MUMBAI, Feb 10 (Reuters) - Tata Steel, the world's No. 7 steelmaker, expects demand recovery in its key European market to be volatile, but is hopeful the situation may improve in the second half of the coming fiscal year that begins in April, a top official said.
The company, which operates two-thirds of its global capacity in Europe, on Thursday posted its first quarterly loss in more than two years, as prices there fell sharply on the back of weak demand.
"The feeling is, in Europe, FY12/13 will be a mirror image of FY11/12 ... the first two quarters may be weaker than the last two," Chief Financial Officer Koushik Chatterjee said in a conference call with analysts on Friday.
Tata Steel's consolidated margins slumped to 5.9 percent in the December quarter from 11.6 percent a year earlier. Prices fell about $43 a tonne on average in the quarter as the European debt crisis impacted decisions of buyers.
Earlier this month, ArcelorMittal, the world's largest steelmaker, posted an unexpected quarterly net loss , while Korea's POSCO, the world No 3, reported a smaller-than-expected profit rise.
"Recovery in Europe will be very volatile. For next year, we will be keeping our target at the current year's production level," Chatterjee said.
Tata Steel, which mothballed a hot strip mill in south Wales in December, is operating only two of four blast furnaces at Scunthorpe in England.
Last month the company said it would cut 200 jobs at four European plants as part of a restructuring of its European steel tubes business.
The steelmaker, however, expects additional sales of one million tonnes in 2012/13 in India, as new capacity is added at its facility in Jamshedpur in the eastern state of Jharkhand.
Tata Steel will complete a planned expansion of its Indian capacity to 9.7 million tonnes by March from 6.7 million tonnes now, Chatterjee said.
Sales at its Indian operations, which account for a quarter of its global capacity of 28 million tonnes, rose 16 percent during the December quarter, and the company expects demand to improve in coming quarters as interest rates ease and investment picks up.
Shares in the company, valued at about $9 billion, initially fell 4 percent on the unexpected quarterly loss. They later rebounded on hopes the company's margins have bottomed out and are likely to recover in coming quarters.
At 12:41 p.m. (0711 GMT), the shares were up 4.2 percent in a Mumbai market down 0.5 percent. The stock lost 50 percent of its value in 2011, but has recovered nearly 40 percent so far in 2012 with foreign funds among the big buyers.