Covid-19 impact: Tata Steel cuts down production across the globe

The firm says the overall impact of the current situation on operations and financials yet to be assessed, management is keeping a close watch

Tata Steel said on Wednesday that it was reducing operations at sites in India and Europe in the wake of the action taken by national governments to contain the spread of Covid-19.

Since the 21-day lockdown was announced in India, steelmakers such as JSW Steel, Steel Authority of India Ltd, and ArcelorMittalNipponSteel India have reduced capacity utilisation.

Not just in India, however, but across the globe, producers have reduced operations. On Tuesday, ArcelorMittal said that in response to decline in industrial activity, it was reducing production and temporarily idling steelmaking and finishing assets, on a country by country basis in alignment with regional demand as well as government requirements.

The overall impact of the present situation on operations and financials was yet to be assessed, Tata Steel said, but the management was keeping a close watch.

The company said that based on specific guidance and approvals received from the relevant district administration, mining operations have been operating normally but integrated steel facilities in Jamshedpur, Kalinganagar, Angul (Tata Steel BSL) and Gamahria (Tata Steel Long Products) have started reducing production levels, and operations in the downstream facilities have been suspended and put on care and maintenance mode.

Tata Steel’s consolidated crude steel production capacity across its units in India is at around 19.6 million tonnes.

The company further said that in view of restrictions in despatch of finished goods and poor market conditions due to the shutdown of customer operations in automotive, construction and other segments, shipments to customers have been curtailed.

"The company is focused on conserving cash and liquidity and are reducing the cost base to align with the operating and market situation with strong focus on working capital management," it added.

However, Tata Steel has clarified that all payments to MSME vendors and contract workers are being done on due dates.

The company said that it has taken several initiatives to ensure that the operations are in a state of readiness to ramp back and serve customers once the situation improves and normalcy is restored.

On Saturday, Tata Metaliks, a subsidiary of Tata Steel, had announced that in view of the practical constraints of continuing operations and despatches and safety & health of employees and other stakeholders, it was suspending production of pig iron and DI pipes at its plant in Kharagpur, West Bengal till the situation improved.

In Europe, Tata Steel said that it was currently operating all four blast furnaces at a reduced level across the two steelmaking hubs – in Ijmuiden in the Netherlands, and Port Talbot, Wales and despatches to customers is currently continuing at the revised levels.

The overall European steel demand has sharply reduced compared to the normal conditions and many of our customers have paused production, including European car manufacturers, the company said.

"Tata Steel Europe has therefore reduced production at some of the European mills to match this lower demand. The business is focused on preserving cash and liquidity to tide over the challenging period," the company added.

However, Tata Steel Europe is continuing supply of steel products vital for society, including for food packaging, where demand has increased for canned food.