Daily Management Review

Net loss of Tata Steel increased tenfold


09/12/2016


Indian Steel group Tata Steel Ltd. increased its net loss in the I fiscal quarter tenfold as a result of lower demand and losses related to business in the UK.



Terry Robinson
Terry Robinson
Net loss in the April-June amounted to 31.83 billion rupees ($ 476 million) compared with a loss of 3.17 billion rupees in the same period 2015.

The result was unexpected since experts polled by Thomson Reuters on average had forecast a reduction of loss to 1.88 billion rupees.

Revenue of Tata Steel, two-thirds come from outside India, fell by 5%, up to 263.32 billion rupees.

In April-June, the company received profit of 5.75 billion rupees in India, which is 35% more than in the previous year (4.25 billion rupees). Tata Steel plans to double its production capacity in the steel plant in Kalinganagar up to 6 million tons. The company expects to reach total production capacity of 16 million tons upon completion of the expansion process. 

Tata Steel Ltd. was going sell the business in the UK due to weak demand and low prices for steel. The decision was made on March 30 at Tata Steel’s board of directors meeting. However, after the British residents voted leave the EU in a referendum on June 23, the company decided to consider alternative options for the UK division.

Among the contenders for the assets, including a metallurgical plant in Port Talbot, were JSW Steel of India and Hebei Iron and Steel, as well as ThyssenKrupp.

Meanwhile, the G20 is trying to solve the problem of overproduction of steel. Leaders of the G20-member countries may approve establishment of a so-called Global Forum on the question of excess capacity in the steel industry, with the participation of the Organization for Economic Cooperation and Development (OECD). Text of the founding document is still in the consultation stage, and the very idea is greatly opposed by China and India, according to The Wall Street Journal.

Representatives of the European industry note that China’s industrial policy allows local producers to flood markets in Europe, the United States and other developed countries with cheap steel products. European Commission President Jean-Claude Juncker said that he intends to "defend interests of the European steel industry and its workers." He added that the industry has lost tens of thousands of jobs in Europe over the past few years, partly due to the fact that China has played "against the rules".

In his speech at a business forum on September 3, Chinese President Xi Jinping indirectly recognized the problem, and rebuffed objections, saying that China has taken measures to reduce overcapacity on its own.

China, the world's largest steel producer, has doubled exports to the EU in the last two years, while demand in Europe remained below the levels seen before the financial crisis of 2008. Prices for steel in the EU fell by about 40% over the past two years.

According to the World Steel Association, China produced 466 million tons of steel in the first seven months of this year, or half the world's output.

source: wsj.com






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