Two leading steel manufacturing giants, renowned for their dominant presence in India’s metal industry, are facing significant financial headwinds. Recent financial reports reveal a concerning decline in their cash reserves over the past two fiscal years, primarily attributed to intensifying competition from subsidised Chinese imports and market pressures following the post-pandemic steel price correction.
Import Impact
Tata Steel’s reserves dropped to Rs. 8,677.7 crore in FY24, a 45% fall from FY22. This decline stemmed from China’s post-COVID property crisis, which led to overcapacity and a surge in steel exports. Cheap, government-subsidised Chinese steel imports reached an eight-year high, undercutting domestic steelmakers profits.
Between 2022 and 2024, China’s finished steel exports to India surged 2.4 times, and hot-rolled coil (HRC) imports jumped 28 times, creating significant price pressures on domestic steel.
Industry Challenges and Outlook
JSW Steel reported double-digit profit drops in Q2FY25, while Tata Steel saw a 13% sequential profit decline despite turning profitable. Analysts remain cautious, citing weak post-festive demand, low steel prices, limited exports, and China’s muted stimulus.
In FY24, JSW Steel’s reserves dropped 28% to Rs. 12,348 crore. Free cash flow remained negative for these two firms, reflecting ongoing challenges.
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Capital Expenditure
Steelmakers face reduced cash reserves and shrinking profits, limiting their ability to pursue ambitious capital expenditure (capex) projects. Tata Steel is reconsidering its capex plans due to cheap imports and pricing pressure. Managing Director T.V. Narendran stated that current EBITDA levels in India don’t justify large-scale investments.
The company has ongoing capex commitments in India, the UK, and the Netherlands, including major transformations at its Port Talbot and IJmuiden steelworks.
Future plans
In India, Tata Steel plans to invest Rs. 10,000 crore annually to expand capacity to 40 MTPA, including projects in Kalinganagar, Jamshedpur, and Ludhiana. Meanwhile, JSW Steel has reduced its FY25 capex target by Rs. 4,000 crore and estimates Rs. 1 lakh crore in investments by 2030 to reach a 50 MTPA capacity.
Written By Fazal Ul Vahab C H
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