Well, let's talk about Tata Steel's numbers. It's been an in-line performance and the stock is reacting. So let me welcome on board Mr. T. V. Narendran from Tata Steel to talk about not just the quarter gone by, but what lies ahead for Tata Steel. Mr. Narendran, great to have you in. First up, I want to talk about the macro setup, and how can we not address the elephant in the room? The trade war concerns now seem to have abated, at least for the time being, the next 90 days, with the US and China now having lower tariffs. China, meanwhile, continues to work on stimulating its economy. How is it that you read into these developments and the kind of impact it's going to have on global steel demand-supply equation?
Yeah, thank you. Thank you, Aisha, for having me on the show. Yeah, globally it's been a pretty volatile few weeks or months, particularly with the actions on the tariffs. It's good that it's settling down because that gives a little bit more certainty to supply chains and hopefully will reduce some of the inflationary pressures that we started seeing. As far as China is concerned, the biggest problem in China, as far as we are concerned, is the construction industry. Pretty much all other sectors are showing an increase in consumption of steel. It's the construction industry which is yet to recover. So we are obviously waiting and seeing if there are going to be any more measures from the Chinese government to prop up the construction industry, because China is still exporting about 10 million tons of steel a month, which is way too much, and that's a concern. But I think overall it's positive that the world is coming to some sort of understanding on tariffs and things are settling in.
Where is it that you think the prices are headed, and could we see upside given that the worst of the trade war impact is behind us?
We've already seen some stabilization of prices both in Europe and in India. The spreads have improved a bit because some of the raw material prices had gone down during the last quarter. As far as India is concerned, the safeguard duties have also helped. So we are seeing margins improving across geographies, which is reflected in our performance within Europe.
Mr. Narendran, after several quarters of losses, Netherlands has finally turned profitable in Q4. Will profitability expand further in the fiscal?
Absolutely. I think the way we look at Netherlands is it's always been a very profitable business for us. It's just that in the last two, three years we had both some external issues and internal issues. The external issues are related to the Russia-Ukraine war and the impact it had on gas prices, electricity charges, and hence input costs. As far as internal issues are concerned, we had a blast furnace relining which took longer than it should have. We had a cold rolling mill upgrade which also had some issues. So we had a challenging couple of years, and which was reflected in the quarterly performance that you mentioned. But last year we've had pretty much full production, almost 6.75 million tons, which is the highest we've done in many years. And even though the spreads have not been great—in fact, the spreads have compressed during the year—you see that the Netherlands business has delivered almost €100 million EBITDA positive compared to the €450 or €500 million negative EBITDA that they had the previous year. So the trajectory is good, and we are focusing a lot on transformation costs, taking out controllable costs both in the UK and Netherlands. So you should see the European business continue on this trajectory.
Specifically, how far have the discussions with the government of Netherlands on the integrated decarbonization and environmental measures reached, if you could just help me with a tentative timeline?
So it's progressing quite well. We've had a lot of deep discussions. We are hoping that during this year we will come to a conclusion. Maybe towards the second half of this calendar year is when we think we should come to some sort of conclusion, because when we negotiate with the Netherlands government, we also need to keep the EU in mind. So the Netherlands government also has to get the requisite clearances from the European Union. So all this is going on. We hope that in the second half of the year we will conclude some sort of an understanding with the Dutch government.
Is there a number? How much grant are you seeking from the Netherlands government?
Well, I can't give you a number, but it has to be substantial because the project is much larger than what we're doing in the UK. Typically, if you look at a thumb rule in Europe, the expectation is 40% to 60% of the capex should be given as a grant, otherwise, honestly, the viability of the business case is not there.
UK's EBITDA, Mr. Narendran, has—you know, the loss there has expanded both on a year-on-year as well as sequential basis because of your lower realizations and higher other expenses that you've incurred. Is the transition now on track?
Yeah, it is. Like I said, Netherlands is already in positive EBITDA territory for the last two quarters; it'll continue to be that way. We've announced that we are going through a big transformation program to take out another €500 million of cost in Netherlands, and a lot of that should start accruing this year. In the UK, we've already taken out about £230 million of fixed costs during the last year. We'll be taking out another £200 million of fixed costs this year, and hence you will start seeing the UK, which has traditionally been a significantly negative EBITDA business, come back to break-even or positive during the year.
