Are we in a commodity super cycle?

I am not sure what is a super cycle. I have seen steel prices at $180 per tonne 25 years back. Then we got used to $600 a tonne, which looked like a super cycle that time. In the last ten years, we got used to $350. Today, it is $800-$850. But if coking coal is at $400 for China, your starting point is $600. But no other country is adding capacity just because steel prices are high. Also, steel is not an attractive industry for investors. That is why I feel prices will stay higher than we have seen in the last ten years.

But you would have looked at long-term trends. Where are we right now?

We are obviously at the higher side of what we have seen. But these are not the highest prices I have seen. Steel prices were higher than this leading up to 2008. We look at much lower prices for long-term planning. We take a long-term average. So, going by the long-term average, we are on the higher side. But the question is, what will bring it down if demand is strong?

Will Indian manufacturers have pricing power?

India has a huge advantage with indigenous iron ore reserves. A lot of our pricing power also comes from our supplies as we don’t control coal prices, which are higher today. India is well-positioned as we believe that consumption of steel will grow strongly.

What are the reasons behind rise in Tata Steel profitability?

Investment in digital infrastructure in the last three-four years helped us. We also pivoted from domestic markets to export markets. From typically 10-15% of the production, exports went up to 40-50% during the time India was shut. This provided agility. Has doubling of steel prices helped? Prices have gone up and have played a very important role in numbers that you see. But we are always focused on cost and how to remain stronger in a down cycle.

Is this the best ever margin?

The EBIDTA margin of the India business in the last 20 years has ranged between 20% and 40-45%. We are now in the 40-45% range for the India business. The Netherlands business is in the 16-18% range and the UK in the 5-7% range.

How did you bring down cost?

Through efficiency metrics. But over the last four-five years, Tata Steel has brought down coal usage by 100 kgs per tonne of steel, having an impact of roughly ₹1,000 crore a year.

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