by Sohrab Darabshaw on OCTOBER 6, 2016
It may not have been a very good year so far for India’s Tata Steel but things seem to be looking up. It’s also looking good for former Tata Steel companies.
Former Tata Operations Turn a Corner
While Tata continues to report consolidated losses, although it hopes to recover in the short term, there’s plenty of cheer for its former European operations. British Steel, after being spun off from Tata is back in the black, just a few weeks after the completion of the sale of Tata’s steelworks at Scunthorpe.
Greybull Capital is the new owner of Tata Steel’s long products business and British Steel now plans to pump in about $65 million (£50 million) of investment this financial year.
In nearby Scotland, the Dalzell plant at Motherwell, Glasgow, reopened recently after the India-native businessman Sanjeev Gupta’s Liberty House Group acquired the steelworks from Tata earlier this year.
Scottish First Minister Nicola Sturgeon officially marked the restart of the Dalzell plant, after it was shut down in December 2015 amid a global steel industry crisis.
Dalzell is the last standing important steelworks in Scotland. It has supplied the U.K. with tough steel plate used in industries such as shipbuilding, construction, mining, oil production and heavy vehicles for decades. The reopened plant will be targeting Britain’s 700,000 metric-ton-a-year market for plate steel which is estimated to be growing at the rate of 3% a year.
Back in India…
Tata Steel strategically is attempting to reduce its exposure in the European steel sector by talking with Germany’s Thyssenkrupp AG about a possible merger of its assets. No deal has been struck yet, but both sides are still negotiating in good faith. Tata Steel has claimed this month its net loss widened to $477 million in the quarter to end-June due to the sale of its Scunthorpe-based business to Greybull.
Managing Director for India and Southeast Asia T.V. Narendran was quoted in the Indian media as saying he would like the two Tata Steel operations, Europe and India, “to be judged separately.”
The reason being that each faced a different challenge, depending on the market it was operating in. Tata Steel India has posted an operating profit margin of 20-21%. There’s positive demand from sectors such as the rail and power, plus there’s growth in the rural areas because of a good monsoon this year. Domestic steel consumption may go up to about 6% this fiscal year.
Tata Steel is also planning to initiate the second phase expansion at its Kalinganagar plant in Odisha province to double its capacity to 6 million metric tons per year. The 3 million-metric-ton-per-year full capacity in first phase will be achieved soon, Tata officials hope, after which a second-phase expansion will start.
According to the Indian Steel Association, propelled by construction and capital goods industry, India’s steel consumption is expected to grow 5.3% to 85.8 million metric tons this fiscal from 81.5 mmt in 2015-16.
Domestic steel demand is forecast to move forward in all the eight quarters during 2016-17 and 2017-18, the ISA said.
An earlier version of this story made it sound as if the ThyssenKrupp/Tata Steel merger had already happened or was a done deal. It has been amended to show that negotiations are ongoing. We regret the error.