Tata expects improvement for next year
Corus, Tata’s European unit, has struggled as the global downturn has hit demand from key industries such as construction and carmakers, but capacity utilisation has picked up as inventories have been run down around the world.
“It is in fact Brazil, India and China, not Russia that are now propelling growth in steel consumption around the world,” said Kirby Adams, the company’s head of European operations.
Capacity utilisation was at 75 per cent in the September quarter, up from 53 per cent in the June quarter, and was expected to be about 80 per cent for the rest of the fiscal year to 31 March, Tata Steel said.
Last month, the World Steel Association (WSA) forecast steel demand would fall 8.6 per cent this year, but that will be a much smaller fall than the 15 per cent it predicted in April.
“It’s not going to be a 2008 scenario again. The worst is over for this company,” said Deven Choksey, chief executive of K.R. Choksey Shares.
“Infrastructure development across the world will improve demand. The consumer is ready to buy,” he said.
Tata Steel has been trying to cut costs by rationalising operations in Europe and also reworking interest costs. It took one-off charges, primarily related to restructuring in Europe, of 9.1bn rupees (£116.9m) in the second quarter.
Tata’s Teesside plant in Britain hurt second-quarter earnings by about 8bn rupees. Adams said that, if necessary, Tata was prepared to mothball the plant. Tata denied it had plans to sell the plant earlier this year.
Earlier this month, Tata Steel issued $546.9m (£287m) in new convertible bonds in exchange for $493m of securities as part of a plan to reduce costs and ease repayment obligations.
The company had gross debt of $12.9bn at the end of September, which it aims to cut by $2bn in the medium term, it said.