Tata Steel focusing on long term
Tata Steel,
India's second largest steel producer, in contrast to most other steel industry players which have taken advantage of the global boom in the steel industry and hiked their prices by as much as 100%, actually cut its prices by 10% this year for some of its key customers.
According to Tata's Chief Executive B. Muthuraman, the price hikes implemented in the last year by steel producers have harmed the health of the global steel industry and is encouraging more and more customers to consider using alternatives to steel.
There is a common worry in the market that the combination of high prices and capacity expansion projects may damage the healthy
trading environment that the steel industry has enjoyed for the last 18 months and flood the steel market with excess supply.
According to US consultancy firm World Steel Dynamics, there is a 60-40 chance that within the next 6 months world steel supply will surpass demand and put the industry's profits at risk.
Tata Steel is also in the process of building new steel facilities that are expected to increase the company's annual steel output from 4 million tons to 15 million tons by 2008. The extra output takes into account $6 billion worth of proposed expansion projects in
India in addition to the impact of
Tata Steel's recent $286 million takeover of
Singapore's NatSteel.
However, Tata's CEO Mr. Muthuraman has stated his belief that the company's planned output increases are realistic and “sensible” in relation to market conditions.