Why is Tata Steel stock melting?

Tata Steel is down 20% over the last one week and 45% in the last one month. So, what are the reasons for the fall?

Here is a verbatim transcript of Haresh Soneji's comments on CNBC-TV18. Also watch the accompanying video.

Steel producers are trying to maintain the price band by taking production cuts. Industry leader, Arcelor Mittal has cut production by 15% a couple of weeks back. On October 16, Corus undertook a 20% production cut over the next three months. Global steel prices have settled down at about USD 800 per tonne at this point in time, down from about USD 1,000-1,400 per tonne peak valuations. A 25% correction from the peak has already been seen.

The cost of production for Corus is about USD 850 per tonne. So, they are working on a loss of USD 50 per tonne at the current market price. Hence, the production cuts. The rationale being that demand is maintained and prices are stabilized because of lack of supply.

Corus said it will evaluate options at the end of three months after looking at steel demand. Its current monthly production of about 2 MT will continue for the next three months. The market feels that prices will drop further by about USD 100-150 per tonne.