NEW DELHI: Govt must keep a watch on unfairly priced steel imports, Tata Steel MD and CEO TV Narendran told TOI in an interview, while adding that the price of the key industrial product is expected to rise in the domestic market in the current quarter. He also said that EU’s carbon border tax (CBAM) will have little impact on Tata Steel’s Indian operations and is a positive for its Europe business, as it levels the carbon cost for all suppliers selling into the region.Tata Steel CFO Koushik Chatterjee said the company managed to protect its margins in one of the toughest years for the steel industry in five years and that the India-EU FTA is an opportunity for Indian companies to transition into low-carbon technologies to export into the EU. Excerpts:PAT has jumped sharply year on year. How do you see the third quarter numbers?Chatterjee: The last three quarters’ consolidated numbers had an almost consistent EBITDA margin of about 15% in spite of very weak markets, especially in the second and the third quarter. It is attributable to the cost-takeout program that we announced in the beginning of the year, and we are almost on track, except in the Netherlands, where delays in the negotiations with the unions have pushed timing. What would have come by March will come now around June once the restructuring is completed. Our target has been to be in that zone of 15% EBITDA margin consolidated, which is essentially in the region of 22 to 24% for a standalone basis. With the Kalinganagar plant now commissioned almost fully and the downstream products mix also coming into play, India margins will look to expand. In the Netherlands we should see margin expansion because of consistent operating performance and two big regulatory impacts — CBAM, which will push the price up, and tariff quotas, which will come in from July. Overall, in one of the most challenging years in the last four or five years, we have been able to maintain this, we should be holding on to our cost gains and building on it. When the market provides that tailwind, we should be in a better position.Global and Indian steel prices have been weak. What is your outlook on margins for the next two quarters?Narendran: Steel prices seem to have hit its bottom in the last quarter. We are expecting steel prices to go up in India; realizations will be about Rs 2,200 higher per tonne for India for Tata Steel in the fourth quarter compared to the third. While the spot prices have started going up, the realizations quarter on quarter for us will be down about Rs 3,200 because of the mix, because we’re selling more volumes and some of the lower-price segments even though spot prices are up. Overall, we expect margins to be better in Q4. Volumes are also better for us in Q4 compared to Q3, by almost half a million tonnes and hopefully the momentum will carry on. We are watchful on coking-coal prices which have also gone up by about $50 in the last few weeks. The worst is behind us.Given India’s dependence on imported coking coal, are you seeing any structural relief on sourcing, or is cost volatility continuing?Narendran: Coking coal is not a very liquid market; it’s highly volatile depending on one-off events. If bad weather in Australia impacts ports, then coking coal prices shoot up. That’s a problem compared with iron ore, which is a much more liquid market for Tata Steel India. Most of the coal we import will be from Australia because that’s the best coal for us. The US trade deal opens up options from the US but those are not suitable for most of Tata Steel’s coal carbons because we use a technology called stamp charging for which Australian or Indian coal is better. The US coal is not so great… We buy some volumes for India where we use top-charged coal, coke-making technology at small volumes, but we buy coal from the US for the Netherlands. This will be a volatile market.On CBAM, how do you view the EU’s CBAM regulation and what impact will it have on your business?Narendran: CBAM is actually a carbon-equalization tax; it is less of a trade issue and more of a carbon-equalization tax. We operate in Europe, where we pay a carbon tax in Europe and CBAM ensures that anyone who sells in Europe pays the same carbon tax. So CBAM is positive for our European operation. We don’t sell much steel from India to Europe. So we are not impacted by CBAM significantly for the Indian operation.Indian steel volumes have been very strong. Which sectors are driving demand, and do you see any early signs of slowdown?Narendran: Indian steel demand has been strong. We’ve always said over the last few years that steel demand growth in India will be at a higher growth rate than the GDP growth rate because it’s investment-led growth. Earlier it used to be more consumption-led growth. So, if GDP was growing at 7%, steel demand would grow at 5%. Now when GDP is growing at 7%, we are seeing steel demand grow at 9-10%. We are seeing strong growth across sectors. Automotive is very strong. Construction is also continuing to pick up because of infrastructure spending. Some concerns have been payments from state governments; particularly the MSME sector gets impacted when projects’ payments come late, so liquidity has been a bit of a concern in the market. Otherwise, from a pure demand point of view, the Indian demand story has been great.How confident is Tata Steel in maintaining current utilisation levels at its Indian factories amid imports and rising competition?Narendran: We’ve always had among the highest capacity utilizations in the country. We are pretty much at 100% all the time, every year apart from the COVID year. Otherwise, we run full out unless there is a planned shutdown like blast-furnace refractory linings. Largely we are confident because we have a very strong franchise in the domestic market. Our exports are typically 5–10% of production because we are able to sell all that we produce in the domestic market. I don’t see that as a problem. We work well in advance of production to develop inroads in the market.How do you see the India-EU FTA impacting Tata Steel, given your international operations, and will it help collaboration on green steel?Chatterjee: One important thing in the FTA has been that CBAM has been kept as a carbon-equalisation measure because local players in the EU pay that carbon cost. CBAM itself is meant to trigger transition to green steel. We are seeing that in the Netherlands where we are involved and others of our peers are doing that and it may help Indian companies move towards a green-steel configuration especially those who want to export into the EU. To export into the EU you have to reduce your carbon footprint and modify technologies which will ensure CO2 levels go down. The carbon tax or the EU ETS tax will be a hindrance in exporting competitively into the EU. If the EU increases spending on defence, infrastructure and engineering, it can become an attractive market needing low-carbon steel. It is an opportunity for Indian companies to think about transiting into low-carbon technologies and making green steel if they have interest in exporting into the EU.How effective have recent safeguards by the Indian govt been in protecting the steel industry, and what more does the industry expect from the government?Narendran: The safeguard has been helpful. When it was announced, it was for six months, which created uncertainty; the notification ended in Nov and there was a period when it was not sure if it would get extended. That confirmation is helpful to give us long-term certainty. It’s been extended for another two years which is good. While we had originally asked for more safeguard, even this level is fine for the time being. Our ask of the government is always to keep a watch on unfairly priced imports. The steel sector is the biggest private-sector capital investor in the country and we shouldn’t be derailed by unfairly priced imports from countries and companies who are not making money at those prices. The second part is whenever there are trade complaints action should be taken fast because the damage is caused fast. The third part, which is already getting addressed in the budget, is to continue to spend on infrastructure because that not only helps demand for steel but also lowers the cost of doing business outside factory gates — logistics and transportation costs are important components of our costs. These are the areas where we can get help from the government, which we’re getting.What are Tata Steel’s top priorities over the next three years?Narendran: First, continued growth in India, not only in volume but also in terms of the right product mix. We will keep investing in downstream businesses. Second, transformation in Europe both in terms of financial performance in the UK as well as moving to greener process routes in the UK and the Netherlands. Third, in the Netherlands, where we are dealing with some challenges to our social licence to operate, we need to address those.There is a probe underway by the CCI against major steel players, including Tata Steel. What is your response, and have there been any discussions with the government?Narendran: We will follow due process. These are allegations being made and we have accessed the report and are reviewing it. From what we’ve seen, the commentary is more on steel prices moving up and down; steel prices reflect global prices and commodity movements like coking coal costs. It’s very open and transparent so we will make our submissions to the CCI. We will have the opportunity over the next few months and we feel we’ve done nothing wrong. Steel prices move up and down. We’ve also had the lowest steel prices in the last few three years so I don’t think anyone anywhere can control steel prices simply because it’s a global product and its price is determined by international factors. We’ll make a submission to the CCI and hopefully they will hear and appreciate our point of view.