Indian private-sector producer Tata Steel expects demand to keep rising on India's increased infrastructure spending and the third wave of the Covid-19 pandemic subsiding, and sees higher steel prices.

"There's a 35pc increase [in capital expenditure] this year, on top of a 20pc increase last year. So every year, the capex is going up, infrastructure focus is going up. So the demand is expected to be strong and the demand-supply balance will also be better," Tata Steel chief executive and managing director TV Narendran said.

The Indian government raised the country's capital expenditure by 35.4pc to 7.5 trillion rupees ($100bn) in its union budget of 2022-23.

Steel prices will continue to remain at higher levels and be more volatile than in the last ten years with major producers like China, Japan and Korea, importing raw materials and reducing steel exports to lower their carbon footprint, coupled with steelmaking costs going up because of increased raw material costs, Narendran added.

The steelmaker's cost for coking coal increased by $80/t in the third quarter from the second quarter and it expects costs to rise by $40/t in the fourth quarter. The company's realisations will reduce on the quarter due to negative realisations in flat products and exports, although higher export volumes will offset some of the margin reductions.

The Argus premium low-volatile hard coking coal index hovered near record highs of $465/t cfr India yesterday, up by 174pc on the year due to supply tightness.

Tata Steel's subsidiary, Tata Steel Long Products, won the bidding process to acquire a 93.71pc stake in the 1mn t/yr Neelachal Ispat Nigam Limited (NINL) last week.

"This acquisition will enable us to significantly ramp up our long products portfolio instead of waiting for 5 to 10 years to develop a new site and also to benefit from the growth in infrastructure in India and the retail housing growth in semi urban India," Narendran said.

Tata is looking to restart the current 1mn t/yr plant at NINL before beginning the first phase of expansion to increase capacity to 4.5mn t with the launch of a new plant.

By Sumita Layek

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Argus Media Limited published this content on 08 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 February 2022 10:01:00 UTC.