India: Tata Steel Exports Double in Q2 FY20

Tata Steel, India reported two fold increase in export volumes to 0.64 MnT in Q2 FY20 against 0.31 MnT in previous quarter. The guidance for exports for this fiscal will be around 2.4 MnT. Although export realization was lower than domestic realization this quarter, but helped to clear inventories shared officials during conference call. Lower volumes to Automotive segment were compensated by higher exports. Other key highlights of concall were:

1.Coking coal cost expected to reduce in Q3- Company officials mentioned that coking coal price is expected to reduce by around USD 15/MT Q-o-Q basis against previous quarter. Prices have softened on lower demand from China and India and likely to remain in check given import restrictions by China. Thus cost reduction in coking coal prices will start reflecting in Q3 when sentiments will be improving in Indian market.

2.Company raised flat steel prices in Nov '19- Tata Steel (India) raised flat steel prices by INR 500-750/MT in Nov’19 amid slight improvement in demand. Also company has raised long steel prices in Nov '19.

3.Tata Steel to participate in iron ore mining auctions - Odisha govt has invited bids for iron ore mining blocks which are due to expire in 2020 out of which Tata Steel is participating in 10 block auctions. Some for captive and other for commercial mining.

4. Steel prices declined in Q2- Steel prices on an average basis have declined by around INR 4000/MT Q-o-Q in Q2 against Q1. However in Oct’19 prices reduced by INR 1000-1500/MT on monthly basis against Sep' 19.

5.Auto contracts for H2FY20- Company has finalized few auto contracts for H2 FY20 and few are yet to finalized. Negotiation is on process and will be finalized in a month or two.

6.Expected improvement in Demand- In Q3 FY20 input cost will reduce and steel prices shall move upward with improvement in demand in Oct-Dec quarter with the end of monsoons, increase in the government spending and lowered in liquidity crisis.

7.Kalinganagar expansion under process: Tata Steel, Kalinganagar expansion is under process. Construction of Cold rolled mill and pellet plant will be completed by the end of next fiscal.

8.India upbeat China in HRC exports - India & Russia remained price setters for exports in South East Asian HRC market compared to China. Indian mills aggressively exported HRC to Vietnam this quarter however will be less active in coming quarters if demand picked up in domestic market.

9.Chrome ore auctions - The Sukinda chromite mine lease expires on March 31, 2020. As the Odisha government has not yet notified the auction of this mine. Tata Steel is working towards closing mining at Sukinda as well as associated operations in a smooth and responsible manner. Tata Steel is also exploring alternative business models for its chrome ore business to ensure continuity in serving out long term customers globally

Tata Steel participated in auctions of chrome ore mines. They have received official notification on winning one mine however for second one, notification is yet to be received

10.Tata Steel BSL performance - In Q2FY20 crude steel production was lower by 5% Q-o-Q due to planned shutdowns in seasonally weaker quarter. However deliveries grew by 21% Q-o-Q with higher exports and domestic sales.

It has successfully developed indigenous hot rolled steel for 22 skin panels for India's one of the largest auto manufacturer and commercialized skin panel steel for the commercial vehicle segment. Also it has received approval for API X70 grade HR coils from Indian oil marketing companies and has secured orders for API pipes for cross country pipeline/city gas distribution projects

11.Tata Steel long products performance- Crude steel output stood at 0.15 MnT in Q2FY20 up by 25% which was 0.12 MnT in Q1FY20. Meanwhile steel deliveries stood at 0.11 MnT against 0.09 MnT in previous quarter. However realization were down with lower sponge and long steel prices; further impacted by sluggish automotive sector.Also company has commenced the operations at DRI kilns and pellet plant.

12.Tata Steel is consolidating its Indian subsidiaries - To drive scale, synergies and simplification,Tata Steel is consolidating its Indian subsidiaries in four major business verticals viz. Long products, Downstream, Mining and Infrastructure. The process is expected to be completed in next 6-9 months, subject to necessary regulatory approvals.