Tata Steel, one of the largest steel-makers in the country, is re-evaluating the next round of capex in view of depressed domestic steel prices and a supply glut from China. It is difficult to make “good investment plans” due to continued depression in the metal’s prices, TV Narendran, MD and CEO told businessline in an exclusive interview.
The current expansion plans of over ₹ 27,000 crore (cumulative) that include phase II of Kalinganagar expansion are due for completion this year. Additionally, ₹4,000 cr of capex will be towards setting up an electric arc furnace (to produce steel from the scrap) in Ludhiana, which is expected to be operational over the next 12 months. The NINL capex plans are on track, awaiting environmental clearances, while the rolling mill setup in Jamshedpur is underway. These previously announced investments continue to be underway and have not slowed down.
For FY25, Tata Steel had a capex guidance of ₹17,000 crore.
However, a review of new investments, post these, will be taken up depending on market conditions. The plan was to take capex proposals to the Board, but depressed prices at present continue to be the overhang.
“So (if) steel prices remain at current levels and there is no support, then obviously it’s difficult to make a very good investment plan,” he said.
When asked specifically whether future expansion plans are on hold, Narendran said: “I wouldn’t say we’re putting anything on hold, but we are evaluating the situation.”
“We were evaluating this plan to go to the Board (for the next phase of expansions)…. getting ready. And we’ll wait and see. I hope we’ll have some answers in the next few months,” Narendran added.
India’s steel industry has been hit by rising Chinese imports and sluggish domestic market prices. Exports have also weakened. Trump tariffs are seen as a further worry as China’s supply surplus could find a way into India, further adversely impacting domestic markets. A DGTR probe into alleged dumping is underway, but results are still awaited.
From being a net exporter of steel six to eight quarters ago, the country is now a net importer of the alloy. For 10MFY25 steel imports were at 8.3 million tonnes (mt), more than twice the volume of exports at 3.9 mt. Imports exceeded exports by 4.4 mt, as per recent Steel Ministry reports.
According to him, the steel industry has been among the biggest private sector investors in recent years. “I think all players in the industry had announced big expansion plan…. So, I think one round of expansions is getting completed, and the question is: is there a viable investment option if steel prices stay the way they are,” he said.
Narendran was speaking to businessline on the sidelines of an event organised by AIMA (All India Management Association) here.
Excess supplies from other markets, will at some point lead to industry rethinking investment decisions.
“… Companies struggle to have healthy cash flows. At some point, future investments can get impacted,” Narendran said.
Billionaire Sajjan Jindal’s JSW Steel has announced a substantial reduction in its capital expenditure (capex) plan for FY25, slashing it by up to ₹4,000 crore as part of a strategic re-evaluation of ongoing and future projects. The steel major deferred its Vijayanagar plant’s Blast Furnace 3 expansion, a major project originally slated to significantly boost production capabilities, primarily because of cost-control measures in response to changing economic and market conditions within the steel industry.
Stainless steel major, Jindal Stainlesss too has put new capex plans under review because of current market conditions.