‘Unfair to say domestic steel industry is a cartel’
Domestic demand for steel is expected to get a boost with the government laying emphasis on infrastructure development. However, the pricing of the commodity has become a contentious issue. In an interview to Aditi Divekar, T V NARENDRAN, managing director of Tata Steel, talks about allegations of cartelisation and the brief shortage of iron ore that led to an increase in prices. Edited excerpts:
The Competition Commission of India (CCI) has launched a probe against steel firms for allegedly forming a cartel. How do you justify the recent price hikes?
It is unfair to say that the industry is a cartel. Steel prices in India have not moved in isolation, domestic prices reflect global prices as is natural for any globally integrated industry. Secondly, about 60 per cent of steel imports come from Japan and South Korea, which have no import duty due to free trade agreements (FTAS). If Indian players were increasing steel prices irrationally, steel could have easily come from Japan and South Korea. But, it did not because international prices were higher. We respect that customers are unhappy when prices go up, but we are in a globally integrated industry that is volatile. Domestic players would also prefer stable prices, but volatility is an unfortunate reality.
All large primary players, like you, have captive sources of ore. Why was there a shortage of raw material?
The bigger steel players obviously have secured iron ore supply through auctions. The smaller ones, however, rely on merchant miners. Availability decreased as a lot of iron ore moved from merchant miners to captive miners. Iron ore mines that were auctioned in 2020 took time to get back to pre-auction level of production, so that also led to a shortage, particularly in Odisha. The scenario has improved. It is unfortunate that the 2020 auction, disruption of supply, and transition of ownership all came around the same time.
Tata Steel has been looking to restructure the Europe business, but has failed for a second time. What do you think is going wrong?
With Thyssenkrupp, it was a mutual approach, but was not cleared by CCI. In the case of SSAB, they came to us. We were not looking for buyers. They had some concerns from a European transition cost point of view, because each country there has set goals for lowering carbon emissions by 2030. SSAB felt it needed some clarity on the transition plans. Just as it was their call to approach us, it was also their call to not follow through. Our focus remains on making the European business cash neutral or cash positive and we continue to improve our operational performance.
Will you do anything differently?
We are in the process of separating the UK and the Netherlands businesses. It will help us from a longterm perspective as it provides more strategic options. At the same time, if someone approaches us for a partnership, we are open to exploring it. Each unit has its own challenges and advantages, and since Brexit, the policy issues may be different in the UK and the Netherlands. So, it makes sense to have separate entities.
Will Brexit prove advantageous for your Europe operations?
It is too early to say anything. There is no disruption as of now. Policy changes in the UK, how the pound behaves, the UK’S trade ties with others… we will have to see. It will take a year or two to get some clarity.
When will Tata Steel bring its capex plans back to normal? Are there any fundraising plans in anticipation of increase in demand from infrastructure and housing industries?
We will slowly get our capex back to normal levels. We will give capex guidance for FY22 in a couple of months, once we finalise our plans in India. However, capex will be provided for only after the deleveraging plan of $1 billion per year. That goal will continue to be the priority, followed by capex. With regard to fundraising, there is no such plan as of now.