Tata Steel sees India sales up 20%

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Tata Steel Ltd, said on Thursday stronger demand in the current quarter would drive its expected 20% increase in Indian steel sales volumes and 7 to 8% growth in European sales volumes.

"On a consolidated basis, sales volumes will be better in the January to March quarter compared with the 2009 quarter," said Vice Chairman B. Muthuraman to Reuters Global Mining and Steel Summit in a video conference from Washington, DC

Muthuraman also said he would like to export steel into the US market, which imports about 20 to 30 million tonnes of steel per year during "good or normal economic times."

"And we would definitely like to play a part in that at correct prices and quality," he said.

Asked if Tata was considering setting up production in the United States, the executive said, "No, not at present."

He reasoned that the US has sufficient steel production capacity, currently running at about 70%.

"It is for us, not one of those lower-cost locations in the world. You have to be careful about where you make steel and where you sell steel. It's not always the place where steel demand exists," he said.

Tata, the world's eighth largest steel maker, operates plants in Europe with capacity of 20 million tonnes, India with 6.8 million tonnes and Southeast Asia with about 3.5 million tonnes of annual output.

Last month, Tata reported lower consolidated sales in its fiscal third quarter ending in December, because of steel price comparisons that were well below a year ago, Muthuraman said.

Sales volumes, however, grew in India by 20 to 25% last quarter, and the executive said he looks for a similar volume increase in the current quarter.

"In India, market demand is quite robust. We expect steel demand to be nearly 9 or 10% higher this year (2009-10) than for 2008-09," the vice chairman said.

Most of Tata's increased sales will come from 1 million tonnes of new capacity added at its Jamshedpur facility in India, available during the current year. By the middle of next year, Jamshedpur's capacity will grow to 10 million tonnes.

Tata makes steel to order and does not make steel to stock. That means the new tonnes are being produced to address a market increase of about 10%, Muthuraman said.

"In India, there has been overall growth. The auto industry is doing very well and construction is doing even better. In a year when world steel demand will be more as less the same as last year, India's has grown as much as 10%," he noted.

He said nonresidential demand was especially brisk.

"You'd be amazed at the number of bridges and roads and airports and public utilities that are getting built. Much of the construction increase is coming from this," he said.

Tata sells domestically about 85 to 90% of the steel it manufactures in India, exporting about 10 to 12% mostly to neighbouring countries like Bangladesh and Nepal.

In Europe, where the India-based steelmaker owns Corus, Tata has been wrestling with excess steel capacity.

Though European steel demand has been stagnant or growing extremely slowly, Muthuraman said, capacity utilization has gone up quarter to quarter, because of improvement in demand.

To address only slow demand growth, Tata is gradually increasing its capacity, to about 85% this quarter compared with 83% in the previous quarter.

Last month Tata curtailed production at its Teesside cast products plant in northern England. Asked whether there was a chance of ever restarting the facility, the vice chairman said Tata was keeping its options open.

For now, he said, there where no slab orders and the economy was not improving fast enough to put it back in the company's plan right away.