What’s your view on capex, given the challenges the industry is currently facing?

Guidance is for Rp12,000 crore, and we’re sticking to it. We are not cutting it because it is for the expansion of India and Kalinganagar. We have announced that we will double our India capacity over the decade. Of course, we will continue to review it. In the last two years, we have strengthened our balance sheet; so, a rise in interest rates is not too concerning. We have paid off many foreign debts; So, the weakening of the rupiah will not have much impact. We now have more organic than inorganic growth plans, which means more brownfield expansion where we can adjust the pace as needed and also manage our growth pace. To date, there have been no changes to the capital expenditure plan; we are quite optimistic about steel prospects in India. Even now, basic requests are pretty good, and we’re continuing our guide.

Will you be able to recover market share after the export duties are removed?

The increase in China’s exports in May-June was only temporary. In my opinion, it was more in response to the disruption caused by the covid shutdowns. Instead, China’s stated goal is to reduce exports and reduce its carbon footprint. In addition, with the current steel prices, Chinese companies are not making money because of the high price of coal. Chinese companies, in fact, are already starting to lose money at those prices. I expect production cuts, or they will wait for demand to improve in their domestic market.

Second, while the purpose of the export duties is to control steel prices, India must promote exports. China, Japan, Korea, etc. import raw materials and export steel, so why doesn’t India, which has iron ore reserves, export steel.

Also, steel mills were set up in faraway parts, and they created jobs. These are things to be encouraged. When we are in such a competitive position to export steel, why do we only depend on domestic demand? There are cost advantages and scale advantages.

Your European business had a positive surprise last quarter. Will it last? Will the transition to green be a financial burden?

European performance will be better than in the past. European business has various durations (three months, six months and one year long term contracts). This quarter looks at the benefits of all types of contracts. We’ve focused on operational stability, and deployments in Europe have improved and are better than the long-term average. The higher costs and capital expenditure required to go green also means that spreads are likely to be strong. This should help provide better performance due to internal as well as external actions.

Green is inevitable in Europe, but there are also clear policy roadmaps and infrastructure roadmaps; this is a very well coordinated effort, and the government is working with industry in a coordinated manner.

What’s the update on government support for the UK factory?

We submitted the proposal about two years ago and waited for the new government to form. We got a chance of survival because the spread is supportive; so, if cash flow remains supportive, we will continue to be in business. However, there are several assets that will expire in the next two to three years. So you have to shut it down or reinvest getting it up and running. Businesses don’t generate that much cash flow, and then we need to go green as well. So, we have submitted a proposal to the government.

Is there a possibility of unlocking the value in Tata Steel?

Maybe there is a possibility. We invest in new materials business, etc., but we want to nurture it first and take it to a higher level. Someone also asked me if you split the business, your multiple can double. But right now, our focus is on growing this business to a different scale.

Is there a risk of increased debt in the current situation for steel makers now?

If you look from the 1990s, every cycle went down, some manufacturers went out of business. But now, we have reached the stage where there are very few players. Each of us is much stronger than before. I don’t see such a situation, although there may be some churn in long product segments. Smaller players in this case are more fragile. The second area that could create disruption depends on government decisions about public sector steel companies.

In the domestic market, do you expect the government to be the biggest spender, or do you expect private capital spending to increase?

India has traditionally had growth driven by consumption. A welcome change is that now there is a lot of focus on infrastructure, and India can have growth driven by infrastructure investment like any other country. So, we’re going to be relying a lot on government-led growth.

Private sector investment returns in supply chains, electronics manufacturing, etc. Portfolio outflows have been offset by private investment inflows, which have been positive.

What is your view on the commodity cycle?

I expect steel prices in the next decade to be higher than they were in the last decade. The average for the last decade has been around $600 per tonne. In 2015 we saw prices approaching $350. Today at $600, we feel that is ridiculously low. There will be volatility in steel prices but in a higher range.

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