After 13 years of trying to operate in one of the most difficult environments (stringent carbon norms, weak import controls), Tata Steel is again trying to exit Europe. Its plan to sell the Netherlands business (Ijmuiden) to SSAB is a win-win situation for all, say analysts. Emkay Global Financial Services has upgraded Tata Steel to Buy with target price of Rs 638 per share driven by strong steel and weak RM cost environment. The possibility of the divestment of Ijmuiden operations will deleverage balance sheet faster and re-rate the stock, it said.
Meanwhile, domestic steel production and consumption continued to improve in October 2020 both sequentially as well as on y-o-y basis. Both production and consumption of steel have consistently been improving since April 2020.
"Capacity utilisation levels of crude steel improved with the unlocking of the economy and recovery in demand initially on the back of higher international demand before domestic demand began to pick-up which eventually moderated export. After hitting bottom in April 2020 at 27 per cent, capacity utilisation rate of crude steel returned to year-ago level of 76 per cent in October 2020," CARE Rating said in October month steel update report.
As regards the sector outlook, the rating agency said the domestic steel production and consumption is expected to remain steady going forward in October-March (H2FY21). "For the whole year FY21, we expect crude steel production to be lower by 10-12 per cent and consumption to be lower by 14-17 per cent, mainly impacted by poor first half. While large players have reported faster return to normalcy after covid-19 impact, the recovery by smaller players are expected to be long and protracted due to their limited diversification and weaker financial flexibility," it said.