Global aspirations
World class capabilities
Indian values
Financial highlights
Financials
Chairman's statement
The year that was
Home

home > Chairman's Statement

 

Chairman's Statement

Dear Shareholder,

The global steel industry has seen continued strong demand growth during the year. However,  depressed prices have put pressure on margins.

The consumption of finished steel products world-wide increased to over 1 billion tonnes, an increase of 40 million tonnes. Steel production and consumption in China continued to outstrip global growth rates and now accounts for 31% of the world's production and consumption of steel. Security of raw material supply has become a new priority with various global steel manufacturers seeking captive capacities or long-term commitments for iron ore.

The Indian economy continued to see robust growth across most sectors and the 8% growth rate appears to be sustainable. The Indian corporate sector has shown its confidence in the country's economic fundamentals by committing significant amounts of capital towards the creation of new capacity in several sectors. The Indian steel industry has also increased production to cater to the higher consumption levels. Tata Steel's performance in the past year has understandably reflected the trends prevailing in the country. The Company has been able to post its highest-ever output and sales and has continued to focus on enriching its product mix to meet the demands of sophisticated user industries. Domestic steel prices however have weakened, mirroring trends in international markets.

The Company also continued to pursue its de-integrated production strategy through the acquisition of Millennium Steel in Thailand and the integration of its Singapore subsidiary, NatSteel Asia. It has been able to further enhance its ability to provide value-added products and solutions to its customers and entered into a joint venture with Bluescope Steel, to offer specialized construction products and solutions.

In recent years, steel was regarded as a "sunset" industry and value destroyer world-wide. Today, the industry is characterized by strong demand growth and consolidation. The per capita consumption of steel in India continues to be extremely low at around 32 kilograms. The large infrastructure projects under implementation in the country are expected to significantly increase the demand for steel in the coming years. If India were to have the same per capita consumption as China has today, then India could consume more than 260 million tonnes of steel annually. Reflecting its confidence in India's future development, Tata Steel proposes to establish three greenfield facilities in Orissa, Chhattisgarh and Jharkhand, with an aggregate capacity of 23 million tonnes. These greenfield projects and other strategic acquisition opportunities could see Tata Steel making a total estimated investment of Rs. 70,000 crores in the next decade, constituting the largest investment within the Tata Group. In implementing these projects, Tata Steel will continue its tradition of focusing on community development and rural welfare. Amongst other initiatives, Tata Steel has already undertaken to upgrade the polytechnics and industrial training institutes within the State of Jharkhand.

Over the next decade Tata Steel has committed itself to attaining global scale with output exceeding 30 million tonnes and a strong regional presence. Tata Steel has been recognized as one of the most cost-efficient steel manufacturers world-wide and it is believed that achieving global scale with the same production efficiency will further enhance the Company's global competitiveness. The aggressive move to be a significant steel producer in the industry reflects the new mindset within the Company to have a meaningful global presence. The innovativeness and spirit of the Tata Steel employees, which has always been one of its greatest strengths will, I am sure, meet the challenges ahead and enable the Company to successfully fulfill its long-term vision.




Chairman
Mumbai, 31st May, 2006