?

Yes. Initially, the redundancy plan involved 3,000 people, but after the union’s proposal, we decided not to close one plant, reducing the total to 2,800. Out of this, we expect 2,500 to leave within the first 18 months, and about 1,800 will leave by March. We’ve already placed orders for an electric arc furnace with Tenova Technologies, and we expect to get all approvals by June and start construction in July. We aim to power the furnace with green energy, and the furnace should be operational by 2027. The UK government has also cleared duty-free imports of slabs and coils to keep downstream operations running until then. Over the next two quarters, we expect to move from negative EBITDA to neutral or positive EBITDA in the UK, which will stop the financial losses.

How are discussions in the Netherlands progressing?

Discussions are ongoing. We have submitted a plan, and the government is reviewing it. They will conduct due diligence and appoint independent parties to evaluate the plan. There has also been a change in the Dutch government, which caused some delays. However, the new government has received a mandate from Parliament to negotiate with us. We hope to conclude this in the next three to six months.