Tata Steel targets over 60% value-added portfolio to cushion cyclicality amid rising input costs and global uncertainty

The company said downstream products currently account for around 35-40% of its portfolio. Management said the strategy is aimed at reducing exposure to the volatility seen in basic steel products such as hot rolled coils and construction steel, where pricing pressures tend to be sharper.

“The more value-added you are, the more you go towards the end consumer, the pressures will be a bit less,” Tata Steel chief executive officer and managing director T V Narendran told FE.

Expanding downstream footprint

The steelmaker is expanding its downstream footprint through investments in tubes, wires, galvanised products, packaging steel and colour-coated steel. It recently acquired the remaining stake of its joint venture partner BlueScope in the coated steel business and is also adding a hot rolled galvanising line at Tarapur. The company is additionally expanding packaging steel capacity by about 300,000 tonnes.

Management had said during the fiscal fourth quarter earnings call that value-added products typically add 5-10% incremental EBITDA over commodity steel products.

On steel prices, Tata Steel said the January-March recovery largely offset the sharp declines seen till November-December, with prices only recently moving above last year’s levels.

Current price levels appear sustainable

Narendran said current price levels appear sustainable due to rising input costs, which will need to be passed on at least in part, improving global market balance and reduced import pressure. Chinese steel prices have risen by $20-25 per tonne in recent weeks, while exports from China have moderated from 11-12 million tonnes a month to 9-10 million tonnes, helping tighten international markets, he added.

Narendra added that the safeguard duty gave the domestic steel industry policy certainty at a time when Chinese exports were at peak levels globally. He pointed out that the steel sector is among India’s largest private capex contributors, with annual investments of Rs 50,000-60,000 crore, and therefore required assurance that these investments would not be undermined by a surge in low-cost imports. 

The company also pointed to the weaker rupee making imports less competitive. However, it cautioned that seasonal softness in long products during the monsoon period could continue.

Tata Steel maintained that demand conditions in India remain supportive despite concerns around a broader economic slowdown. Steel consumption growth has consistently outpaced GDP growth in recent years and domestic demand is expected to comfortably absorb the additional 2 million tonnes of volumes Tata Steel expected to add in FY27.

The company added that infrastructure-led growth, automotive demand and its expanding retail distribution network continue to support consumption.

On the impact of tensions in West Asia, Tata Steel said the region has increased costs and supply-chain risks linked to freight, energy and raw materials. The recent fuel price hike is expected to have only a limited direct impact on Tata Steel’s logistics costs because 90% inbound movement happens through rail and sea, while outbound uses more road transport.

“We are more looking at what is the impact of fuel price increases on the commercial vehicles business of auto companies, because that to us has a bigger impact if commercial vehicle sales drop, then that hurts the sentiment of the auto industry,” Narendran said. 

Separately, Tata Steel said it expects another Rs 7,100 crore in cost transformation savings during FY27 after achieving savings of over Rs 10,800 crore in FY26. Management said digitalisation and AI are increasingly driving these efficiencies through predictive maintenance, procurement analytics, inventory forecasting and operational optimisation across plants and offices.

It has also earmarked Rs 20,000 crore in capex for FY27.