Realisations to improve by Rs 3,000 a ton in Q2, says Tata Steel

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Better prices and demand for its products will help Tata Steel improve its realisations by Rs 3,000 per ton in the second quarter, as compared to the first, said TV Narendran, CEO and MD.

"That is the minimum that we are expecting," Narendran told analysts in a call on August 14.

In the first quarter ending June 30, the company had said, its realisations were hurt because of the COVID-19 disruption. Overall, the steel major had reported a consolidated net loss of Rs 4,648.13 crore for the June quarter of FY21. It had reported a loss of 1,615.35 crore in the March quarter and a profit of Rs 714.03 crore in the June quarter of FY20.

But things will start looking up from the second quarter, the company has hinted, as most of its clients start ramping up production. Tata Steel's capacity utilisation, which had slumped by over 50 percent post the lockdown in March, is back to 95 percent in July.

The recovery has been led by clients in the auto sector, which consumes about 20 percent of the steel produced in India. "The auto forecast has been improving week after week.  Earlier it was only the tractors, and now the two-wheeler segment, helped by demand from the rural markets, is doing well," Narendran said.

The top Tata Steel executive said that while passenger vehicles are recovering fast, the same couldn't be said of medium and heavy commercial vehicles. The lighter commercial vehicles are faring better.

The better demand scenario has already helped the company take a price hike of up to Rs 2,500 per ton, since June." Though current prices are still below their pre-COVID-19 levels, it is unusual to see rates going up during the monsoon," Narendran said.

Demand for steel usually falls during the monsoon, when construction activity - the biggest consumer of steel - comes to a standstill. But 2020, has been a different year on all counts.

The improving domestic scenario will also see Tata Steel selling more in its home market, instead of exporting.

While in the first quarter it had shipped half of its production to overseas markets, mainly in China and South-East Asia, exports will come down further in the second quarter. "In the second quarter, we will export 25 percent of our production," said Narendran.

Tata Steel also has a major presence among small and medium enterprises, with up to 9,000 of them buying steel from it.

"About 4,000 of them were active two months ago. Now that has increased to 8,000," Narendran said.