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%.

New complex in Kalinganagar

Fortune 500 India: Tata Steel scripts stunning recovery