Tata Steel: Expansion Mode

The global steel industry has faced challenging times in the financial year 2017. Still, the performance of Tata Steel has been better compared to the last financial year.  The steel giant stands at No. 9 in this year’s BW Real 500 by registering total assets of Rs 1,72,447.37 crore and total income of Rs 1,16,018.66 crore.

The macro economic conditions in FY17 were better both in India and elsewhere and that has helped the fortunes of the industry. Moreover, supply side reform measures by China restored the balance in global trade of steel.

For Tata Steel, the Kalinganagar plant in Odisha is now the centre of the company’s focus. “The commissioning of the Kalinganagar plant and a smooth and rapid quality and quantity ramp up helped us significantly,” says T.V. Narendran, MD &CEO, Tata Steel. “Our equity with our customers and our distribution network helped us grow faster than the market in India. Our focus on costs and the benchmark performance levels of coke rates, etc., helped us manage costs in India well,” he adds.

In Europe, the continued efforts on restructuring, driving cost efficiencies and enriching the product mix helped improve Tata Steel’s performance.  Global steel output will be tapering in the next year and the slowdown is expected to continue through 2035 as countries around the world start to rein in output while demand retreats, according to the World Steel Association.

However, considering the current stage of development of the Indian economy and the likely growth potential for the country’s economy in the next decade, the steel demand in India is set to see significant growth in future. The Indian government has outlined its intent for ensuring long-term viability of the sector through the recently announced National Steel Policy 2017, as the steel sector is facing financial difficulties in India.

“Steel prices and raw material prices continue to be volatile and hence it requires us to be very watchful,” says Narendran. “While the macroeconomic conditions have improved, we are not totally out of the woods yet.”

In Europe, the challenges of the company’s complex restructuring initiatives required Tata Steel to engage with the multiple stakeholders. “Our focus globally is on our costs, on our customer relationships, on our product mix and on our people, which helped us weather these challenges,” Narendran explains.

In future, Tata Steel’s priorities will be to focus on the Indian market, achieving operational excellence and deliver value-added and differentiated products to its customers. Tata Steel Europe is currently pursuing the pension restructuring programme in the UK and is hopeful of concluding it soon, according to the management.

One of the core elements of Tata Steel’s operating strategy has been its focus on sustainability and the environment. The company is committed to minimise its impact on climate change and is continuously working on the strategy to reduce the carbon footprint of the business.

Tata Steel expects the macro economic conditions to keep improving in India and globally. The EU region is slowly but surely seeing better times.

“The full ramp up of our Kalinganagar plant and our continued efforts in the market place will also help us deliver a better performance in FY18 vis-à-vis FY17,” says Narendran.