The last three-four months must have been a roller-coaster ride for you. Just when things had started improving for you, the Covid-19 lockdown put a spanner in the works. How is the situation now?
We had a tough six-seven months of the financial year starting from April last year till maybe October or November. Things started looking up after November. The demand started picking up. Normally January to June is a peak season for steel consumption in India. So the steel demand was picking up. Apart from the auto industry, other industries were looking better and the steel prices were moving up but obviously we started sensing things were going wrong because of the pandemic. It impacted us in Europe in February and we knew it was going to come to India.
We had started taking some precautions by the end of February in India. The demand was still quite strong till the lockdown happened and then most of our customers were closed so we did not have a choice though we were allowed to run a plant as an essential service. Prices in India were static because there were no sales but the fact that inventories were building up meant that all Indian producers were trying to export. So the export markets were crowded with Indian suppliers towards the end of March and early April.
Thankfully by the end of April, China started pulling in quite strongly and so a lot of steel exports started going to China and we saw a recovery of the international markets starting April. The steel prices went up by about $50 per tonne. So, that was the story of the last three-four months’ roller coaster ride.
Now of course we have started unlocking. Your own capacity in May was roughly at about 80%. It has slowly started increasing. What is the pace of recovery like? Is it better than your expectations, lower or bang in line? Also, are realisations stable at that level or is there a bit of rebound coming in?
When the markets opened up sometime in May, there was still a bit of inventory in the system whether it was with the customers or with us. So, there was some price pressure because the prices have been trending upwards till March. There were some price corrections in May when the transaction started but the international prices were quite strong.
Between April, May, and June, steel prices have gone up by about $50 a tonne. The fact that Indian steel producers could export and had an export option, kept the domestic prices quite stable. We have seen consumption grow in sectors which are linked to the rural economy. In the automotive business, the tractors business has been reasonably strong. Motorcycles have been stronger than scooters because they are both dependent on the rural economy.
Rural infrastructure spending by the government has been positive. We sell a lot of steel -- about 20% of our revenues -- to the rural economy. It could be roofing sheets, it could be reinforcing steel for the individual house builders. So, these segments are strong.
The second area is where we are seeing pick up is where the government is spending. It could be oil and gas, it could be railways. So, sectors which are dependent on the government spend are showing positive signs.
What continues to be quite weak in the auto sector is the non-tractor and non-motorcycle automotive commercial vehicle, passenger vehicles. There is some sign of improvement but as you know, they had a pretty tough year last year as well. So, any improvement is only going to get them back to where they were last year and not where they were a year before last. So, it is a long haul back for them. There are some sectors which are positively impacted by the good monsoons, the rural economy and the government spending. The rest are still struggling to come back including the SMEs.
Focussing on Tata Steel India business, the overall India EBITDA was really given a lot of support because of the sort of rebound or the increase you see in Bhushan. For the last few quarters, we had been consistently seeing improvement in the Kalinganagar and Jamshedpur plants. What is the profitability in terms of EBITDA?
Quarter on quarter, we saw an EBITDA improvement in Kalinganagar and Jamshedpur of about Rs 2000-2500 a tonne which was on the back of cost takeout and price hikes. It should have been even better if we did not have the lockdown because we would have sold at least half a billion tonnes more which would have helped us in cost as well as realisations. We have lost half a billion tonnes of March sales which was at the highest price.
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June 30, 2020 at 05:50PM
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Steel consumption up in sectors linked to rural economy: Tata Steel - Economic Times
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