Do you see a structural issue with demand in Europe given that it has been weak?
Europe is the only geography where steel consumption is still less than what it was in 2008, at 80% of that level. While I don’t expect a significant recovery in demand, I expect it to stop shrinking. The European market will have a restructuring on the supply side over the next few years, because of higher carbon border taxes. We will be one of the survivors in a more balanced market. UK, with the natural advantage of having its own scrap, also puts us in a competitive position, while the Netherlands is a port-based facility.What is the progress on discussions in the Netherlands?
We expect to have some sort of an agreement in 3-6 months. The magnitude of support is expected to be more than that in the UK because the magnitude of the transition is bigger. We will be transitioning 7 million tonnes (MT) in Netherlands over the next 10 years. The philosophy in Europe is about 40-60% capital expenditure and some operating expenditure. We don’t have the kind of urgency in the Netherlands that we had in the UK, because it was never a bleeding business. But we want to transition fast because the carbon taxes will kick in by end of the decade, and we need to transition at least half the capacity before that.
Will Tata Steel have the same capacity in Europe after transition of both these facilities?
Yes. We restructured capacity when we acquired Corus, bringing it down to 3 MT from 10 MT in UK.
Could there be a risk of oversupply in UK when the electric arc furnace is ready in 2027?
We don’t expect demand in UK to shrink beyond what it is. We will be at least $150 per tonne cheaper in the cost of production. This changes our cost position, and we will not start losing money in the UK every time steel prices drop.Do you think the balance sheet can support these transitions?
Yes. Our net debt to Ebitda is 3.3. We hope to bring it below 2.5 by end of year. While net debt will not go down significantly because of planned capex, cash flows will improve because of Netherlands going back to positive, incremental volumes in India, and UK turning Ebitda positive in second half of year. While it won’t make up for negative Ebitda in Q1 and Q2, loss for full year will be significantly lower.
