Tata Steel has batted for the doubling of safeguard duty for a longer term as the steel industry navigates trade turmoil. In a conversation with Sambit Saha of The Telegraph, Koushik Chatterjee, ED & CFO of the company, also favoured implementing quality control orders for imported steel. He held out hope that the UK business would be cash-neutral by the end of FY26. An excerpt.
Tata Steel reported a higher EBIDTA and PAT in the Q1. Do you expect to maintain the upward trend in the subsequent quarters in FY26?
Let me answer that with some fundamentals. During the first quarter, we had lower volumes due to some planned shutdowns, including the relining of the blast furnace, maintenance shutdowns.
From Q2 onwards, the volume numbers both on production and sales will be higher sequentially. So, the operating leverage will see improvements.
The pricing scenario has become even more complex due to multiple reasons. First, the trade and tariff uncertainties across the world continue almost daily, with multiple shifting positions that put the supply chains at risk. Second, we are yet to see the trajectory of the outcomes from China’s ‘‘anti-involution” strategy of the steel sector to bring supply-side discipline not just within China but also on the seaborne side.
So, as you can see, it can’t be a binary answer. We will focus on the controllables, including the production discipline, continue our relentless focus on cost transformation and focus on customer needs.
Tata Steel UK narrowed the EBIDTA loss in Q1. Do you expect the operations to turn EBIDTA neutral in FY26?
In the UK, we have taken out structural costs since last September when we decommissioned the heavy end in Port Talbot. That helped in reducing the fixed cost base by about 20 per cent. It’s not enough, and we will take out another 20 per cent this year too.
In addition, our transition model in the UK is now de-integrated, as we purchase the substrate and undertake further downstream processing into specialised products for our customers. Therefore, managing the spread to achieve profitability is the key.
The supply chain is long, and the UK market remains oversupplied as the import quotas were higher than the consumption levels, which hopefully will be corrected soon by the government. The prices were depressed in the first quarter, and the demand scenario was also uncertain due to the trade deal between the UK and the US.
Overall, we are getting future-ready internally, and hopefully, if the market stabilises, we will be exiting the financial year 2026 with neutral EBIDTA margins.
Will there be an impact of the EU-US trade deal on the Netherlands operations, given that a large competitor has already trimmed demand forecast?
Honestly, we have to see the details of it. Tata Steel Netherlands has a 600,000 tonnes per annum exposure in the US directly and through its processing centres in the US. Some of the grades of steel that the Netherlands exports are not made in the US. We have the annual contract negotiations later in the year with our US customers who are also struggling to absorb the tariff impact, and we are also evaluating newer markets in Latin America and West Asia.
Tata Steel’s gross debt is nudging ₹1 lakh crore again. Is it the reason for Tata Steel being reticent in taking up NINL expansion, which has been on the drawing board for some time?
The effective net debt has been bound over the last 6 months. With India and the Netherlands generating strong operating cash flows and net debt to EBIDTA stable at 3.2x, we are confident that will drive down both the metrics and the net debt as our volumes increase in India. We will continue to grow in India, and there is no reticence on NINL expansion.
Mega projects require a fair bit of planning and approvals before they go for the final investment decision. We are now in the engineering phase and getting all regulatory clearances, some of which also relate to legacy issues before our acquisition.
It has been close to 100 days since the provisional safeguard duty was imposed. Is there a case to impose a longer term and higher duty?
At a time when the global trade dynamics are focused on protecting individual national interests, the safeguard duty is an important step to create a level playing field.
Without a strong steel industry, India cannot hope to have a strong industrial or manufacturing ecosystem ever. The “melt and pour” principle that all countries, including the US and EU, are putting in trade deals equally applies to India, especially when the Indian steel industry is competitive and can meet the required quality of steel.
National sovereignty on foundational industries like steel is critical for India’s national economic interest. Hence, the safeguard duty indeed should be longer term and ideally double what exists today to ensure it truly “safeguards” the national
interest.
The Madras High Court has stayed the quality control order on steel. What is the view on the order, which has been dubbed anti-MSME?
Without getting into the specifics of the case, let me say that quality control is necessary to bring parity between domestically produced steel and the imported steel. This is critical to ensure the quality of end products produced in this country meets its national standards and objectives.
All countries and economic regions globally have very stringent quality standards, and every importer is required to get certification or accreditation before imports are allowed.
For a country as large and complex as India, this is a basic hygiene element. The most important point is that India is a growth geography, and the entire world will be looking to dump their steel here, including defective and non-prime steel. If we don’t have adequate quality standards, it is a risk to national security.
Hence, quality standards are very critical both from a quality parity perspective, competitive fairness, and a larger consumer and public interest.