Tata Steel Q3 preview: UK turnaround, Europe carbon tax under the spotlight

Investor unease has been heightened by a blunt warning from chief financial officer Koushik Chatterjee. “If there are no actions from the government, it will be difficult to get Ebitda breakeven by 4QFY26," he said during a post-earnings call in November. By “actions", Chatterjee was referring to the need for tougher import restrictions from the UK government to shield domestic producers from cheap imports from countries like China.

Without that policy backstop, Chatterjee told Mint last quarter, it may be left with little choice but to consider further restructuring of its UK business without disclosing details, an option it is keen to avoid. The European operations of the steelmaker include its plants in Port Talbot in the UK and the IJmuiden plant in the Netherlands.

Unsurprisingly, the steelmaker's quarterly calls have felt less like routine earnings discussions and more like a seminar on the future of Tata Steel’s European operations. Alongside this, the company’s plan to secure raw materials domestically by the end of 2030 has captured the attention of analysts and investors.
At present, Tata Steel meets 100% of its iron ore requirements in India through its six captive mines; the steelmaker came to own these long before India mandated auctioning with a high bid premium. These mines are set to expire post-2030, and to keep them, the steelmaker would have to go through an auction process where bid premiums often cross 100%.

“When we bid for the mines it needs to make sense. There is no point bidding a price at which the cost of iron ore is so high that you'd rather buy it from the market," T.V. Narendran, managing director of Tata Steel, told analysts in November during an earnings call, adding that they are engaging with mining companies like Odisha Mining Corp. Ltd and NMDC, and imports are also an option.

If Tata Steel turns to the market for iron ore, it risks exposure to price volatility and greater reliance on overseas supplies, especially as the quality of domestic iron ore continues to decline.

The expiry of captive iron ore mines from FY30 is set to reverse the iron ore security among private steel companies, according to a Kotak Institutional Equities report dated 8 December, 2025. “Majority of Tata’s operating iron ore leases will expire and we estimate a potential erosion of ~30-40% of its steel operating margins post-FY2030E," analysts Sumangal Nevatia, Siddharth Mehrotra and Keshav Kumar wrote in their report.

In response, the company has begun taking steps to shore up raw material security. In early December, Tata Steel signed a memorandum of understanding with Lloyds Metals & Energy to explore iron ore mining opportunities in Maharashtra. It also acquired a 50.01% stake in Thriveni Pellets Pvt. Ltd, a maker of iron ore pellets. Iron ore pellets are small balls of iron ore used to make steel.

Additionally, Tata Steel recently sourced a bulk shipment of iron ore lumps from Tata Steel Minerals Canada (TSMC), the first time the Indian operations have tapped the Canadian arm for this key raw material, Mint reported earlier.

That move, however, is likely to prompt tough questions from investors around logistics costs, freight economics and the long-term viability of importing iron ore from Canada.

For these reasons, all eyes will be on Tata Steel's October-December results, which will be announced on 6 February.

Mint lists the major areas to focus on in the company's earnings.

Demand and pricing

Steel prices fell to multi-year lows in the December quarter due to weak demand, oversupply and uncertainty regarding the safeguard duty. However, post announcement of the safeguard duty, the prices of hot-rolled coil (HRC) and cold-rolled coil (CRC) were increased by 4% to ₹51,700 per tonne in the second week of January, after a 2-4% hike in early January 2026, according to Big Mint, a commodities market intelligence.

Analysts will now look for management commentary on how much room is left for further price increases after the announcement of safeguard duty and resumption of construction activity. Steel prices remain under pressure in Q3FY26, led by weakness in flat products amid supply outpacing demand, according to an Elara Securities January report.

Revenue and profitability

Axis Securities expects lower HRC prices to partially offset higher sales volumes, and estimate consolidated revenue to increase by 14% compared to Q3FY25 and 4% compared to Q2FY26 to ₹60,887 crore.

Aditya Welekar of Axis Securities, in his note dated 7 January, wrote that Ebitda is expected to improve by 46% compared with the same quarter last year, led by higher steel production. On sequential quarterly basis, Ebitda is expected to decline by 3%, led by lower steel price realisations in India and the Netherlands.

Analysts at Axis Securities and Kotak Institutional Securities expect the company's Ebitda per tonne to decline on higher coking coal prices and lower steel realisations.

On European operations, Kotak expects UK losses to widen at US$166/ton versus US$154/ton in 2QFY26. Any commentary on the timeline for Ebitda break-even will be crucial.

Europe’s carbon tax

Unlike many peers, the implementation of the carbon border adjustment mechanism (CBAM), commonly referred to as a carbon tax, is expected to support earnings at Tata Steel’s Netherlands operations, as steel prices are likely to rise once the levy is fully enforced.

For now, however, there is limited clarity on the applicable rates, even though CBAM took effect from 1 January. As a result, analysts will be closely watching management’s commentary on the mechanism, since any uptick in contributions from overseas operations could provide a swing in the company’s earnings.