Has Tata Steel’s long-awaited European honeymoon begun?
India’s steel conglomerate may have hit upon the right formula in its European operations by catering to a niche market: rail.
Having acquired Corus about 7 years ago, Tata Steel’s European dealings have been keenly watched by steel analysts. Even as it struggles, like any other steel company in India, against the dumping of cheap Chinese steel, Tata’s European operations seem to be showing the first signs of a revival.
The company announced that it would be supplying wear-resistant rails for London’s Crossrail project. The Crossrail route will serve 40 stations over 100 km from Reading and Heathrow in the west, via twin-bore 21-km tunnels below central London, to Shenfield and Abbey Wood in the east.
It also launched an innovative and stronger structural steel tube product in Europe called Celsius 420, which can be used in the construction of buildings and to reduce the weight of machinery or large vehicles.
We at MetalMiner reported way back in 2013 that rail steel was a new line of business being contemplated by Tata to chart a new growth path.
According to reports Tata has already started delivering the rails for the Crossrail project and, by its end, the company will have supplied the project with over 57 km of its heat treated, wear-resistant rail, and supplied about 7,000 tons of rail to create one of Europe’s largest railway redesigns.
Celsius 420 is being described as “next-generation steel.” An Economic Times report quoted Henrik Adam, Tata’s chief commercial officer Europe, as saying the Celsius range was already a well-known product for structural hollow sections, a type of metal profile with a hollow tubular cross section.
“In Celsius 420, we’re bringing to market an entirely new range of hot-finished hollow structural sections that we think is in a class of its own,” he claimed.
This could significantly impact business at Tata Steel, especially after it had, earlier this month, posted a 69% drop in its Q3 quarterly earnings due to shortages in raw materials, the cheap imports and the lower Russian ruble hurting its European and Indian profitability.
European Chief Executive Karl-Ulrich Köhler said of the quarterly results that European steel demand continued to recover in 2014 and was expected to improve modestly again in 2015.
A week ago, the company announced a decision to acquire three strip product service centers in Sweden, Finland and Norway from rival SSAB to strengthen its product offering in the Nordic belt. In Norway, Tata Steel already owns 50% of the service center, and had decided to buy the remaining stake held by SSAB.
Köhler was quoted as saying the move would strengthen the company’s grip on the European operations, and improve the local processing capability. The center offer services such as cutting-to-length, slitting and recoiling, supplying the strip steel to automotive, construction and electrical supplies customers in the region.
The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.