Post the US Presidential elections, China could look at reducing its steel exports as there are looming concerns over its trade options, TV Narendran, MD and CEO, Tata Steel, said. The Chinese have stopped approving new projects on steel, even if it is on replacing capacities, , he added.

The Chinese are expected to cut production by “4 per cent or 40 million tonnes (mt)”and if that continues for another two – three years, some surplus metal which is finding its way into global markets will come down, said Narendran.

“So I think there are actions being taken in China and now with the US Presidential election, I think China would be even more concerned about its trade options and I’m sure will take some action to reduce some of these excesses.....I’m more positive on demand pricing,” he said during a recent investor call.

While less than 1 per cent of China’s direct steel exports are shipped to the US, its steelmakers are heavily exposed to potential tariffs on goods such as containers, vehicles, engineering machinery, home appliances and elevators.

Reportedly, a day after Donald’s Trump’s victory was announced, sentiments in China’s future markets turned bearish with the January rebar contract on Shaghai Futures Exchange closing 1.11 per cent lower (compared to the day before settlement prices).

So far, the global trade data available suggest Chinese exports are over 80 mt for Jan–Aug period, almost 20 per cent up y-o-y.

Capex

Tata Steel had previously guided for a ₹16,000 crore capex and the company is on track.

“Our approach to capital projects is now more about doing all the detailed engineering, get the environment clearances ahead of going to the board for approvals because that gives us more certainty in the execution. Often we take the board approval and then take longer than planned on environment clearances, etc.” Narendran said.

In Q2, Tata Steel commissioned the 5 mt blast furnace at Kalinganagar – as a part of its strategy to scale up the high margin business. A cold rolling mill is already running.

The Tata Steel top brass said, the entire complex (Kalinganagar) cost about ₹3,900 crore; and as other associated facilities are commissioned expansion could be to the tune of ₹19,000 crore.

“Post Kalinganagar, Tata Steel would look to bring on stream two more facilities – one 0.8 mt steel plant in Ludhiana to be ready by 2026; and in Jamshedpur, it is setting up a 0.5 mt mill.

This apart, the company would look at expanding capacities at Neelachal Ispat which will take it to 5 mt (from 1 mt).

After that we have the Kalinganagar option from 8 mt to 13 mt and the Bhushan option, the Angul plant option from 5 mt to 7 mt.,” Narendran said.

Price Movement

According to , Narendran, pricing-wise, the metal has hit “the lowest” around September. And since October, prices have gone up.

“We are more optimistic about long product prices because that is less dependent on China (or) impacted by China exports... (which) is mainly flat products. And longs consumption is more dependent on construction. So we are more positive at long prices than flat prices. But flat prices also seem to be picking up now,” he added.

However, the Tata Steel MD is not confident of prices hitting the July peak, even if Oct-Dec is seen as a better quarter in terms of price movement.

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