Even though coronavirus cases continue to surge at a rapid pace in India, thereby affecting business activity, Tata Steel has managed to reach at 100 per cent productivity, thanks to a boost in domestic demand. Tata Steel CEO and Managing Director TV Narendran said a good monsoon and rural economy has led to a revival in domestic demand in the current quarter. With a boost in domestic demand, the company is less dependent on exports to increase sales.
The COVID-19 induced lockdowns severely affected the steel industry in India, leading to disruption in the supply chain, thereby hurting production. The stringent lockdown measures forced steel makers like Tata Steel to slash operations by up to 50 per cent in April. The players also had to turn to exports to find markets for their produce. As the country started opening up, the phased ramping up of production helped Tata Steel post steady sales domestically. "Production is running at 100 per cent and we are now less dependent on exports than we were in Q1 (April-June)," Narendran told PTI.
Tata Steel's overall India operational capacity (including Tata Steel BSL and Tata Steel Long Products) is 20.6 million tonnes per annum (MTPA). In the first quarter of 2020-21, Tata Steel India produced 2.99 million tonnes of crude steel, while sales stood at 2.92 million tonnes. "We are seeing a revival in demand in Q2, led by a good monsoon and the rural economy. While the auto-recovery has been led by the demand for tractors and motorcycles, we are now seeing the passenger car business pick up as well. It has also been a strong quarter for appliances," he said.
Tata Steel is also seeing demand in the government projects, including the oil and gas sector, water conveyance systems and railways. Construction is still a bit slow but the monsoon quarter has traditionally been the weakest quarter for construction, Narendran said.
In the international markets, the V-shaped recovery in China and also the country's transition from being a net exporter of steel to a net importer has changed the demand-supply dynamics in the region, he added.
To counter the closure of the Indian markets in April and May, Tata Steel had ramped up exports significantly by tapping new markets and improving the supply chain capability and export constituted around 50 per cent of total sales volume in April-June 2020-21. Tata Steel has reported losses in the past two quarters.
During April-June of 2020-21 fiscal, the company reported a consolidated loss of Rs 4,648.13 crore. During the fourth quarter of 2019-20, the company had posted a loss of Rs 1,615.35 crore. When asked about the markets where the company sees growth coming from, Narendran said, "The India business has always been EBITDA positive and cash positive. Hence, over the last few years, we have grown organically and inorganically in India. "Given our long value chain from mining to downstream and the growth opportunities in India, we expect the India business to be one of the most profitable in the steel industry globally."
Edited by Manoj Sharma with PTI inputs