Tata Steel's Ambitious Expansion Plans Set to Drive Growth in the Steel Industry

Tata Steel's Growth Strategy

Tata Steel has announced its expansion plans, which are expected to drive growth for the company. According to market expert Parthiv Jhonsa, the management has laid out a clear roadmap for growth, focusing on both legacy facilities and new, efficient projects.

Key Components of the Growth Strategy

• Expanding Capacity: The company plans to organically expand the capacity of Neelachal Ispat Nigam Limited (NINL) at Meramundli from 1 million tonnes to 4.5 million tonnes.
• Tie-up with Lloyds Metal: Tata Steel has tied up with Lloyds Metal for a slurry pipeline connecting its Barbil mines to the Kalinganagar facility, which can be further extended to a port-based pipeline.
• Low-Carbon Technology: The company is also investing in a 1-million-tonne pilot project in Jamshedpur using a low-carbon technology developed in the Netherlands, which is expected to be more efficient and cost-effective.

Financial Implications

Parthiv Jhonsa noted that the company's capital expenditure is expected to be substantially lower than a typical greenfield project due to existing land, mines, and engineering work. He expressed confidence that debt would not be a problem for Tata Steel, given its strong earnings before interest, tax, depreciation, and amortisation (EBITDA) of ₹14,000-15,000.

Steel Market Outlook

Jhonsa shared insights on the potential impact of safeguard duties on the steel market. He noted that even without the duty, landed costs of imported Chinese Hot-Rolled Coil (HRC) are currently about 10% higher than domestic prices. With a recent price hike by Chinese major Baosteel, domestic prices are already seeing upward momentum, with a price hike of about ₹500 per tonne observed in key markets.

Metals Space Outlook

Looking ahead to the broader metals space, Jhonsa identified copper as his top pick for the next two to three years, driven by a global copper crunch, lack of new major mines, and no significant reserve discoveries. He also prefers aluminium, which is benefiting from strong demand from both legacy sectors like infrastructure and new-age sectors like renewables and electric vehicles. Zinc, nickel, and lead are also expected to perform well, with zinc's demand closely tied to the Indian steel cycle.