Tata Steel MD: Government policies and aid must clean up India’s dirty steel industry

TV Narendran, managing director of Tata Steel Ltd, said the government must provide financial and policy support if the steel industry is to reduce emissions.

Tata Steel closed its second and final blast furnace at its UK plant in September, the same month it commissioned India’s largest blast furnace at its Kalinga Nagar plant in Odisha, signaling the trajectory of both countries. There are disagreements.

“Whatever facility we build, we will be one of the cleanest and greenest facilities in the country. We always want to be the benchmark wherever we do business,” Narendran said in an interview.

“Having said that, it also depends on policy,” he said.

Narendran said European regulations require companies to pay 65 euros for each ton of carbon dioxide emitted. He said the taxes leveled the playing field for everyone and justified investment in emissions reduction processes.

However, the lack of such regulations in India has not pushed steelmakers to switch to clean technologies, Narendran said, adding that Indian steelmakers could reduce emissions in various ways, such as using more scrap in the manufacturing process. , but this will increase the cost.

“No customer (in India) is willing to pay more for it. The regulator doesn’t give me any incentive to do so. In Europe, customers are willing to pay more for green steel; the regulation encourages you to reduce your CO2 footprint,” he explain.

According to a 2022 study by the European Commission’s Joint Research Center, steel produced in India is the most polluting in the world, emitting an average of more than 2.6 tons of carbon dioxide per ton of steel. This is 20-25% higher than China, which is the second dirtiest country.

Mainly blast furnace

In India, steel is primarily produced in blast furnaces, which smelt iron ore into iron at high temperatures while emitting carbon dioxide and other pollutants. These blast furnaces use coke as input, which is produced by heating metallurgical coal in the absence of oxygen, a process that emits a variety of pollutants including nitrous oxide.

The alternative to blast furnaces in India is the use of kilns to produce direct reduced iron (sponge iron), a process preferred by small secondary steel producers. These kilns also burn coal and cause serious pollution.

Narendran, however, did not place the burden of reducing emissions solely on policymakers.

“Of course the industry has to pay some costs. I’m not saying everything has to be passed on to customers or to the government. But the government has to pay some of the costs and customers have to pay,” he said.

Narendran compared it to the clean energy and electric vehicle industries, where government subsidies helped the industry reach scale before competing with traditional technologies.

European government funding

Even in Europe, governments have funded steelmakers’ transition to clean technologies. The UK government will fund £500m of the £1.25bn cost of Tata Steel’s move to cleaner steelmaking. The company is in similar discussions with the Dutch government to obtain subsidies for closing blast furnaces in the country.

Tata Steel’s profit margins in India are likely to shrink further this quarter as steel prices remain low. The company has lowered its achievement target to $2,000 per ton in turn.

Although domestic demand remains strong, Indian steel prices continue to fall in line with depressed global prices.

“The market is still a bit fragile, but I think things are improving little by little. So, let’s wait and see,” Narendran said.

Steel demand may fall

While steel demand from the automotive industry may take a hit from slowing car sales, demand from the construction industry remains strong, he said. Demand for trucks, two-wheelers and tractors was also strong, supporting steel sales, he added.

Tata Steel successfully deleveraged its balance sheet during a period of rising steel prices four years ago, and the company’s debt has continued to rise. The company’s net debt reached its highest level since fiscal 2021 as of September 31 $88,817 crore, the net debt to Ebitda ratio was 3.41, exceeding the guidance of 2.5-3.

“We’re not comfortable with that. Obviously we want to get it down to 2.5,” Narendran said. He said debt had increased in recent years due to the acquisition of Neelachal Ispat, capacity expansion at Kalinganagar and restructuring in the UK.

“In the next few quarters you will see debt come down a bit and by fiscal 2026 we will be at (net debt/Ebitda) 2.5; that’s our plan,” he said.