Mr TV Narendran, CEO & MD of Tata Steel, told ET that first half...

Mr TV Narendran, CEO & MD of Tata Steel, told ET that first half of calendar year 2019 will be a strong period for the steel industry globally, said Mr TV Narendran, managing director of Tata Steel, apart from some concern on trade flows, the fundamentals are strong and growth in China, India, US and Europe is good.

Q - Has the slowdown in China’s economy impacted Tata Steel?

A - The concern about China maybe a bit overstated at times, but there is still a concern. From a macroeconomic point of view, China is growing quite well at 6.5%. What has slowed down a bit is the automobile growth in China. Growth in appliances has also slowed down but the growth in the real estate market is still quite strong. Hence, you are seeing the impact more on flat products which are dependent on automobiles and appliances than in long products which are dependent on construction. So; there has been a little bit of unwinding of positions in China and there is also lot of speculation going on about the cuts in China. There is a view that the cuts announced by the government are less than what people had anticipated. We have seen the flat product prices soften by about S30-40 in the Southeast Asian markets. As far as its impact on India is concerned, I am hearing of import parcels being booked into India. It is not because the domestic prices always are a bit on the higher side compared to the imported landed prices, because when you import you run the risk of having materials come in two, three months after you have booked, unlike in domestic where you get it immediately. So, that is playing out. As of now, the imports in December are forecast to be about 600,000 to 700,000 tons. There will be some sort of impact in the domestic markets, but I am positive that given the fundamentals of the Indian economy, the prices will stay up. It is our job to make sure we get the best prices that we can.

Q - Tell me a bit about pricing. Where is the power? Which sections attract more premiums?

A - The long product prices have been more stable than the flat products and long products depend a lot on the infrastructure activity. A lot of spending continues in the infrastructure space and we believe that a lot of it will happen as a prelude to the elections, when a lot of activity will happen there. In terms of flat products, India is different from the international markets because auto demand in India is still quite strong. For Tata Steel, our strongest franchise is a B2C business which is 20% of our revenues where we really sell through our distribution network and reach out to individual customers who buy Tata steel because they trust Tata Steel. They are not customers who are looking at the international price. They are consumers who want three to five tons of steel and they are happy to pay a premium for Tata steel because they trust Tata Steel. The other big franchise for us is the automotive franchise which is about 20% of our revenue, where quality is more important than anything else. It is not about what the cheapest steel available is but who amongst the quality producers can give me the best price. You are competing with three or four people in India and globally and an auto company typically looks for stability of supplies and quality. These are two of our strongest franchises and account for 40% of our revenues. Another 10-15% of our revenue comes from our downstream business which is value added products and services. That again is reasonably stable. That is why Tata Steel tends to have numbers which has more stability than some of our peers because we have fairly strong franchises in these areas and also the fact that we are able to sell most of our volumes in the domestic market indicates the equity that we enjoy with our customers.”
Source: ET