Ratan sees difficult year ahead for Tata Steel

Ratan Tata, head of the Tata group of companies, said on Tuesday that the next 12-18 months would be "difficult and challenging" for Tata Steel, but hoped that it would come out stronger from the difficult period to become a more cost-effective manufacturer of steel.

"The past year and probably the next 12-18 months are likely to be difficult and challenging for Tata Steel," he wrote in a letter dated 31 May to the shareholders in the company's annual report. He said the effects of the global economic downturn seriously impacted the company's global operations in the second half of the last fiscal.

"The demand for steel declined 26 per cent in the UK and Europe in the third quarter, compared to a year earlier, and after a further contraction in the fourth quarter, demand had fallen by 57 per cent in the UK and 44 per cent in Europe compared with a year ago," he pointed out.

Indian operations witnessed a less pronounced drop in demand of 11 per cent in the third quarter of last year, reflecting the reduced activity in infrastructure and commercial vehicles, Tata said.

He said Tata Steel would need to make substantial investment in a phased manner to secure raw material from its overseas mines, adding that the company was evaluating several other mineral projects in Brazil and Australia besides the ones it already has.

He said Tata Steel India is fully self-sufficient in terms of iron ore, and with regard to coking coal, the company is 52 per cent self-sufficient.

The country's largest and the world's sixth-biggest steel firm also plans to raise up to Rs5,000 crore through the issue of  securities, and is seeking shareholder approval for the fundraising.