Tata Steel delivered steady growth in domestic volumes despite a challenging third quarter, marked by volatility in global steel prices amidst inflationary pressures, and tightening of financial conditions. Steel prices remained under pressure, resulting in subdued steel spreads, company officials informed at the quarterly investors call organised recently.
Tata Steel continues to progress on its sustainability journey and aims to achieve net zero carbon emissions by 2045 through multiple pathways, including an increase in scrap usage in furnaces.
The company’s capex spent during Q3 was INR 3,632 crore and for 9MFY23 was at INR 9,746 crore. Furthermore, the company aims to spend INR 3,000 crore in Q4FY23 to ensure capacity expansion of the Kalinganagar project.
Update on projects:
- Phased commissioning of the 6-mtpa pellet plant at Kalinganagar has begun. This will further help to reduce costs as the company will stop buying pellets from the market in FY24.
- Work on the 2.2-mtpa cold roll mill complex and 5-mtpa expansion is ongoing.
- Work has commenced on enabling activities with respect to the 0.75 mtpa electric arc furnace in Ludhiana, which is an important milestone for achieving emission reduction targets.
- Downstream expansion plans of the tin plate business is under way from 0.38 mtpa to 0.68 mtpa, tubes from 1.2 mtpa to 1.5 mtpa, and wires from 0.47 mtpa to 0.55 mtpa.
- Neelachal Ispat Nigam Limited (NINL) has begun operations and its capacity is being ramped up to a rated capacity of around 1 mtpa.
Furthermore, the steel major aims to expand capacities across multiple sites at Kalinganagar, NINL, the EAF at Ludhiana and downstream plants across the country.
Automotive sales during the quarter comprised 15% of the overall deliveries and the same is expected to sustain in future with incremental capacities coming up at the CRM complex and Kalinganagar plant.
Other highlights:
- Production up q-o-q: Tata Steel’s standalone crude steel production rose 3% q-o-q to 4.77 mnt in Q3FY23 as compared with 4.64 mnt in the last quarter. On y-o-y basis too, the same registered an increase of 3% against 4.64 mnt in Q3FY22.
- Sales down q-o-q: The company’s sales fell by 4% q-o-q to 4.59 mnt in Q3 from 4.76 mnt in the previous quarter. However, on an annualised basis, the same registered 8% growth as against 4.25 mnt in Q3FY22.
- EBITDA up 4% q-o-q: The company’s standalone earnings before interest, tax, depreciation, and amortisation (EBITDA) registered rise of 4% q-o-q to INR 5,334 crore in Q3 as compared to INR 5,135 crore in the preceding quarter.
- Record sales in value-added segment:
a) Industrial Products & Projects registered 15% growth on the year.
b) Oil & Gas, infrastructure, solar sectors have registered 17% y-o-y growth. - Steel prices fall q-o-q, outlook positive: Indian steel prices remained subdued in Q3, and the fall in prices of long products was higher compared with that of flat products due to the extended monsoons and stoppage of construction activities in the northern part of the country. Steel prices are expected to rise further in Q4 with demand picking up across various segments and removal of export duty in November last year. Also, there are not much threats of imports going forward as it was earlier, said Mr. T.V. Narendran, CEO and Managing Director, Tata Steel.
- Net sales realisations (NSR): The company’s realisations were around INR 2,000/t lower in Q3 as against Q2. Furthermore, the company expects realisations to be higher by INR 1,400-1,500/t in Q4 against Q3 as steel prices have started rising from December 2022 and the expected coal consumption costs are likely to be lower in Q4 as against Q3.
- Lower raw material prices: Prices of coking coal declined by $82/t on consumption basis and royalty also fell by around 14% on q-o-q basis. This led to lower realisation during the quarter and margin expansion. Going forward, the company expects coal prices to be in range of $250-350/t in the upcoming quarter.
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