Tata Steel believes that high energy prices in Europe are a key risk factor

Tata Steel Company posted a record quarterly profit of £12,548 million in the third quarter, boosted by an improved performance of its European operations. But higher energy prices in Europe pose a risk, said Koushik Chatterjee, CFO of Tata Steel.

How does Tata Steel Company approach the problem of rising energy commodity prices?

There has been an inflationary trend around the world. Energy prices are higher in Europe and we see this as a risk factor. But I think this issue is being discussed. In some ways, it will be a winter in which we need to be very careful and take steps to ensure that our exposure to energy prices is reduced, both from a consumption perspective and in taking positions. So, I think this is how we are seeking, in essence, to limit the inflationary impact of these prices on profitability.

Your colleagues seeks to introduce an energy surcharge to cope with rising costs.

In Europe, we have a carbon surcharge of €12 per tonne and it is increasing. When price levels are high, then the increase in costs is passed on to customers. But we need to make sure that we keep our internal actions to improve our efficiency. That is why I believe that this surcharge is logical.

How much is the impact of Chinese policies felt on the steel sector?

China has strategically moved away from exports and is focusing on nationalizing its own capacity, thus reducing production.

So the impact of the decline in real estate construction in China is offset by lower production in China, said Tata Steel’s chief financial officer. It is important to understand that China’s impact on the maritime trade market is slowly diminishing. And as we see, it will have less and less impact on domestic markets.

Steel is becoming much more localized than globalized, as we have seen in the last decade. While China still accounts for 50-55% of global steel capacity, they are working on some path to strengthen, reduce their carbon footprint and focus on better technology, and essentially produce steel for China’s demand.

How do you see the strict standards related to corbon emissions affecting the supply of steel?

The carbon problem is a global problem. So, these emission standards are important. For example, in Europe it is proposed to launch the carbon border adjustment tax. So, the laws in Europe become much stricter and ensure the limitation and reduction of the carbon emissions of the steel industry. It would not allow imported steel to come from anywhere in the world with a higher carbon element in steel.

That is why we see supply shortages in the steel industry. And this is actually one of the structural reasons why prices are high, because there is a limited supply.

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