Image Source: The Financial Express
In a candid assessment of India’s steel sector, Tata Steel Managing Director T V Narendran has warned that the industry is becoming increasingly concentrated, with fewer players able to withstand the financial and operational pressures. Speaking to Economic Times, Narendran highlighted the capital-intensive nature of steel production, the cyclical volatility of global prices, and the urgent need for sustained margins to support future capacity expansion.
Key Highlights from Narendran’s Interview
- India’s steel industry is shrinking in terms of active players due to financial stress
- Long-term operating margins of 15–20% are essential to generate cash flows for new investments
- Tata Steel aims to double its capacity to 40 million tonnes by FY31
- Global steel prices remain under pressure due to excess Chinese exports
- The UK operations of Tata Steel are expected to turn EBITDA-positive this fiscal
Industry Under Pressure: Why Survival Is Tough
Narendran emphasized that the steel industry is not in a financially “fantastic” state. Many companies are struggling to survive, leading to a consolidation of players. The sector’s capital intensity—requiring ₹6,000–₹7,000 crore for every one million tonne of new capacity—makes it vulnerable to global price swings and margin compression.
He noted that without consistent operating margins of at least 15–20%, steelmakers cannot generate the cash flows needed to invest in new plants or upgrade existing infrastructure. This lack of financial resilience has historically led to high debt accumulation and insolvency among several players.
India’s Growth Potential vs. Investment Reality
Narendran projected that India’s steel demand could grow to 250–300 million tonnes in the coming years. However, meeting this demand will require massive investments and a healthier financial ecosystem. He stressed that it’s not just about surviving in the market—it’s about having the capacity and capital to grow.
Tata Steel, India’s second-largest steel producer, currently operates at 21 million tonnes and has recently commissioned an additional 5 million tonnes at its Kalinganagar facility. The company is targeting a near-doubling of capacity to 40 million tonnes by FY31, signaling its confidence in India’s long-term steel demand.
Global Headwinds and Policy Response
The global steel market has been rattled by excessive exports from China, which has led to a supply glut and price erosion. Indian steelmakers had appealed for a 25% safeguard duty to counter this, but the government implemented a 12% duty for 200 days starting in April 2025.
Narendran pointed out that the industry’s vulnerability to global pricing and trade dynamics makes it imperative to monitor financial health and policy support. He also called for more strategic interventions to protect domestic producers from unfair competition.
Tata Steel’s International Operations: A Mixed Bag
While Tata Steel’s Netherlands business remains self-sustaining, its UK operations have been a financial drag. Narendran expressed optimism that the UK unit will turn EBITDA-positive by the end of this fiscal year, following years of restructuring and cost-cutting.
He acknowledged that the company’s focus has been on fixing the UK business, which has historically burned cash. With recent transitions and operational improvements, Tata Steel expects to reduce losses and stabilize its international footprint.
Conclusion
Narendran’s remarks offer a sobering look at the challenges facing India’s steel industry. As demand grows, so does the need for robust financial health, strategic investment, and policy support. Tata Steel’s aggressive expansion plans reflect confidence in the sector’s future—but for many players, survival remains a daily battle.
Source: Economic Times
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