Tata Steel plays the long game in India's infra boom

Tata Steel will also install multiple electric arc furnaces, including one already under construction at Ludhiana, adding around 2 million tonnes of extra long-product capacity. (Bloomberg)
Tata Steel will also install multiple electric arc furnaces, including one already under construction at Ludhiana, adding around 2 million tonnes of extra long-product capacity. (Bloomberg)

Summary

  • The company will boost capacity at its recently acquired Neelachal Ispat Nigam Ltd (NINL) to 5.5 million tonnes per annum (mtpa) from the present 1 mtpa, said Ashish Anupam, vice-president, long products at Tata Steel.

MUMBAI , NEW DELHI : Tata Steel Ltd is looking to capture India’s infrastructure boom by doubling the manufacturing of long steel products used in construction over the next six years, a top company executive said. Currently, three-fourth of its capacity is in flat steel, used in automobiles and consumer goods.

The company will boost capacity at its recently acquired Neelachal Ispat Nigam Ltd (NINL) to 5.5 million tonnes per annum (mtpa) from the present 1 mtpa, said Ashish Anupam, vice-president, long products at Tata Steel. It will also install multiple electric arc furnaces, including one already under construction at Ludhiana, adding around 2 million tonnes of extra long-product capacity.

This will take Tata Steel’s total long products capacity to 10-11 mtpa by 2029-30 from 5.3 mtpa at present, Anupam said in an interview. The entire project may cost 35,000 crore.

“If I look at FY30—we have a seven-year runway—longs would be close to about 10 to 11 million tonnes, ballpark," he said. He clarified that this was still at a planning stage, and no formal proposal has been presented to the company’s board.

Currently, Tata Steel has 5.3 mtpa of long steel capacity out of its total set-up of around 21.6 mtpa in India. This capacity is spread across NINL (1 mtpa), Jamshedpur (3.3 mtpa) and Usha Martin (1 mtpa) facilities.

“If I look at Tata Steel, in 2019, the company was only 3.3 MTPA in longs out of a basket of around 21 MTPA. And that was primarily because Tata Steel’s portfolio was predominantly flat steel. The acquired Bhushan plant was all flat steel," Anupam said. “The company therefore decided to increase its long steel capacity."

Long products refer to steel bars, rods and wires that primarily find applications in construction and engineering products. Flat steel includes steel plates and sheets which find uses across a variety of industries, including consumer goods and automobiles.

Demand for long products is expected to swell as India continues to invest to ramp up infrastructure. The Union budget for 2023-24 raised capital investment outlay for infrastructure by 33% to 10 trillion, which is almost three times the outlay in 2019-20.

“Construction activities account for nearly two-thirds of the total steel demand in India. As India develops, there will be an increasing spending on infrastructure given our moderate level of infrastructure penetration. To that extent, the demand for long products is expected to increase faster than the overall steel industry," said Jayanta Roy, senior vice-president, Icra Ltd.

In India, the flat steel market is dominated by primary steelmakers such as Tata Steel and JSW Steel. Secondary steelmakers, which tend to have a smaller set-up, currently dominate the long steel market.

Their smaller size affords them the ability to be located closer to demand centres rather than mines. Their cost overheads also tend to be lower. These benefits help them undercut primary steel mills. However, they seldom match primary mills in terms of quality and volumes.

Among primary steelmakers, Jindal Steel and Power is the only company whose capacity is already geared more towards long products.

To be sure, other primary steelmakers too are looking to ramp up their long-products capacity to cater to the growing demand from infrastructure and construction. In fact, one of the key reasons that many companies are closely watching the planned divestment of state-owned Rashtriya Ispat Nigam Ltd is its long steel capacity.

Tata Steel shares ended 1.91% higher on BSE on Friday at 133.5, up against a 0.34% rise in the benchmark Sensex. The stock has given nearly 31% returns over the past year compared to an almost 19% gain in the Sensex. Peers JSW Steel and Jindal Steel and Power have given 18% and 39% returns, respectively, over the same period.

nehal.chaliawala@livemint.com

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