After Tata Steel's big losses, shareholders could ask if it's time to sell Corus

livemint.com:

Tata Steel's substantial net loss of ₹12,560 crore in the second quarter of fiscal 2024, mainly attributed to the restructuring efforts in its UK and mainland Europe steel operations, raises questions about the company's strategic view and intent on its European business. Tata Steel faced a dual challenge, marked by impairment charges and restructuring provisions related to its UK business. Its other challenges include overcapacity, economic uncertainties, high fixed costs, legacy liabilities, and trade tariffs.

Economic factors, such as fluctuating demand and Brexit add to the complexity. High fixed costs and legacy liabilities are difficult to reduce in the short term, and trade tariffs impact exports and imports. The company has continued to express concerns regarding the sustainability of its European business, citing insufficient cash flow and liquidity.

Tata Steel's thriving Indian operations and the struggles in Europe present a stark contrast. While India maintains a healthy profit margin, Europe lags behind. A significant portion of the impairment and restructuring costs pertained to the decarbonisation project undertaken in the UK as part of a £1.25 billion investment with the UK government.

This initiative involves the establishment of a 3 million tonne electric arc furnace (EAF) at the Port Talbot facility, designed to replace existing carbon-intensive assets. As a result, Tata Steel decided to impair these heavy-end assets, incurring an impairment charge of ₹2,631 crore. The transition to EAF technology is expected to yield substantial savings, including carbon cost reductions in the range of £50–60 per tonne.