Today we will talk to the management of Tata Steel. We had a special conversation with the CEO and MD of Tata Steel, T.V. Narendran, on the quarter one results. Let's listen. Here are Tata Steel's quarter one numbers. The numbers show resilience and strength in the stand-alone India operations as always. What is special in the results and how is the growth outlook? Also, the European operations that everyone is watching. What does the outlook say? For a full discussion on this, we have the company's MD, T.V. Narendran with us. Sir, welcome to the show, namaskar. First of all, congratulations. The India operations are showing very good growth consistently. And on that, my first question will be. Now, if you look at the results, because during the quarter there were probably price hikes, so there is an impact. The big question is: will the tailwinds you've been seeing so far continue going forward?
If you look at a holistic level, India's growth is still strong. The automotive sector is very strong. Whether it's three-wheelers, two-wheelers, or commercial vehicles, it's very strong in all sectors. Construction will be slightly lower this quarter because normally monsoon time construction is a bit soft. But overall, the India demand story is strong and that's why we are continuing to invest to grow in India. Regarding prices, last quarter we got a benefit of almost ₹6,000 from price increase compared to Q4 of last year. So for this quarter, Q2, our forecast is that price will be lower by ₹1,500 compared to Q1, but volumes in Q2 will be better because in Q1 we had a shutdown, so you might have seen that volumes are slightly lower. So volumes will be better in Q2. Prices may be a bit lower, but overall we will, I think, deliver a better performance in Q2 than Q1 also.
Certainly, we may see slightly better volumes in quarter two. But if you look at the European operations, over the years there has been a good improvement. Now going ahead, what will happen in European operations?
If you look at Europe, in the UK, as we said last year, we are continuing to show a reduction of losses quarter on quarter. It has not yet reached break-even. But you will see that Q2 losses will be less than Q1 and will be quite close to break-even. And hopefully by the end of the year we will break even in the UK. In the Netherlands, we had some specific issues. Our direct strip plant, DSP, which accounts for 20% of production, was closed the entire quarter because there were some environment-related issues and we have now gotten permission to run it. And from the 5th of August we will start production again. We have permission to run it for at least one month. And that will help us in volumes. In Q2, the Netherlands volumes will also increase. Costs will also be slightly lower. And we expect Q2 performance of the Netherlands also to be better than Q1. So both Netherlands and UK, Q2 will be better than Q1.
Certainly, quarter two may be better than quarter one. That in itself is significant. But let's talk about prices, sir, and China's influence is very strong. In such a scenario, steel is being exported from China. Now, if we look at Indian prices in terms of imports, there seems to be a slight difference. What are the updates on this?
There is a two-fold challenge from China. One is the direct challenge: steel exports. As you said, China's exports are still more than 10 million tons per month, so that has an impact. Some material is coming to India as well, but more than that, international markets are not available now for most Indian players simply because Chinese prices have really depressed international prices. So that is one challenge. The second challenge is that if you look at China's indirect steel exports, meaning products that use steel, their exports are now more than steel exports. Almost 110 million tons of steel exports are happening, and besides that, 150 million tons of products with steel. So that is impacting our customers. You see, they have exported 10 million tons of cars. If you look at appliances, they continue to export huge volumes. If you look at excavators, mining equipment, a lot of equipment and machinery, China is now exporting and it is a dominant player in many markets. That will impact us indirectly because customers are getting impacted by this. And that's why we feel that as a country and as industries, we always need to have a strategy to be...
Sir, in quarter two you said that volumes may increase from here, but prices may remain slightly subdued. There could be a slight decline. But importantly, regarding your coking coal, raw material costs, what changes are you expecting during quarter two?
The pricing guidance we have given is largely for India. The prices in India, as we said, will be ₹1,500 lower compared to Q1 in India. In Europe, actually in the UK, we are expecting our prices to be about 80 pounds per ton higher in Q2 compared to Q1, and in the Netherlands about 10 euros per ton higher in Q2 compared to Q1. There it is a different impact. But in the UK, the entire benefit will not come to the business because a substrate cost is also going up. Overall, coal prices: our guidance is that in India, maybe about $5 per ton higher in Q2 compared to Q1, and in the Netherlands maybe about... rather, India about $10 per ton higher Q2 over Q1, and Netherlands about $5 per ton higher.
