ADVERTISEMENT

Technologies

European Operation From Tata steel hits new profit trail

ADVERTISEMENT

ADVERTISEMENT

Tata Steel’s European operations are expected to be one of the most profitable since 2007.

The strong commodity cycle has impacted the European company. This was triggered by the removal of coronavirus restrictions and a drop of Chinese exports. At the end of the nine-month period ending December 31, 2021, the EBITDA (earnings before taxes, interest, depreciation and amortization) of PS768 million.

Analysts expect that this trend will continue in the current quarter. This will place the profits of the current fiscal year at the same level as the highest levels ever recorded by the European business with its Indian owners.

ADVERTISEMENT

ADVERTISEMENT

T. V. Narendran, chief executive officer and managing Director for Tata Steel Group, agreed with analysts’ views.

It was a great first year. We have seen improvements quarter-on-quarter and more due to the fact we had annual contracts which were renegotiated from January 1st,” Narendran stated in Calcutta on Sat.

Long considered the Achilles heel for Tata Steel Group’s Tata Steel Group, Europe is now divided into two regions: the UK in the UK as well as the Netherlands.

It posted EBITDA of around 1,063 million in 2007-8, its first year under Indian ownership. In the wake of the subprime crisis that erupted in the financial markets, EBITDA dropped to PS893million the following year.

This European business would not achieve the same amount of EBITDA if it didn’t struggle with high costs.

This impressive performance is set against the backdrop of thin volumes.

TSE reported 6.63mt (mt), steel delivery over nine months compared to 22.8mt in 2007-8 and 18.8mt in 2008-9. This suggests an increase of EBITDA margins.

TSE had to sell units to maintain its profitability.

War’s impact

Due to the conflict between Russia and Ukraine, the market is extremely uncertain. Costs for raw materials and freight have increased significantlyhowever, prices have also increased.

“All prices have risen in Europe because everyone’s costs have been increasing.” At the annual Eastern Regional Council of CII meeting, Narendran stated that spot goods prices in Europe have reached EUR1000 a tonne.

One Tata Steel chief said that margins would increase in the next few months before costs catch up with them. Prices for coking coal are currently at $650 per tonne and iron ore prices have exceeded $150 per tonne.

You’ll see margins increase in the near future as price increases coincide with cost hikes. But, over the next few months, cost rises will start to impact everyone. 

It will get better. It will get better if it continues for a longer time. Then you will feel the pressure. Narendran stated that there are two types of pressures: the first is cost pressures and the second is working capital pressures because everyone has high-value material.

Despite rising costs, the war has decimated both Ukrainian and Russian steel exports to a large extent.

Both countries export 45mt annually of merchandise, and a large portion of that went to Europe.

This has created an opportunity for Indian steelmakers to export, especially in Turkey and Europe.

Tata Steel exports to the South of Europe and Turkey to avoid being overtaken by the European company.

Narendran stated that India’s exports will remain at 10-15% of its output, with the primary focus being on domestic demand.

Prices have a greater impact on long-lasting products used in infrastructure and construction than flat items used in consumer durables and automobile durables.

Since Russia and Ukraine were the main producers of billet, war had an impact on long-products production. which acts as a product intermediary for long-products.

The rising cost of billets has caused the scrap prices to soar.

“In India secondary producers are seeing price increases for scrap, coal prices rising and these price hikes were first pushed forward by the secondary producers,” Narendran explained.

Flat steel prices were stable because there was no other producer.

ADVERTISEMENT

ADVERTISEMENT