TATA STEEL broke a seven-year profitability streak in FY24. Its consolidated loss touched ₹4,437 crore, higher than even FY15 (₹3,926 crore) and FY16 (₹3,049 crore) as geopolitical concerns and moderating demand from China put pressure on prices and environment and regulatory costs dented profitability. Total income fell 8.74% to ₹2.26 lakh crore due to lower sales, elevated raw material costs, sharp fall in volumes at Tata Steel Nederland (TSN) B.V. and high operating costs in the U.K. These hurt business in all three key locations: India, the U.K. and the Netherlands. Also, higher Chinese exports amid an economic slowdown there softened prices globally, affecting profitability.

While these factors hurt the industry as a whole, some challenges were unique to Tata Steel. One was high exposure to Europe where it faced high energy prices and tough carbon emission rules. For example, the relining of blast furnace number 6 at TSN took longer than expected. This affected production and caused an EBITDA loss of £368 million. It also earmarked ₹7,814 crore as exceptional costs for surrendering mining leases in Sukinda, Odisha, and for the employee separation scheme in Europe. Total debt was ₹87,082 crore at the FY24.

But, the T.V. Narendran-led steel giant has made a quick turnaround. The Tata Group firm is number one in the profit-to-loss category in the ₹1 lakh crore income band.

Turnaround Story

The recovery in profitability in H1 FY25 shows the fiscal year may turn out well for Tata Steel. The company reported a 51.4% increase in profit to ₹959.61 crore in the first quarter, though revenue slipped 8%. EBITDA surged 29% and EBITDA margin touched 12.1%. Q2 was also positive with steady volume growth. Crude steel production rose 5% to 5.3 million tonnes. The company reported a net profit of ₹833.45 crore compared to a net loss of ₹6,196.24 crore in the same quarter of FY24.

The European operations, however, remain muted. “The global operating environment has remained challenging due to subdued economic activity, inflation and geopolitical tensions,” says Narendran. Elevated steel exports from China have distorted the global trade, affecting prices, he adds. In 2023, China exported around 94.3 MT finished steel, the highest since 2016, and 36.2% more than the previous year. It has exported 81 MT in 2024 so far. India is not even among the top 10 in steel exports with China, Japan and South Korea grabbing the top three spots. It is, in fact, a net importer, with April-October 2024 imports touching a seven-year high of 5.7 MT, primarily from China. At the same time, finished steel exports have dipped to a seven–year low of 2.8 MT so far this year. India is the second-largest producer of steel behind China but there is a big gap between the two. China produced 1,019 MT of steel in 2023. India was at 140.8 MT followed by Japan (87 MT), the U.S. (81 MT) and Russia (76 MT), according to the World Steel Association’s 2024 data. “China exported 10 MT in September, an eight-year high. Various nations, including India, have initiated anti-dumping investigations on select products. While demand from India has remained strong, prices have moderated,” Narendran said in a call with analysts this month. He says as the global operating environment remains “complex,” with key regions facing subdued growth, macroeconomic conditions in China continue to weigh on commodity prices, including steel. “In India, demand continues to improve but domestic prices are under pressure due to cheap imports,” he says. Tata Steel reported a 5.6% dip in consolidated revenue to ₹1.08 lakh crore in the first half of FY25. Profit was ₹1,793 crore as against a loss of ₹5,986 crore in the year-ago period. EBITDA rose 25% to ₹13,046 crore. There was a three percentage point improvement in EBITDA margin from 9.1% to 12%.

Meanwhile, the company is on a massive expansion spree in India as the country contributes the most to crude steel production (67%) and deliveries (68%). In September 2024, it initiated a mega expansion in Kalinganagar, Odisha. It commissioned India’s largest furnace, which will increase the total capacity of the plant from three MT to eight MT. Narendran says the furnace has an eco-friendly design and uses an evaporative cooling system. “Something like this is being used in India for the first time. It is expected to lower water and power consumption by around 20%.” Capital expenditure, was ₹4,800 crore in Q2 FY25 and ₹8,585 crore in the first half of the year, mostly in India. Koushik Chatterjee, executive director & CFO, says the new complex in Kalinganagar will cost ₹3,900 crore. “We will commission associated facilities worth ₹19,000 crore in Kalinganagar in the current financial year.”

Revival in Europe

Both the U.K. and the Netherlands account for 25% of Tata Steel’s crude steel production. The transition at Tata Steel U.K., with planned de-commissioning of two blast furnaces at the Port Talbot plant in Wales to meet the country’s decarbonisation targets, was also affected by higher costs, which put pressure on margins amid subdued demand. The company expects a spillover to Q3 and Q4 as well.

In the U.K., the EBITDA loss widened from about £91 million in Q1 to about £147 million in Q2. “It’s a transition quarter for the U.K. The revenue per tonne was stable while the cost rose £100 per tonne,” says Chatterjee. Tata Steel plans to pump in £1.25 billion into Port Talbot, which will be partly supported by a £500 million grant from the U.K. government. “This investment will preserve steel-making in the region as well as sustain over 5,000 jobs in the U.K.,” says Chatterjee. The company signed a contract with Tenova in October 2024 for a state-of-the-art electric arc furnace. “We expect to start groundwork at the site around July 2025.”

TSN turned EBITDA positive in Q1 FY25 but EBITDA contracted due to weaker demand, lower realisations and higher other expenses, says Narendran. Its Q2 FY25 EBITDA was £22 million compared to £43 million in Q1 FY25. “Liquid steel production in the Netherlands will be much higher than in the previous years. The last, blast furnace six, is operating now.” The furnace was offline since April 2023 for maintenance and upgrade.

In the Netherlands, too, the company has sought the government’s help for decarbonisation. “I do not see the Netherlands capex coming into play in the next 12 months. We are in negotiations with the Netherlands government,” says Chatterjee.

To boost decarbonisation, Tata Steel has also set up satellite R&D centres to leverage national and global tech systems and focus on areas such as hydrogen and mining. “In the U.K., upon transition to electric arc furnace, direct CO2 emissions will fall by 50 million tonnes over a decade,” says Chatterjee.

Expansion Pace Right: CEO

Despite trudging on the recovery path, many say the company has been slow in taking up growth projects, especially in India. Aditya Welekar, senior research analyst, Axis Securities, says de-leveraging will be crucial in FY26 as it’ll be a capex-light year. Analysts at the Investment Trust of India say the Tata Steel management expects Q3 FY25 spreads to be impacted on a QoQ basis.

Narendran, however, says the pace of growth at Tata Steel is “just right” as per the current market scenario. The company is focusing on engineering and getting environment clearances before seeking board approvals, he adds. “This gives us more certainty in execution. We have a public hearing for Neelachal expansion on November 29. Once we have the environment clearance, we can progress fast.”

Tata Steel currently produces 35 MTPA crude steel in India, the Netherlands, the U.K. and Thailand. It is aiming for 55 MTPA by 2030. Narendran says a lot of engineering work is going on and upcoming projects will be announced after the board’s approval. “The focus will be on the Neelachal expansion, which will take it from one MT to five MT. After that we have Kalinganagar, from eight MT to 13 MT, and the Bhushan plant from five to seven MT.” Whether Tata Steel’s recovery continues amid industry headwinds remains to be seen.