Tata Steel update on 2QFY20 volumes

Global business confidence remained subdued during 2QFY20 as weakening economic activities and prolonged uncertainty over trade conflicts impacted investment decisions and trade flows. The accommodative monetary policy stance by key advanced and emerging market economies is yet to show any noteworthy impact on economic activity levels. Consequently, apparent steel demand remained weak, weighing on steel prices across geographies. Though the regional spot steel spreads have begun improving since mid-July'19 from the lows of 1QFY20 with softening coking coal and iron ore prices, the meaningful benefit will flow through in the next few quarters. In Europe, the steel industry continued to face significant headwinds amidst lower demand conditions due to Brexit uncertainty and trade conflicts.

During the quarter, overall economy activities in India further weakened as reflected in low investment sentiment and demand slowdown as is evident in plummeting vehicle sales and weak GST collections; This combined with a seasonally weaker monsoon quarter adversely affected overall demand for steel. The Indian government has announced various measures to stimulate economic activities and market sentiments, however the benefits of the same in terms of new private investments and improved domestic consumption will potentially manifest only in the longer term. The recent rate cuts by the Reserve Bank of India are a welcome step to improve liquidity though transmission of the rate cuts is not evident and hence the credit offtake has not yet picked up. However, as the monsoon season comes to an end and the festive season starts, an improvement in sentiment is expected to trigger a pick-up in consumption and thus, steel demand.

In this environment:

-- Tata Steel India's 2QFY20 sales volume increased by 5%QoQ primarily with better volumes at TSBSL. During the quarter, lower volumes to Automotive segment were compensated by higher exports while deliveries in Branded Products & Retail segment and Industrial Product & Projects segment were maintained. Tata Steel India's Crude Steel production was flat on QoQ basis.

-- Tata Steel Europe's 2QFY20 production volume was lower primarily with adjustments related to weaker market conditions, planned summer shutdowns and unplanned outages; sales volume was flattish on QoQ basis.

Tata Steel Production Volume1:

Tata Steel India production in 2QFY20 stood at 4.50 million tonnes (provisional) compared to 4.50 million tonnes in 1QFY20 and 4.30 million tonnes in 2QFY19.

Tata Steel Europe production in 2QFY20 stood at 2.46 million tonnes (provisional) compared to 2.65 million tonnes in 1QFY20 and 2.42 million tonnes in 2QFY19.

Tata Steel South East Asia production in 2QFY20 stood at 0.57 million tonnes (provisional) compared to 0.58 million tonnes in 1QFY20 and 0.54 million tonnes in 2QFY19.

1. Production Numbers: India - Crude Steel Production; Europe - Liquid Steel Production; South-East Asia - Saleable Steel Production.

Tata Steel Sales Volume2:

Tata Steel India sales volume in 2QFY20 stood at 4.14 million tonnes (provisional) compared to 3.96 million tonnes in 1QFY20 and 4.32 million tonnes in 2QFY19.

Tata Steel Europe sales volume in 2QFY20 stood at 2.28 million tonnes (provisional) compared to 2.26 million tonnes in 1QFY20 and 2.27 million tonnes in 2QFY19.

Tata Steel South East Asia sales volume in 2QFY20 stood at 0.61 million tonnes (provisional) compared to 0.62 million tonnes in 1QFY20 and 0.65 million tonnes in 2QFY19.

2. Figures for Tata Steel India includes Tata Steel Standalone, Tata Steel BSL (from 18 May 2018) and Tata Steel Long Products (from 09 April 2019) without eliminating inter-company transactions.

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