Tata Steel Expects Royalty Costs For Iron Ore To Fall More Than 60% In Q3

Tata Steel Ltd. expects royalties on iron ore, one of the factors that weighed on the steelmaker’s operating income in the second quarter, to decline more than 60% in the three months ending December.

Following the rollout of the new mineral code, the company’s royalty cost for the key steelmaking raw material rose to Rs 1,000 crore for the quarter ended September, Koushik Chatterjee, executive director and chief financial officer at the company, said in an interview with BloombergQuint. That's likely to fall to at least Rs 400 crore in October-December, he said.

Tata Steel’s operating profit rose 2.1% sequentially to Rs 16,456.1 crore in the second quarter. That missed the consensus analysts’ estimate Rs 19,025.4 crore. Besides higher royalties, rates and taxes at its European unit, an increase in energy cost and adverse forex impact at overseas entities ate into the operating income.

Still, Chatterjee said a 40% Ebitda margin domestically definitely puts Tata Steel’s India business “at the top of its game globally”.

Further, the company expects to hike prices to an extent of Rs 2,500 a tonne across products for the quarter ending December. He expects coking coal costs to rise $80 a tonne sequentially.

He expects European spreads to improve more than 150 euro a tonne for the third quarter despite higher coal prices as steel prices continue to rise in the region.

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