Tata Steel lifts profits, but UK pain lingers amid cheap imports

The steelmaker may also fall short of its target of expanding its domestic steelmaking capacity to 40 million tonnes per annum (mtpa) by 2030, as it plans to pace growth based on industry profitability and margins, T.V. Narendran, managing director and chief executive officer of Tata Steel Ltd, said in an interview with Mint.

“India has improved because we have had the Kalinganagar expansion coming on stream. More production in Kalinganagar means more cost efficiency because that is one of our most cost-efficient plants," said Narendran. Another key reason for the company's improved financials was its cost-cutting programme, which it launched at the start of the fiscal year. The Netherlands business, which had a difficult 18 months due to blast furnace relining and even reported losses for the first time, has now recovered and is producing close to 7 million tonnes, he said.

Tata Steel aims to cut costs up to ₹11,500 crore this financial year, and has already achieved ₹5,450 crore in savings in the first half of the fiscal (H1 FY26).

Narendran, however, noted that the outlook for the UK operations remains weak amid rising steel imports. The company, which has invested £1.25 billion to restructure its European business, is unlikely to turn profitable unless the UK government introduces stronger import restrictions.

In the absence of any policy action by the UK government, the company will have to resort to “further restructuring" of its operations to “make it more sustainable," said Koushik Chatterjee, executive director and chief financial officer at Tata Steel Ltd, adding that they would not prefer taking such measures.

Chatterjee also emphasised that there is no further scope to cut costs in the UK business, and that’s why their focus is on policy.

Narendran said, “If nothing happens, China keeps exporting 10 million tonnes a month and steel prices stay where they are and the UK government takes no action, then obviously it will be very difficult for us to become Ebitda positive in the UK."

Tata Steel is urging the UK government to adopt measures similar to those in the EU, which has reduced import quotas for each country and raised duties on volumes exceeding those limits.

Tata Steel shares fell 1.15 % to ₹176.55 apiece on the National Stock Exchange on Thursday, compared to the benchmark Nifty50, which ended steady.

Roadmap to 40 mtpa

At the end of FY25, Tata Steel's local capacity stood at just 26.6 mtpa.

“The company will not complete 40 million tonnes by 2030, but will have projects to cover that volume by 2030," Narendran said.

Between Jamshedpur at 11 mtpa, Kalinganagar expandable to 16 mtpa, Meramandali to 10 mtpa, and Neelachal Ispat Nigam Ltd to 10 mtpa, the company has the land capacity to scale up to around 46 mtpa, Narendran said.

Tata Steel’s immediate focus is to ramp up Kalinganagar to its full 8 mtpa capacity by 2025-end and scale up Neelachal Ispat from 1 mtpa to 5 mtpa, pending regulatory clearances. Once both expansion projects are completed, Tata Steel will achieve a capacity of 31-32 mtpa. Further, the company expects Bhushan Steel’s capacity to rise from 5 mtpa to 6.5 mtpa and Kalinganagar’s from 8 mtpa to 13 mtpa by 2030, taking Tata Steel’s total capacity to around 38–39 mtpa.

In addition to this, Tata Steel has started construction of an electric arc furnace (EAF) in Ludhiana of 0.75 million tonnes, which will be commissioned by 2027. Thereafter, Tata Steel plans fast-track two more EAF projects, depending on the operational success of the Ludhiana plant. Narendran expects another EAF project to be completed in addition to the Ludhiana one by 2030.

Q2 performance

Tata Steel, India’s second-largest steelmaker by capacity, reported stronger-than-expected net profit for the September quarter. Profits more than tripled from a year ago to ₹3,101.75 crore, on account of higher deliveries in India and the Netherlands, and cost control measures.

The figure surpassed a Bloomberg estimate of ₹2,739.58 crore based on a poll of 16 analysts. Sequentially, the steelmaker’s profits rose 49%.

Narendran cited multiple reasons for the robust results such as strong Indian operations, lower coking coal prices in the Netherlands and cost-cutting measures. “Unfortunately, the markets have not helped us at all across geographies," he said.

The UK operations, though still in the red, have halved their losses compared to last year, despite lower steel prices. Narendran added that the UK business has implemented about £350 million in fixed cost reductions along with operational efficiency measures.

Tata Steel’s consolidated revenue from operations rose 9% compared to the same quarter a year ago, and 10% sequentially to ₹58,689 crore in the July-September quarter.

The steelmaker’s consolidated Ebitda - earnings before interest, tax, depreciation and amortization - rose 45% to ₹8,897 crore compared to the same quarter last year.

For the overseas operations, the steelmaker’s Netherlands operations reported an Ebitda of €92 million compared to €64 million in Q1FY26. However, the UK Ebitda loss widened to £66 million compared to a loss of £41 million in 1QFY26 due to subdued demand.

Outlook

Tata Steel expects realisations in India to fall by around ₹1,500 per tonne in Q3, following a similar decline in the previous quarter. The steelmaker also anticipates coking coal consumption costs to rise by about $6 per tonne, Narendran said in a post-earnings interaction with analysts on Thursday.

India will see “some margin compression", but the domestic operations will have upside in terms of volume, which will be half a million tonnes more in Q3 due to the Kalinganagar ramp-up, he said.

The European operations may also report weaker operations. The Netherlands may see margins soften slightly, though lower input and energy costs should provide some cushion.

In the UK, “maybe things shouldn't get worse", Narendran said, adding that the company is "trying to see how to improve, Q2 was worse than Q1", but it's not necessary Q3 should be worse than Q2.

“The outlook for the third quarter remains subdued, with steel spreads in India likely to stay under pressure amid softer prices and rising coking coal costs. In the UK, achieving breakeven this fiscal appears unlikely without policy support from the government," said Aditya Welekar, senior research analyst at Axis Securities.