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Tuesday, June 22, 2021

Steel prices to support Tata Steel Ltd’s decrease

According to the rating agency Standard&Poor, the continuation of steel cost will reinforce Tata Steel Ltd’s dedication to reduce.

Tata Steel Ltd – an India-based company, has lead the average cost to be raised by Rs 6,000-7000 per ton for the three months until June 2021. This increase is around 10% and this is supposed to rise EBITDA/ton for Tata Steel’s operations to roughly around Rs 30,000-32,000, which is the double approximate profitability.

The strengthening of steel cost might lead to a higher level of rating pressure. If this will happen, the company’s ratio of capitalization from operations (FF) to charges to move over and beyond our update trigger of around more than 25%.

But, the ratio above 25% is not likely to be kept by Tata Steel if the steel prices go back to normal levels which means that the EBITDA/ton will be half the estimate that is now.

The dedication of Tata Steel is repeated in order to decrease its debt for around $1 billion a year since it renews growth fund expenditure.

”We believe the company could outperform this target in FY22 based on current steel prices and capex plans (capital expenditure).” said Standard&Poor.

The total capex of Tata Steel is in total Rs 11,000 for FY22, out of which Rs 7,500 which will go to Indian operations. Moreover, the company has also came with a statement in regards to the renewal of its 5 million ton a year increasing in Odisha since there is a remaining capex of around $2 billion. The advantages from the increasing will be ensued in phases from FY24.

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