Tata Steel's ED & CFO Koushik Chatterjee answered questions from a foreign broadcaster. He stated that Tata Steel has made a big profit in this commodity market as steel prices are lively around the world.
If inorganic opportunities come, Tata Steel will look at them based on merit, what value we can create from it and what value we can add to it, he says.
What about steel price dynamics?
We have seen raw material prices rise. Every industry faces inflationary pressures and supply constraints. What factors will help you offset cost pressure?
Chatterjee: So, raw material is also a commodity that is experiencing its own rise at this time point, and we see this in raw material prices. I think it's definitely increasing, and it's a function of supply and demand, and so we've seen an increase in iron ore prices over a long period of the last six months. It's dropping now, so these fluctuations happen.
It is important to understand the spreads. I think we are very strict and focused on managing spreads as best as possible to bring back yields. It is in the spread that you make your margins.
In the case of Europe, what you're essentially seeing is the lagged effect of long-term contract spreads. Europe usually takes the job for one year, six months, three months, etc. follows a larger contract proportionality, such as Therefore, when contracts are renewed, it comes with higher specs than we've seen in the past. This will be fixed.
This is a time issue and will therefore be fixed in the second quarter. We already see this impact and stretching going to increase, but the reality is that where the market is, where there is broader supply demand, the spreads will certainly be at a much higher and more comfortable level.
What are the steel prices and Tata Steel's expectations this quarter?
Chatterjee: I think especially the spreads in Europe will expand materially and hold it in India.
An investigation is currently underway regarding accusations of cartelization of the steel industry in India. Will this affect Tata Steel's pricing power?
Chatterjee: The best answer is that the steel industry is a global industry. Therefore, one or two or several people cannot have it. I think this is a reference for the rest of the world.
I think this is the way we actually work with our customers, distributors and engineers to ensure that the price formulation is in line with or in line with the product's market movements. I think this is how it works. This is how pricing works. It is not something that any one person or a few people can affect. It is the same supply-demand dynamics model. It also depends on how the economy grows.
What is Tata Steel's strategy to acquire more iron ore mines in India in the next few years?
Chatterjee: When it comes to new leases, you now know that there is a very transparent auction method in the country. We participate to the extent that it meets our requirements or our option levels. It will be so in the future.
The government has announced its position on the sale of RINL & NINL. How aggressive will Tata Steel be, especially on NINL?
Chatterjee: I think it's important to say that this is seen as a very strong organic pipeline. And we will follow this pipeline in parallel with the market growth. As you know, we are looking very aggressively at completing our expansion in Korea. Beyond that, we have other plans to expand the business in India. If inorganic opportunities come, we will look at them from merit, what value we can create from it, and what value we can put into it.
And finally, about your overall strategy.
Will it be a forward value game or a volume game for Tata Steel and secondly, future-proofing for an imminent potential downside because it's a cyclical game, how do you hold your position especially in lowering debt levels?
Chatterjee: So, the value game with the volume, so not both. I think we mentioned earlier that we have a very strong pipeline and that we will definitely pass it and therefore it will create more value for us. We are very focused on profitability, cash flows and balance sheet.
Also new material works etc. We also focused on new businesses such as So, it's not binary as it's about value, it's volume. I think the market will grow even more. That's why I think there's room for everyone, we will do our part to help our focus areas, provide value to our customers, and also ensure our profitability and cash flows are the best when it comes to the business cycle. We're playing the market, but I think it's very important to ensure that our own competitiveness and focus never diminishes.
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