Tata Steel · tone and specificity signals across the available quarters.
Language signals
We are extremely mindful of the EBITDA losses and then the performance losses that are happened in the, in our European portfolio. I can also assure you that we are working towards a structurally more robust operating configuration in both UK and in the Netherlands.
The decisiveness is purely because the assets coming to the end of life. Therefore, to ensure that the safety of the employees working and compliance to all the regulatory stuff, we need to come to a view.
We don't really need to pursue inorganic growth to realize our growth ambitions. That's why we have said that our priority is on organic growth, but at the same time, obviously, we'll be watching carefully what's happening in the inorganic space.
It would be very ironical if in India, with all the iron ore that it has, firstly, overtaxes the iron ore and negates the competitiveness that we as a country should have right at the raw material stage.
The underlying performance, though, has actually improved on quarter-on-quarter.
We are looking forward to producing about 1.7 million tons from this new facility after the startup in September.
The goal of getting that breakeven is very important for us as a company, and we continue to chase that. The market has been very volatile, and you understand that.
We are more optimistic about the prices going forward. This will be a slightly difficult quarter because of what I just described.
Without the cost savings, EBITDA would have been down because we are low on the volume. That is for sure.
The restructuring and the transition would commence after this consultation. Given our proposed plan to change the business model and the route for steelmaking, the existing heavy end assets at Tata Steel UK will only be used for a defined period.
In India, net realizations are expected to improve by about INR 2,200 per ton, quarter-on-quarter, aided by domestic demand, which has showed great resilience despite the renewed volatility in the global sentiment.
The larger concern to me is less of Chinese imports into India, more of Chinese exports across the world, because that's, already 8 million tonnes for the last few months, which is not a good situation, from an international price point of view.
Our target is to ensure that we achieve a neutral to positive breakeven... by June of 2025.
If steel prices stay at $450-$500 levels, it will be difficult for any steel company to support very significant expansion.
We are one of the lowest cost producers of steel in the world, and that allows us to make money even at these prices in India.
If there are no actions from the government, just by our own actions, it will be difficult to get EBITDA break-even by Q4.
The U.K. is behind the curve as far as the EU is concerned or comparative to the EU is concerned as far as these initiatives are taken.
We are also looking at prioritization, optimization, and sequencing on the CapEx such that it is affordable for all stakeholders.
We have now proposed to close both the high emission blast furnaces and coke ovens in a phased manner in 2024, and will commence the statutory consultation process about restructuring as we transition to a EAF-based steelmaking at a cost of about GBP 1.25 billion, with GBP 500 million support from the U.K. government.
The demand has been quite strong actually. As you saw year to date, the steel consumption in India has grown at about 10%-12%. So demand has been strong. Pricing has not reflected that robustness of demand so far.
We are also undertaking a deep transformation program in terms of improvement in our cost position, not just by the volume, but multiple areas, and I think that will also start flowing in, if I look at on a full year basis next year.
Our focus is the very fact that we are putting up a DRI and EAF is because we have a pellet plant. And therefore, we said we will be focused on a gas-based solution at this point of time, and any funding support will be based on a gas-based solution.
If the private sector investment needs to be protected in India, particularly in manufacturing and particularly in steel, then it's not just demand growth, but it needs to be profitable demand growth for the steel industry to invest the cash flows that are required.
We are more focused around 2.75 level and on a steady-state basis. That has been our focus. Our capital allocation is very clear that we will not want to have the growth at the cost of debt.
We expect that prices in Europe will move away from Asian prices and move towards the U.S. prices. May not reach the levels of U.S. prices, but certainly will move closer to that.
The effectiveness and timing of the CBAM effect and the trade-related quotas will determine how quickly the imports retreat from the EU market and the utilization of the local steel industry increases, which will have positive implications on the price regime.
We are hopeful that some actions will be taken in the market because obviously, with these levels of quotas and these prices, it's obviously not looking good from an EBITDA point of view.
The closure of the blast furnace and the winding down of the heavy end was something that we've been talking about for quite some time given the financial performance of the UK business.
Our fundamental point with the government is as far as private sector, CAPEX is concerned, the steel industry is leading the way with investments. And we need to make sure that this momentum is not derailed because of somebody selling steel which is unfairly priced.
We will not opt for debt support, but for the project in the U.K., we will fund it from India.
Our objective is in India, our asset should be one of the last men standing in the world. In Europe, it should be the last man standing in Europe.
The cost takeout in Tata Steel India started in 1995 and never stopped. All that we are saying is we are upping the game to make it more structural and make it larger in size.
If the U.S. and China can come to some understanding and trade flows both ways, then we are in a better place because obviously, China needs to take care of the construction industry if it has to make a positive difference to steel.