Chinese steel exports of around 8mn t/month since March are a cause for concern as they continue to pull down global steel prices, according to Indian private-sector producer Tata Steel.
"If Chinese steel exports come down to 5mn t-6mn t level, then hot-rolled coil prices should be more in the $600-$650/t range rather than the $550-$600/t range that it is in just now," the company's chief executive and managing director TV Narendran said on 25 July.
Higher Chinese steel exports in March-June are because of higher domestic production during January-March as producers expected an economic recovery this year, Tata said. But this did not happen and production levels are currently falling, which will also lower exports, Tata added.
The steelmaker's net sales realisations will drop by 3,200 rupees/t ($39/t) in July-September, but the company will benefit from a $50/t reduction in coking coal prices during the period.
India's domestic demand remains supported by government spending and higher consumption across new segments. But lower international prices and seasonality have dampened Indian steel prices, while an economic slowdown in key regions, including inflationary pressures and a tight monetary policy, continue to weigh on global commodity prices.
Tata's 5mn t/yr expansion at its Kalinganagar plant in Odisha is continuing, with a 2.2mn t/yr cold rolling mill and a 6mn t/yr pellet plant already in operation. The continuous annealing line and galvanising line will be commissioned in the next few quarters.
The pellet plant will ramp up production later in the year, but the company is already saving on costs as it has stopped buying pellets and started shipping pellets from its Meramandali plant to the Kalinganagar plant.
Tata is also in the process of adding another caster in its steel melt shop that will increase capacity by 0.5mn t/yr with some volume benefit from October to November, but it said the caster will only reach nameplate capacity during the 2024-25 fiscal year once the blast furnace comes in.
It also recently commissioned two new tube mills, which will take its tube producing capacity from 1mn t/yr to 1.3mn t/yr.
Tata said its UK plant is importing hot-rolled coils from Indian operations for downstream production like tubes, and imports are complying with the UK steel safeguard quotas.
Discussions with the UK government for a support package for its UK operations have picked up speed, the steelmaker said, and Tata will enter a decisive position in the second half of the year as the assets come to the end of life and it becomes necessary to ensure employee safety and regulatory compliance.
