Tata Steel has earmarked a capex of ₹16,000 crore in FY25 of which nearly 75 per cent will be spent towards ramping up of capacities in the country, particularly completion of projects at Kalinganagar, in Odisha. The remaining would be spent towards the UK de-carbonisation programme.
The company’s top brass remains confident of a 8 – 10 per cent growth in steel demand in India which has fuelled its capex push. “Overall, the demand is expected to grow at 8 – 10 per cent a year. So that’s why we are bullish about growing in India,” TV Narendran, Managing Director and CEO, Tata Steel said during a recent earnings call.
Doubling Capacity in India
Doubling of capacity to 40 million tonne per annum, spread over the next few years, has already been set in motion, he said.
Under the existing plans, capacity at Kalinganagar will be moving up to 8 mtpa, from the existing 3 mtpa in the first phase. The capacity can then be expanded to 13 mtpa. The company has enough land to expand capacities to 16 mtpa at Kalinganagar.
The second point of focus will be expansion of the Neelachal Ispat Nigam Ltd (NINL), which is already running at full capacity. Capacities there would be ramped up to 4.5-5 mtpa in the first phase; and then further expanded to 10 mtpa, “and beyond that” if required.
A new electric arc furnace (EAF) plant — which uses scrap for production of steel — of 2 mtpa capacity will also be coming up in Chandigarh. Whereas in Meramandalli (Odisha) capacities would be expanded to 7 mtpa, from the current 5 mtpa; with final plans being to take it up to 10 mtpa.
“Land acquisitions have already been done for 40 mtpa capacity and some more are underway. We have started work on Kalinganagar, Meramandali.... But these days, since there is a lot of requirement on green cover in all our sites.... In fact, expansion of more than 40 mtpa is plausible..... beyond this we have another 10 million, which we can add in our existing sites,” he said.
For Tata Steel, the EBITDA margins for the India business was higher by 22 per cent; but this was offset by operating losses in the UK and other operational issues in Netherlands.
UK, Netherlands business
At Tata Steel UK, one blast furnace at Port Talbot will be closed by June-end while the second blast furnace will be closed by September. The coke-oven was closed in March. The company will, however, continue to operate the hot strip mill during the transition period. The entity is expected to become EBITDA positive from Q3FY25 onwards.
Tata Steel’s Indian business has proposed an infusion of £2.1 billion of equity in the UK business. The proposed fund infusion will be used to repay the existing external debt at offshore entities and to support the restructuring costs at Tata Steel UK Limited.
In Netherlands (IJmuiden), the business is expected to be EBITDA positive in FY26. The blast furnace which was started back in February (pot relining) is fully ramped up now. The Dutch government is willing to support the replacement of the one of the two blast furnaces there. Replacement will see use of direct reduced iron plant and an EAF.