Tata Steel Ltd has delivered a compelling yet contrasting performance in the July–September quarter. While its Indian operations surged ahead with higher output and tighter cost controls, the company’s UK business continued to drag down overall profitability amid weak market conditions and persistent import pressures. In a candid conversation with Mint, top Tata Steel executives shared insights into the quarter’s dynamics, the future of the European businesses, and the steelmaker’s long-term capacity goals.

India’s Momentum: Output Up, Costs Down

Tata Steel’s India operations were the backbone of the company’s improved financial performance in Q2. With the Kalinganagar expansion beginning to hit its stride, production ramped up significantly — boosting efficiency in what is already one of its lowest-cost plants.

The company also intensified its cost-cutting drive, launched earlier this fiscal year. By the end of the first half of FY26, Tata Steel had already saved ₹5,450 crore, nearly half of its full-year target of ₹11,500 crore. This strong domestic showing helped lift consolidated results even as global markets remained uncertain.

Beyond India, Tata Steel’s Netherlands business emerged from a difficult period of blast furnace relining and is now operating close to 7 million tonnes annually, returning to profitability after months of strain.

The UK Conundrum: High Costs, Low Prices, and Policy Hurdles

In stark contrast, Tata Steel’s UK operations remain firmly in the red. Despite pouring £1.25 billion into restructuring its European business, profitability continues to be out of reach. The blame, according to top management, lies in a surge in cheap steel imports and the absence of robust import controls — the type the European Union has implemented successfully.

Executives described the space for further cost cuts in the UK as “exhausted,” placing the onus squarely on the UK government to introduce stronger trade safeguards. Without such policy action, CEO T.V. Narendran warned, achieving EBITDA positivity in the UK will be exceedingly difficult, especially with China exporting close to 10 million tonnes of steel per month into global markets.

If policy support fails to materialize, Tata Steel may be forced into “further restructuring,” a scenario the company is keen to avoid.

Capacity Expansion: On the Path to 40 MTPA, But Not By 2030

While Tata Steel remains committed to scaling up its domestic capacity, Narendran acknowledged that reaching 40 MTPA by 2030 may not be feasible. Instead, the company aims to have all projects in motion by then.

Today, Tata Steel’s India capacity stands at 26.6 MTPA. With existing land banks at Jamshedpur, Kalinganagar, Meramandali, and Neelachal Ispat Nigam Ltd (NINL), the company has room to scale up to around 46 MTPA over time.

The near-term goal is clear:

• Ramp Kalinganagar to 8 MTPA by end-2025
• Scale Neelachal Ispat from 1 MTPA to 5 MTPA once regulatory approvals come through

Together, these expansions should push Tata Steel’s capacity to 31–32 MTPA. Further increases—from Bhushan Steel to 6.5 MTPA and Kalinganagar to 13 MTPA—could lift the total to 38–39 MTPA by 2030.

Additionally, Tata Steel is advancing its electric arc furnace (EAF) strategy with construction underway for a 0.75 MTPA EAF in Ludhiana, slated for completion in 2027. If successful, two more EAFs may be fast-tracked, with one expected to be operational before 2030.

Q2 by the Numbers: Profit Surges Despite Global Headwinds

Tata Steel’s September quarter results exceeded expectations on multiple fronts:

• Net profit: ₹3,101.75 crore — more than triple year-on-year
• Consolidated revenue: ₹58,689 crore — up 9% YoY
• EBITDA: ₹8,897 crore — up 45% YoY

These gains were driven by strong Indian deliveries, cost control, and improved performance in the Netherlands. However, the UK’s EBITDA loss widened to £66 million, reflecting persistent demand weakness.

Management highlighted that the quarter’s performance came despite markets “not helping at all,” pointing to global steel price softness and macro uncertainty.

Outlook: Volume Gains Ahead, But Margins Under Pressure

Looking ahead to Q3 and beyond, Tata Steel expects a mixed demand and pricing environment:

• India: Realisations may fall another ₹1,500 per tonne, with coking coal costs inching up by $6 per tonne. However, higher volumes — thanks to Kalinganagar’s ramp-up — should cushion the impact.
• Netherlands: Margins may soften slightly, though lower input and energy costs provide some relief.
• UK: Losses may stabilize, but breakeven remains unlikely without policy intervention.

Analysts expect the third quarter to be subdued, with steel spreads tightening and overseas challenges persisting.

Conclusion: A Tale of Two Markets

Tata Steel’s latest quarter tells a story of resilience and imbalance — strong domestic execution contrasted by structural challenges abroad. India is driving growth through capacity expansion and efficiency gains, while Europe, especially the UK, remains weighed down by market distortions and policy gaps.

As the company charts its path toward 40 MTPA and navigates global uncertainties, its ability to balance domestic strengths with international headwinds will define the next chapter in its transformation journey.

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