Tata Steel Ltd (NSE: TATASTEEL) Q3 2026 Earnings Call dated Feb. 06, 2026
Corporate Participants:
Samita Shah — Vice President, Corporate Finance, Treasury & Risk Management
Koushik Chatterjee — Chief Financial Officer, Executive Director
T.V. Narendran — Managing Director and Chief Executive Officer
Analysts:
Unidentified Participant
Vibhav Zutshi — Analyst
Satyadeep Jain — Analyst
Pinakin Parekh — Analyst
Prateek Singh — Analyst
Vikash Singh — Analyst
Pallav Agarwal — Analyst
Ashish Kejriwal — Analyst
Indrajit Agarwal — Analyst
Sumangal Nevatia — Analyst
Rajesh Majumdar — Analyst
Presentation:
operator
Ladies and gentlemen, we thank you for your patience. A good day and welcome to the Tata Steel Analyst call. Please note that this meeting is being recorded. All the attendees audio and video has been disabled from the backend and will be enabled subsequently. I would now like to hand over the conference to Ms. Samita Shah. Thank you. And over to you Ma’. Am.
Samita Shah — Vice President, Corporate Finance, Treasury & Risk Management
Good evening everyone joining us from India and the Far East. And good afternoon to those of you joining us from the West. We are starting a few minutes late and thank you for your patience. Delighted to welcome you all to this call on behalf of Tata Steel where we will discuss our results for the third quarter of FY26. I hope you’ve had a chance to go through our press release as well as the presentation which is up on our website. And to help you better understand our performance, we will walk you through some of the details and obviously take any questions you may have.
We have with us today Mr. T.V. narendran, our CEO and Managing Director and Mr. Kaushik Chatterjee, our Executive Director and CFO. Before I hand it over to them, I would just like to remind you all that this call will be governed by the safe harbor clause which is on page two of the presentation. Thank you. And over to you.
T.V. Narendran — Managing Director and Chief Executive Officer
Thanks Amita. Good evening everyone. Sorry about the delay. So let me start with a few comments before I hand over to Kaushik. The global operating environment remains complex with policy uncertainty and resource prioritization reshaping the interplay between geopolitics, social and market dynamics. At the same time, Chinese Finnish steel exports crossed 110 million tons for the second time in a row which had a significant impact on the regional trade in steel as well as the global trade in steel. Steel prices diverged across the regions during the quarter and amidst the start of steel has delivered a consistent performance with a consolidated EBITDA margin improving by about 300 basis points year on year for the nine months ended 31 December 2025.
India is a core market and the crude steel Production rose about 12% quarter on quarter and year on year. It went on to 6.34 and year on year as well and went up to about 6.34 million tons. And the sales ramped up in line with the production and outpaced the domestic demand taking quarterly deliveries past 6 million tons for the first time for Tata Steel in India along with the ongoing cost optimization, this helped offset the drop in net steel realizations on our quarterly quarter to quarter basis and deliver a 23% EBITDA margin during the quarter.
Some of the segmental highlights are the automotive and special products business delivered the best ever quarterly and nine month volumes driven by rapid OEM approvals for the advanced steel grades from our Kalinganagar plant. The the cold rolling mill and the galvanizing lines are ramping up very well. The auto downstream mix is now more than 50% at the 9 monthly sales level reinforcing our leadership and preferred supplier position. We continue to strengthen our position and branded in the retail segment. Our well established retail brand Tata Tuscon achieved the best ever third quarter volumes while a cold rolled brand for MSME Tata Stadium grew 20% quarter on quarter again helped by the cold rolling mill in Kalinganagar.
Our omnichannel model is deepening customer engagement and with Asian and Digica we achieved a gross merchandise value of almost 2,380 crores which is 68% up year on year. Our commitment to product development and innovative solutions has helped secure internationally certified steel grades for oil and gas and shipbuilding and we introduced mobile board pile cages for the first time in India offering a ready to use solution that enhances productivity and lowers project costs in challenging terrains. Our tubes business achieved the best of our quarterly volumes on account of 0.3 million ton capacity addition and a dominant share in the high value infrastructure projects.
We remain committed to the India growth strategy by investing in capacity downstream facilities and sustainable steel making. And in relation to our recent announcements, I’m happy to share that we consolidated our stake in the color coated business and completed the acquisition of the 50.01% stake in Trani Pellets Private Limited. Moving to UK, our delivery stood at 0.5 million tons lower quarter on quarter due to the subdued Demand and the UK Steel safeguard measures due to expire in June 26. The framework needs to be revised to reflect the market conditions and narrow the policy gap with the EU in Netherlands the liquid steel production is broadly stable at 1.7 million tons while deliveries were 1.4 million tons lower.
Steel realizations were partly offset by better controllable costs and the sentiment in EU is improving supported by the CBAM rollout and the expected safeguard revisions from June 2026. We also commissioned a new production line for packaging steel using patent trivalent chromium coating technology to enable sustainable and regulation ready manufacturing. I will now hand over to KAUSHIK for his comments.
Koushik Chatterjee — Chief Financial Officer, Executive Director
Good evening to all of you who’ve joined in. I will begin with some headline financial performance Data for the nine months ended December 31st, 2025 before moving to the quarterly performance. Firstly, our consolidated EBITDA increased by 31% year on year from 19,040 crores in the nine months ended December 202524 to 24,894 crores in the nine months ended Dec 2025. EBITDA margin expanded by 300 basis points as Narendran mentioned from 12% to 15% and reflects a disciplined execution in an environment marked by macro uncertainty, currency volatility and persistently high finished steel exports from China. Secondly, our performance demonstrates the impact of the Cost Transformation Program which has achieved 8,600 crores in the nine months of savings across geographies.
To put it in context, on a year on year basis lower steel realization across geographies led to an adverse impact of revenue of about 7,400 crores which was mostly offset by higher volumes and declining raw material related costs. In terms of execution, the Cost Transformation program has achieved 93% compliance to the internal plan. The deviation is primarily on account of extended consultation with the Central Works Council in Netherlands. In November 25th we reached a formal agreement on the Employee Restructuring Social Plan leading to the recognition of a restructuring provision of 737 crores in the consolidated accounts under the exceptional items at a consol.
At a geographic level, India continues to be the anchor of our performance with ebitda growing at 12% year on year to 24,431 crores. This the EBITDA margin was 24% and remains close to the 10 year average. Our performance in UK and Netherlands has improved materially on a year on year basis. UK losses have narrowed down by 135 million to negative 170 million while negative while Netherlands EBITDA nearly tripled to Euro 210 million combined. UK and Netherlands EBITDA turned positive for the period. Overall improved profitability and effective working capital management has enabled us to generate operating cash flows of 20,500 crores before capex and dividend and a free cash flow of 5,640 crores which is significantly higher than the nine months ended December 2025.
Moving on to the third quarter performance provided on slide 24 of the presentation, our consolidated revenues stood at 57,000 crores and EBITDA at 8,309 crores translating to a margin of 15%. While steel realizations declined in India and Netherlands they were more than offset by the benefits of our cost transformation program. Expanding on the cost transformation program as a company we have delivered an improvement of more than 3000 crores during the quarter. India delivered cost transformation benefits of around 890 crores. Key cost efficiencies were driven by purchase, optimization of spares, reduced refractory consumption, increased use of coastal waterways which offer a structural cost advantage over the other modes of transport and higher power wheeling and leaner coal mix.
UK outperformed their cost plan by achieving a benefit of 570 crores driven by calibrated maintenance cost, stronger spares, management discipline, insourcing of product testing and improved efficiency in natural gas and electricity consumption. Netherlands delivered a quarterly benefits of around 1600 crores optimization of coal blend leading to decline in procurement cost and deployed value news concept to improve operating efficiency such as fuel rate, scrap consumption etc. Let me now provide a deeper understanding of India, UK and Netherlands quarterly performance. Tata Steel standalone revenues for the quarter stood at 35,578 crores and EBITDA of 7,940. Excluding the FX impact, the adjusted EBITDA stood at 7,900 crores and was marginally lower on absolute basis versus the quarter two of this financial year.
As Naren mentioned, our volumes crossed 6 million tons for the first time in a quarter and this coupled with the improvement in cost has helped partly offset the drop in the steel realization on a quarter on quarter basis. Separately, depreciation and amortization has increased by 6% quarter on quarter to 1826 crores upon capitalization of downstream facilities, example the CRM complex in Kalinganagar and the Combi mill in the Indian complex. Our Wholly owned subsidiary Nilachalispatnigam Limited recorded a 350 crore EBITDA for the quarter up 35% quarter on quarter and reflecting an EBITDA margin of 22%. Moving to UK the local steel makers are having to contend with weak demand, volatile input costs and cheap imports.
Steel prices continue to hover around 500 to 510 pounds per ton and have been in contraction for the last two years. Steel prices continue Existing steel safeguard measures are set to expire in June 2026 and revised safeguard framework is yet to be formally announced. In this context, our EBITDA loss has remained broadly stable at about 63 million pounds on a quarter on quarter basis. Conversion cost per ton were largely maintained, demonstrating cost discipline despite the adverse impact of lower volumes on operating leverage. Separately, work is progressing on the 3 million tonnes scrap based electric arc furnace major demolition work has been completed and securing access to high power electricity is critical for our planned transition.
We are working with the electricity system operator and national grid for the new electrical infrastructure which remains critical for the project commissioning In Netherlands the third quarter EBITDA stood at about 55 million which translates to about €39 per tonne. Impact of lower volumes and realizations were partly offset by the improvement in the costs to the tune of about €21 per tonne on a quarter on quarter basis. TSN performance for the quarter reflects the partial impact of the US tariffs. The US business of Tata Steel Netherlands was high revenue and high margin business catering to automotive, packaging etc.
The levy of tariff to the tune of 50% weighed on the performance. Overall we generated more than 10,300 crores of operating cash flow before CAPEX. Aided by profitability and tight working capital management of the cash flows, we spend on capital expenditure of about 3290 crores with majority focused in India. Free cash flows for the quarter was about 7,054 crores and significantly higher than the second quarter. As a result, the net debt at 81,834 was lower by about 5,200 crores versus the end of previous quarter in September and lower by about 3,900 crores versus December 2024.
Our net debt to EBITDA stands at about 2.6, well within the stated range of around 3.3x for the cycle. Managing regulatory complexities has now become a strategic imperative across geographies. Let me put this in context on Tata Steel Netherlands in the nine months ended December 26, TSN generated an EBITDA of around 210 million. After considering the emission rights, related cost of about 150 million and adverse impact of the tariff from the US at about 50 million euros. Excluding these costs, the TS in EBITDA works out to be more than 400 million or around €93 per ton.
This illustrates the cost of burden currently borne by the EU steel producers. On January 1, 2026, the Seabam entered its definitive phase with carbon costs being embedded into imports and structurally improving the competitive landscape for the EU producers. The CBAM’s definitive phase requires importers to verify embedded emission intensity. Verification is expected to take time and importers who fail to verify will face carbon cost calculated using the default values by the country of origin. Separately, EU intends to revise its safeguard measures from June 2026 by reducing the product quotas and raising the duty for imports beyond the quotas from 25% to 50%.
The effectiveness and timing of the CBAM effect and the trade related quotas will determine how quickly the imports retreat from the EU market and the utilization of the local steel industry increases which will have positive implication on the price regime. Before I close I would like to reiterate our commitment to create a sustainable long term value. India remains a core growth market and we are scaling upstream as well as downstream capacity. In December 2025 we had outlined our India plans including the strategic partnerships with an eye on the raw material security and growing markets in western and southern India.
At the same time, we are progressing with the transition of the UK and Netherlands operations to a more sustainable operating models. Our capital allocation will be prioritized, optimized and sequenced across geographies to ensure consistent returns over time. With that, I’ll end my presentation and open the floors for questions. Thank you so much.
Questions and Answers:
operator
Thank you sir. We will now begin with the question and answer session. We will be taking questions on audio and chat. To join the audio questions queue, please mention your full name and email ID in the chat box. Kindly stick to a maximum of two questions per participant and rejoin the queue. Should you have a follow up question, we will unmute your mic so that you can ask your question. To ask questions on chat we will type in your question along with your full name and email ID in the chat box. We will wait for a moment as the queue assembles.
The first question for today is from Vibhav Zutshi of JP Morgan. Vibhav, please go ahead and ask your question.
Vibhav Zutshi
First question is on Europe. Now some of the European players have come out with very strong commentary on pricing, has actually raised April delivery prices to €700 per ton, which is another €60 per ton higher than spot. Just wanted to understand how sticky and. Sustainable could these be because it looks like demand is still weak but like you mentioned, expectations are around higher utilization levels as imports start to come down. Thank you
T.V. Narendran
Yeah, I think you know when you look at what’s happening in Europe, while the demand has been quite stable around 130 million tons for the last few years, imports had gone up to about 30 million tonnes. And as Kaushik mentioned, the quotas that have been announced are going to halve those imports to about 15 million tonnes. So that’s going to happen by June. And in addition to that you have the CBAM which has already started.
The seabam has an impact on the import prices as well. So if you’re selling into Europe Even in this quarter you’ll have to factor in the CBAP prices and the impact of CBAM on the prices and then on top of that you’re going to have a reduction in imports and that’s what is getting reflected in steel prices going up in Europe, in the continent. So we, you know over the last two, three years we had seen the European prices move more towards the Asian prices but and increasing the gap with the US prices. But because of these actions we expect that prices in Europe will move away from Asian prices and move towards the US prices.
May not reach the levels of US prices but certainly we’ll move closer to that.
Vibhav Zutshi
Okay, thank you, that’s helpful. Second question is on India. No, firstly congratulations on the improving leverage ratios. Just want to understand now the broad timeline for all the capacity expansion. You know, NINL, this 2.5 mtpm era madli and any indication that you can provide for the Maharashtra Greenfield and also how to think about debt as capex would likely accelerate from now on.
Koushik Chatterjee
Yeah, so I think in December when we said that we had the in principle approval of the consideration of the board for the anal expansion. We are working on it. We are maybe weeks away from getting the environment clearance and once we get that our basic engineering ordering is in progress. So I guess it will take about 40 months, 35 to 40 months when we get into that execution level. I think it is also important to mention that we will get to the FID in the next couple of months. So that will stitch in as far as this expansion is concerned.
Maharashtra is slightly longer term because it is at the enabling level and we will have to get into the, the, the project, the DPRs etc so that’s slightly longer but that is parallel work is happening in terms of the planning and conceptualizing it. And as far as the minimally expansion is concerned we have to get the EC clearance. So the first one is the ninl, the second one is the Meramandali and the third will be the Maharashtra or Kalinganagar expansion, whichever we are ready with. So that’s the frame, time frame or rather the sequence. The time frame will depend over the next three years or five years.
The second point, part of the question that you asked about debt, I think we’ve said that that broadly we would like to be up to about 3x net debt to EBITDA and that actually it is sometimes when you have cyclical issues we move to 3.2. When in better times or when we are able to generate more cash flows it comes down as you see now is 2.6. So that’s the kind of range we will not bust that range because we have a strong pipeline of Capex which are productive. There is a program for also the downstream projects as we we mentioned last time.
The HRPGL has got approved in plate is underway. Bluescope we have completed now and we have more downstream in the long, long product segment including on wires which are being worked on. So it is, it is in that range of the balance sheet that we will work in a mid cycle cycle becomes much better then we will recalibrate but effectively the pace of growth will also be calibrated to that extent. Hope it clarifies.
T.V. Narendran
Yeah. And to add to what said we also have the Ludhiana plant coming up in the next couple of months.
Vibhav Zutshi
Yeah, sure. Thank you sir.
operator
Thank you. The next question is from Sumangal Nevatiya of Kotak Securities. Sumangal, please go ahead. So Mangal, we are unable to hear you. We request you to please send in your question via chat or rejoin the queue. We will now move to our next question. The next question is from Satyadeep Jain of Ambit Capital. Satyadeep, please go ahead.
T.V. Narendran
Yep.
Satyadeep Jain
Yes. First question on Europe, what is the status now on uk the the safeguard. What discussions are you having with government? Is there any progress there? And secondly on that front in Europe given CBAM and the emissions have not been verified for a lot of importers, what is the trend in imports? Have they significantly reduced in Europe given. The uncertainty on verified emissions so far.
Koushik Chatterjee
So shall I go ahead? Yeah. So as far as UK is concerned, as I’ve said in the narrative and in the previous narrative also that we are deeply engaged at all levels to get the safeguard and quotas out. We are hopeful that it will happen soon. We know it is progressing and we are encouraged by that. But unless it happens, it has not happened. So I think we are looking forward for that safeguard because it is in the interest of the UK domestic steel industry all around, not just us, to ensure that we have the recalibration of the quotas and the safeguards.
It is also important for UK to do that in the context of the fact that EU has come out with the quotas and with their steel action plan and therefore there is a need to harmonize it. So that is work in progress as far as the CBAM is concerned. I think it’s very early days just now because there was some amount of stock stocking that happened pre December but we will have to get. That’s why I mentioned that the effectiveness of the CBAM we will have to see as to how the imports reduce because the default rates are high at this point of time.
So the first year default rates are significantly high. For example in case of China it is about 3.1. In case of India it’s about plus 4.2, 4.7. So I think we just need to, we need to see as to how it works. As Naren mentioned that irrespective of the demand condition there will be a uptick in prices because arithmetically it has to work in that manner. And then comes the Steel Action Plan. So there are two very fundamental regulatory triggers in EU which will push up the prices. And as Narendran mentioned, it will have an effect of pushing it towards the US.
Prices may not be exactly the same but it will also develop. And if you look at the markup in the CBAM it is 10% markup in 2026, it’s 20 markup on 2027. So till the verification happens the markup keeps increasing. So technically the prices will should increase the marginal cost. So fundamentally what’s going to happen post the Steel Action Plan comes in in June July is that the marginal cost of, of the new supplies either beyond quota or, or within the EU which are the capacities which are shut down, which will come at a marginally higher cost, which will also have a cost push element on the prices.
So we are certainly expecting that the price buoyancy to remain in the EU for a longer period of time.
Satyadeep Jain
Thank you for that, Kaushik. Secondly, on India, just wanted to seek. Your comments on the budget proposal For. National Waterways 5 INDA linking Kalinganagar to Paradeep. What is. I know these projects can be. Can take long. What’s your expectation there in terms of timeline and impact on cost? And does it, if it comes through, does it make you rethink your decision to look at Maharashtra or. Because many players are also actively considering. Staying on east coast including Aslam Mittal. Also is announced a plan on greenfield. Plant on the east coast. If that comes through, would that change your decision? Anyway,
T.V. Narendran
so if I can comment on that, you know, firstly Maharashtra is in addition to our plans for the east coast. It’s not in place of any plans because if you look at our own plans on the east coast between the Kalinganagar complex that we have and Nilachal which is across the road, we have the opportunity to build about 25 million tonnes of steel capacity there which is today at 9 million in 8 billion in Kalinganagar. And 1 million in. So that opportunity exists and this water way that they’re talking about will help that site.
Then you have the Bhushan plant in Biramandali which can go up to 10 million. So in Odisha we have the opportunity to go up to 35 million as against the current 14 million. Right. So that stands, Maharashtra is in addition to that. Maharashtra gives us optionality on the iron ore in Maharashtra, Maharashtra gives us optionality to service markets, Western markets and southern markets. Waterways. You know, India is one of those countries where waterways account for a very, very small percentage, almost negligible percentage of logistics. Whereas if you look at most other geographies, whether it’s the us, whether it’s Europe, whether it’s China, a lot of material, including steel, a lot of steel moves on the waterways.
And I think the government’s ambition is to create a network of waterways. And we are glad that they picked this waterway which is close to a Kalinganagar site, because we think it will help us in bringing down the logistics cost, which as you know, in India is still higher than what it is in other countries. And one of the reasons is the mix, because in India there’s a higher mix of road compared to other geographies, there’s a lower mix of waterways compared to other geographies. And you know, and having more waterways is certainly going to help the logistics cost.
But I think we don’t have a timeline yet. I, I guess it will take some time because it means creating the infrastructure. It also means dredging. So to make it a, you know, all season kind of waterway, you also need to have handling facilities, barges. So there’s a lot that needs to be done. But we are happy that it’s on the radar of the government.
Satyadeep Jain
Thank you so much.
operator
Thank you, sir. The next question is from Pinakin Parikh of hsbc. Pinakin, please go ahead.
Pinakin Parekh
Thank you very much. So my first question is on uk. The losses in the UK operations are relentless and there does not seem to be any policy support coming through. So how should we look at UK over the next few quarters? There’s a safeguard in India, the CBAM in Europe, but there’s nothing in uk.
T.V. Narendran
So, you know, yeah, it’s like this in uk. A lot of actions have been taken by the team. We have ourselves reduced our fixed cost by more than £400 million in the last two years, almost £500 million. So I think in terms of cost takeout, all that could be taken out has largely been taken out.
As Kaushik explained, it is a problem because of the fact that the quotas in UK are higher than the demand in UK and that’s what the government is expected to revise and more so because of the actions taken in the eu. So we’ve been promised that these revisions will happen soon. You must also realize that the UK government itself is invested in the steel industry because of the steel plants that they’ve taken over. So when the steel industry is losing money, it directly hurts the UK government as well. So we are hopeful that some actions will be taken in the market because obviously with these levels of quotas and these prices, it’s obviously not looking good from a EBITDA point of view, what has happened because of the actions we’ve taken.
As Kaushik said, the EBITDA losses have halved. It is still there and we expect it to keep improving because of the actions we are taking, you know, but it will not become positive till there is some action from the UK government on the imports or the steel prices go up in uk. So I think we are more expecting that some actions will be taken in the next few weeks by the UK government. And once it happens, hopefully we are on track to make sure that UK is on positive EBITDA territory. But yes, it is a challenge.
But given the actions being taken in the us, in Europe, in India and elsewhere, we expect the UK government also to be taking this action. So Kaushik, you want to add to that?
Koushik Chatterjee
No, I think that’s perfectly fine. I just wanted to tell Pinakin that we also have some actions being planned up but I think fundamentally because we will also looking at building a new plant and therefore we don’t want to do anything which will affect the long term and therefore we are also looking to ensure that the assets run at the most optimal ability and the conversion cost continues to be in in a manner where we can be competitive post the build of the ef. So I think just now we are looking for more external policy support as an industry.
Pinakin Parekh
Thank you. So just, you know, continuing on that Tata Steel has. So it is doing everything it can but it is facing the twin problems of making an investment while having EBITDA losses. On the policy perspective, you would expect support from the government on the existing steel environment and assume there would be policies related to the capex. So would the company at some point of time wait for the policy to fructify before stepping up on the capex or will the capex continue irrespective of whether there is any immediate support from the government?
Koushik Chatterjee
So If I may just tell, try to articulate cb Once the EAF is built, our cost structure will be different. So when, when our blast furnaces were running, our cost structures were high, we transited to plan for the EF because the cost structure would be lower than what we were running at. We are at an intermediate phase where we are buying the substrate and then kind of working on the conversion cost. So the point is, if we were to not progress with the ef, we are going to delay that transition and into a more profitable unit.
So I think there is no upside in delaying the investment. There is. On the other hand, if all factors are aligned and here also we depend on the national grid for the electricity connection and also our own internal projects for getting it done. But if the quicker we can convert it to that stable state, at least we will be in a better cost position, better working capital position, not cutting slabs and roads from all over the world. So we have done that analysis and scenarios and it makes sense to continue to do the project, take the money which the government has given.
It is a participant and based on that, that’s the basis on which we continue to execute the project at this point of time. And in the longer term we hope that the government for its own requirements, as Naren mentioned, is also a big participant. Now a direct owner or a controlling entity of the rest of the steel industry in the UK is also very mindful of the fact that this bleed needs to stop, not just for us, but also for them. And I hope it is in a matter of weeks now.
Pinakin Parekh
Got it. And just lastly with the safeguard duty place in India, the price hikes that we have seen in India in the spot steel market between December and 1st of Feb. Is it fair to say that the December quarter EBITDA per turn was probably the low for the till the safeguard duty is in place.
T.V. Narendran
Yeah, yeah. I think December quarter prices, particularly the first part of that quarter, was probably the lowest in the last five years for flat products, you know, and pretty low for long products as well. So in some sense that was the bottom as far as the prices are concerned.
So yes, we expect better numbers this quarter, but we should keep in mind that coking coal prices are also going up. So we are conscious of that. But steel prices are certainly coming back to the levels where it should be because it used to be at a discount to import landed. Now it is, you know, caught up with import landed and maybe slightly better. Yeah,
Pinakin Parekh
got it. Thank you very much.
operator
The next question is from Pratik Singh of IIFL Capital Pratik, please go ahead.
Prateek Singh
Hi. Am I audible?
T.V. Narendran
Yep.
Prateek Singh
Hi, thanks for the opportunity. So the question is regarding a bit more strategic regarding the fixed cost takeouts in India and the medium term human resources plan. So how are we preparing for the mines expiry, if any, 2030, any plans to move to an MDO model for mining in the medium term to smoothen the employer transition? I understand we mine much more than our peers and there is always an element of contractual costs as well. But I think our standalone employee costs would be higher than that of our largest peers in the operations and that of the largest listed abnormal manner in India combined.
So is there any way to get a sense as to what percentage of India employee cost is on mining and how are we planning to do this transition over the next four years?
T.V. Narendran
Yeah, so I’ll, I’ll maybe give it a shot and then Kaushik and supplement. Right. So firstly, I’m not sure if our mining costs are much higher than others etc. Because you know, we run a very, very efficient mining operation both for coal and iron ore. If you look at Tata Steel’s legacy costs, a lot of the legacy costs are in jumpship cost, right? So if you look at the cost structure, the demographic profile of our employees in Kalinganagar and other sites, it’s much better. So we don’t have those legacy costs. As Tata Steel grows more and more in Kalinganagar, Meera Mandli, etc, the impact of the legacy cost in Jamshedpur keeps coming down.
And plus we are addressing the legacy cost in Jamshedpur. So because of these actions, the cost disadvantage we may have in some sites vis a vis peers will keep reducing. So and we will be doing this obviously in a accelerated way till 2030. That is one part. The second part is because of the fact that all our sites are within 200km of each other, we have some advantages of scale because if we are, you know, moving to 40, 45 million tons, all of that is going to be produced in about 200 km from each other.
And that gives us a lot of advantages on scale economies etc. Which will also help us negate some of the impact of post 2030. Thirdly, as we mentioned earlier, our move into Maharashtra, move into recycled based steel in north and west, etc are also actions that we are taking to mitigate the impact. And fourthly, the move into downstream basically looks at how do we improve the mix, how do we get better realizations, so on and so forth, beyond all the cost takeouts that we are planning. So all these are expected to mitigate the impact of any cost increases that we will face in 2030.
So this is broadly the plan. And Kaushik, you can add to that.
Koushik Chatterjee
Yeah, I’ll just add two points Pratik. One is the fact that we are not going to exit captive mining. We have mining reserves which are opening up and therefore the mining as an activity will continue for Tata Steel. MDO as an option will always remain and we will be looking at certain opportunities if the MDO remains. We are also now the BRPL which will be in that space also if required. So I think the transition planning for 2030 has already started. We are looking at various alternatives. As Naren mentioned, even Maharashtra is a important alternative.
So the manpower cost is not a not so much of an issue. We also do a lot of contract workers in there. So it is not that we are very heavy but in the sense because from a cost point of view and cost of X mines in ore for us at this point of time is possibly one of the lowest. I I think it is not at all high compared to the rest of the industry and with more mines opening up be it Kalaman, Koira, Gandalpara etc we will be re deploying people and reworking on how we can ensure that the transition costs are minimized.
Prateek Singh
Understood. So. So I understand that there would be no way to get a very ballpark sense as to what percentage of entire employee cost is on specifically mining operations.
Koushik Chatterjee
I don’t have offhand. Maybe we can do that later.
Prateek Singh
Thanks. And the second question is largely on Europe as an earlier participant mentioned earlier as well that prices have risen quite a bit 750 per ton from 650 odd a few months back. So understand the nature of our contracts with what kind of lag do we see these prices coming up to to our PNL.
Koushik Chatterjee
So contracts are about 35% largely in in packaging which is not in the packaging is one area where there are one year contracts, six months contracts. Automotive is the other. Automotive has its own cycle. I think 2026 calendar will at different points in time. See that’s the point I mentioned that the benefits of the EU domestic prices will depend on the effectiveness of the CBAM as well as the quotas both together. So I think the full impact of that will come gradually and not in one jump. And I think the estimation is that it will there is an opportunity for almost about €100 per ton increase in prices over the full year.
So we just need to watch the space and see all said and done. If there is a euro on the table, our colleagues in Netherlands will certainly work to ensure that we get it. But it will happen in at least in two stages. One is CBAM now and secondly is when the tariff comes in post June 2026.
Prateek Singh
Understood. Thanks. And all the best.
Koushik Chatterjee
Thanks.
operator
Thank you. The next question is from Vikash Singh of ICICI Securities. Vikash, please go ahead.
Vikash Singh
Am I audible?
T.V. Narendran
Yes, please.
Vikash Singh
Yes. Thank you for the opportunity. So my first question pertains to neither lens. How much of the carbon credits we. Have as a percentage of overall requirement right now? And since in the last call you. Said that your emission levels are already. Closer to 1.6, does that mean that. Whatever carbon credits we have, these are. Surplus because or we still have to pay some additional, or buy some additional carbon.
Koushik Chatterjee
So the reference point I’m, I’m using the CBAM part. So the reference point for CBAM for EU domestic producers is 1.37. So if it is 1.37 and we are producing about 1.66 or 6,8, there is a gap and there is a free allowance that comes in. So the net of that we have to buy. So I think we need to. We still will be buying and we’ll continue to buy till we do the transition. Because the reduction in free allowances is going to happen from this year to 2032 or 34. Noted, sir.
Vikash Singh
And sir, second question regarding your outlook on the price increase on the 42. If you could give us that price in India or Europe or all both. Geography, India, Netherlands price and the cost. Especially the coking coal cost changes.
T.V. Narendran
So I think the guidance we’re giving is in India the prices quarter on quarter will be about 2,300 rupees higher on a spot basis. Of course hot roll to hot roll will be much higher. But I think when you look at the mix and you look at some of the contracts etc that we have, we see a improvement of about 2,300 rupees per ton in UK it’s going to be maybe about 5 pounds higher or so in Netherlands. While again on a spot basis it is going to be higher on a hot roll coil.
But because of the mix issues that Kaushik referred to, referred to because of the fact that the packaging contracts are getting renegotiated etc, we seeing a quarter on quarter reduction of 33. About 30, €33 per ton. Q1, 2, I mean Q4 to Q3. But having said that, we expect Netherlands to more than offset this reduction in realizations because of cost. Takeout so we expect an EBITDA expansion in Netherlands. Slight improvement in EBITDA in UK also because of the fact that we expect Netherlands to be selling almost 400000 tons more in Q4 compared to Q3. And India will also see an EBITDA expansion because the coking coal cost impact is going to be about $15.
But you know the benefits that we have from the prices etc and also the volume will be slightly higher. The mix is going to be better in India as well. So overall we expect EBITDAS to be better in Q4 compared to Q3. Volumes to be almost half a million tons better in Q4 compared to Q3. Notice it.
Vikash Singh
Thank you.
T.V. Narendran
Yeah.
operator
Thank you. The next question is from Pallav Agarwal of Antique Pallav. Please go ahead
Pallav Agarwal
for the opportunity. So just want to check you know. With CBAM coming in some of the exports that are going to Europe come into India and you know, pressurize domestic prices.
T.V. Narendran
Exports from where? From India.
Pallav Agarwal
From India to Europe.
T.V. Narendran
You mean as an. Because Tata Steel doesn’t sell much into Europe we send slabs to UK for a plant but otherwise we are not a big exporter of steel to Europe. Maybe some of our peers are. But I don’t think that volume will be so significant as to make an impact in the domestic market in India because the demand is pretty strong in India. So last couple of quarters there was a little bit more ramp up of capacities because our capacity ramped up and a few others. But now there’s better balance in the domestic market and you know, so I don’t expect that to have an impact on prices in India.
Pallav Agarwal
Sure sir. And any volume guidance for the next year for FY27
T.V. Narendran
that we’ll give you at, you know when we. Because we are in the process of finalizing a plan. So we’ll give you that guidance in the next analyst call.
Pallav Agarwal
Lastly, you know, if I mean are there any premium products in the UK or Europe that can actually come into. India despite the safeguard duty? Is there any opportunities in the Indian market for that?
T.V. Narendran
No, I think the competitiveness will not be there from if you look at the costs in Europe and the prices in Europe it doesn’t make sense to ship from there to India. But what we are certainly doing is working very closely together, you know, in many areas because there are many applications that we have in Europe particularly in the construction industry which we are bringing back to India from the experience that we have. There are of course some special products which come from UK for instance ikea when they build their, you know warehouses. The roofing sheets actually comes from one of our UK plants.
So. So there are these kind of specialized requirements but not very significant volume.
Pallav Agarwal
Yeah. Thank you sir.
T.V. Narendran
Thanks.
operator
The next question is from Aditya Velikar of Access Securities. Aditya, please go ahead. Aditya, we are unable to hear you. We request you to please send in your question via chat or rejoin the queue. We will now move to the next question. The next question is from Ashish Kejriwal of Noama. Please go ahead.
Ashish Kejriwal
Two questions, one in Europe and second in India. India is possible to share how much price drop we have seen in Q3 versus Q2 and as well as how much coking call cost reduction we have witnessed in Q3. So for India the price drop is about 2,100 rupees Q3 compared to Q2. We had guided 1500 but the market was softer particularly in October. November prices started going up only towards the middle of December. In terms of coking coal I think consumption cost was up by $4 for India compared to Q3 compared to Q2. And secondly is it possible to share UK conversion cost? Because what we understand is that UK even if government gives support and steel prices increases obviously our slab prices will also increase.
So and the cost takeouts which we have already taken and most of the efficiencies we have already taken place in terms of cost reduction. So what kind of government measures we are trying to look at to make EBITDA positive in UK and secondly in Europe also while you are guiding a reduction in prices because most of our contract starts from Jan and you know we have witnessed price, spot price increases. So even if the entire price increase will take into account for the entire year but how we are going to see the reduction in prices in neither land in fourth quarter and at the same time when you are seeing that cost reduction will help in offsetting all the price decline and EBITDA will expand, this is on account of only cost reduction or you know when prices increase can we expect higher ebitda?
T.V. Narendran
So I’ll let address Kaushik address the UK question. So Netherlands, what’s happening is it’s a little bit more of a mix issue than a price issue. The price at a hot roll coil level is going up I think you know because firstly we don’t do so much on spot basis so but it’s going up by about 20, €25. The uh, you know Q4 to Q3 uh where we are getting hit a bit is the packaging. Two things are happening on Packaging contracts. Firstly, there’s a renegotiation of packaging contracts because of new contracts and there, there is a price drop. Right. The second thing which is happening is a lot of volumes of packaging used to go to the US which is now, you know, the volumes are being cut to the us so that volume which does not have so much of a market in, in Europe is being sold in let’s say engineering grades and other grades, you know.
So from a mixed point of view, there is a dilution. So this 33 is more a mixed dilution impact than a price drop impact. So it’s more a mix impact. But there are, like I said, the cost takeouts are going to be more than this and hence we expect the Ebitdas to get better. But going forward, as Kaushik said, going forward, we expect this momentum on price prices to keep, you know, getting better going forward in Europe. And that’s why we are more bullish about the prices in Europe for this calendar year. So that’s where I want to comment on Europe.
Kaushik, you want to comment on uk?
Koushik Chatterjee
Yeah, So I think, you know, very broadly if you look at the price drops that has happened over subsequent quarters or years, actually in Ukraine, UK average price at, at a point in time is to be well over 900 pounds. So we, I think it’s a question of looking at this. And in UK we done now at this point of time have multiple downstream products. So there’s tin plate, there is color coated, there is automotive tubes, etc. So what we are looking at essentially is if there is the quotas are in place and the tariffs are in place, then the spread will increase.
And I think that spread increase of say £75 to £80 would be good enough for us to look at increase in the, in the profitability to make it neutral. Ideally, if, if the, the right quotas in place in the similar manner in you, the price increases should recover to somewhere around £100 per ton plus and that will help in, in the profitability significantly.
Ashish Kejriwal
So sir, you mean to say that at spread of around 100 pound per ton we will be breaking delta? At what spread? We will break even at UK level.
Koushik Chatterjee
So I’m saying today, wherever the spread is, that spread has to expand by, by about 100 pounds per ton to make it a profitable entity.
Ashish Kejriwal
Okay, thank you so much.
operator
Thank you. The next question is from Indrajit Agarwal of clsa. Indrajit, please go ahead.
Indrajit Agarwal
Thank you for the opportunity. I have two questions. First, when are the next auto Contracts. Renewal due in India and what kind. Of price increase can we look over there?
T.V. Narendran
I can give you a guidance on the price increase but certainly prices will be higher. We expect it to be higher to reflect what’s happening in the spot markets. Contracts are due for renewal in April. I think the next set of new prices will be effective April. So we are not seeing the benefit of auto prices this quarter. Whatever we see this quarter is a benefit of the spot orders.
Indrajit Agarwal
And these are now quarterly pricing contracts, right?
T.V. Narendran
Largely, yes. Auto is now largely quarterly contracts. Sometimes you may negotiate two quarters in one shot but you know, it’s typically a quarterly contract in India.
Indrajit Agarwal
Sure. Thank you, that’s helpful. My second question is on spot basis, what are the spot prices? Steel prices and coking coal cost versus the 3Q realization that we had.
T.V. Narendran
In India. You’re asking?
Indrajit Agarwal
Yeah, both in India.
T.V. Narendran
Coking coal like I said on a consumption basis will be about $15 per ton higher Q4 compared to Q3. You know and you know, like I said on a. On a mixed basis, 2200. But if I were to look at the hot roll coil, I think It’ll be about 3,500 rupees higher.
Indrajit Agarwal
No, I want to check that. You will have some inventory and some inventory in transit for cooking coal as well. Right. So let’s say if I were to. Look at one queue, would there be. A further let’s say 1015 increase 1 Q27
Koushik Chatterjee
Indigenous. It is what he’s saying is on consumption.
T.V. Narendran
Consumption. What I’m saying is on consumption
Koushik Chatterjee
that. Takes the stock into account.
T.V. Narendran
Yeah. So if I look at purchase.
Indrajit Agarwal
Yeah.
T.V. Narendran
You know purchase is actually $22 higher Q4 compared to Q3. But the consumption is 15. Because of what you said you have materials in transit and things like that. So if you are looking at some of this will flow through into the next quarter.
Indrajit Agarwal
Sure. That answers my question. Thank you so much.
operator
Thank you. The next question is from Sumangal Nevatiya of Kotak Securities. Sumangal, request you to please go ahead and ask your question.
Sumangal Nevatia
Thanks. So first question is on the volume growth. Headwind. Headroom. Sorry. So just want to understand given our rated capacities what is the potential volume we can achieve in next two, three years without the Ninl? And I believe Kaushik mentioned Ninl would take around 40, 40 odd months. So am I right in expecting commissioning of that? Not. Not before FY30,
T.V. Narendran
FY29? Yeah.
Sumangal Nevatia
Okay.
T.V. Narendran
Yeah. Sumangal, what you need to look at if you look at next year volumes while you give the specific guidance when you do the next analyst call next year we will not have any major brass furnace relyings this year we’ve lost a significant volume because we had a blast furnace relining scheduled in Jamshedpur. So we won’t have that. So that will be a positive for next year. Second thing is we’ll have the Ludhiana plant starting up maybe by the middle of March. Okay. So that’s also a plus that we will have. Thirdly, which is not in the absolute volume in terms of mix, you will see significant improvement because the cold rolling mill, the galvanizing lines, the combi mill in Jamshedpur, all this is ramping up in the second half of the year.
So next year you’ll see the full year of the benefits of all this. So these are, these are the areas where we see some benefits for next year, at least as far as India is concerned. But we’ll give you more specific guidance when we do the next analyst call.
Sumangal Nevatia
Understood. But I mean mathematically 2 to 3 million ton is the headroom before the next expansion kicks in. Is that right? And I mean I’m just comparing with few peers who are much more aggressive in expansion. So is a market share loss over next few years, is it a point of worry or consideration for us in evaluating all the expansion plans?
T.V. Narendran
So there are a couple of comments that I want to make. Firstly, the way we approach an expansion plan has now changed. You know, we first get all the environment clearances and everything else before we get the FID done because we find that that gives us more definitive, you know, timelines and hence let’s say in the Latchel also, as Kaushik said, once the easy comes, we could have said last year itself that we are expanding. But then there’s no easy. So there’s nothing you can do till then. Right? So we will. So that’s one thing. That’s a change that I think. Second thing is, as we said earlier, there is a lot of focus on increasing our downstream capacity and a product mix. And generally in Tata Steel, we always look at can our market share in attractive segments be twice the market share in our overall market share? So if you are a 15, 20% market share player in attractive segments, we should be at least 40% or more. Right?
So that’s what we chase because that gives us a better realization, better product mix, less vulnerability to cycles. So that’s why let’s say whether it’s auto, whether it’s oil and gas, whether it’s a retail business or now more and more downstream, which is so our downstream mix. For instance now we are moving towards a million tons or more than a million tons of tubes. We’ve just approved some expansion in wires. We’ll be about 700, 800,000 tons of wires and that to very high end bias. So I think these are the areas we will focus on.
We will be looking at market share but we will more looking at market share in the right segments, the attractive segments more quality conscious and less segments less vulnerable to cyclicality. So but yes we, we have the Runway to grow and we will continue to grow.
Sumangal Nevatia
Understand that’s, that’s very helpful. One question on, I mean there’s a lot of news flows with respect to Tyson and few of one of Indian peer evaluating it. Just want to know your view on how do you see industry structure changing there any consolidation anywhere? We are looking to participate in any firm and how does it change the market?
T.V. Narendran
No, I think in Europe we are focused on transformation, transforming our facilities. As Kaushik just explained sometime back in uk, the transformation, I mean already there are a lot of cost takeouts and the transformation will put us in a better cost position. In Netherlands it’s more about driving more cost efficiencies and again the impact is already visible but we need to do some more of it and then do the transition. So we are focused on these two sites and making sure that they are on the right place in the European cost curve. But the second point is I do believe that in Europe there will be supply side restructuring simply because anyone whose blast furnace is up for realigning will think hard before realigning a blasphemous right.
I mean probably they will not realign a blast furnace and not everyone who has a blast furnace up for realigning will have the ability to invest in new facilities. Right. So that depends on your balance sheet, that depends on the support you get from the government, etc. So I do see some sort of supply side restructuring. They will be bigger players who have the ability to invest in the transformation. There will be some who will not have the ability to invest in the transformation. And so when their blast furnaces come up for realigning, you will see some restructuring on the supply side which helps the overall market dynamics in Europe. So that’s why given cbam, given quotas, given the supply side actions that happen in Europe, we do see Europe looking more attractive in the next few years than it was in the past few years.
Sumangal Nevatia
Got it, got it. Thank you. And all the best.
T.V. Narendran
Yeah, thanks.
operator
Thank you. The Next question from Rajesh Mazumdar of 361 Capital. Rajesh, please go ahead.
Rajesh Majumdar
Yeah, hi, good evening. So sorry to harp on the Netherlands a little bit more, but I just had a question that are we to assume that the price increases we are seeing there are going to be a pass through or are there any costs that we should be cognizant of in terms of the environment, something that is there more in the CWAM or what we already form, what we’re already paying or any other change in the cost from what it is there right now? I know that you have contracts at. All, but ultimately the price increase should pass through in terms of the bottom line or should there be any other cost that we should be aware of? All, but ultimately the price increase should pass through in terms of the bottom line or should there be any other cost that we should be aware of?
T.V. Narendran
But I’ll let Kaushik answer that.
Koushik Chatterjee
Yeah, no, the price increases that looked at on account of CBAM and tariff are pass throughs. There wouldn’t be any impact on additional costs. In fact these CBAM cost is a compensation of the cost that we pay visa with the imports that come in. So therefore it is more, if I may say, a reimbursement of the cost that we pay. So I think that is how we should look at it and that quotas are effectively related to the imports that are happening. So that has no additional cost implication from us as such. So short answer is the answer is no in terms of any relatable cost on this.
There are other cost factors that are there in. Eu but those are unrelated
T.V. Narendran
in fact, if at all. We are focused on cost takeouts which as you’re aware has been effective in the last year and a half and will continue to be so going forward.
Rajesh Majumdar
Sure sir. Also there is a class action lawsuit filed against Netherlands in December by an environment related company. What is the status of that and is there any development on that front?
Koushik Chatterjee
So that has been filed as you know, by foundation or a trust which is backed by professional litigation financiers and it is kind of a SUOMOTO class action which is currently in the phase of. There is a three months or four months phase during which we are required to submit our defense. And that’s the process that is currently going on and we are obviously looking at it carefully and seriously to ensure that we can put in what is actually the, the truth on the ground. So. So that is in the initial phases at this point of time.
Rajesh Majumdar
Yeah, right. My second question was on the color. Coated business, what is your target capacity in this business? Because that is a high value add business where I think the relations can be quite Significantly higher. So what is the kind of capacity you’re targeting in this business and over what period of time
T.V. Narendran
you want to answer, Samita?
Koushik Chatterjee
You want to do that?
T.V. Narendran
Yeah.
Samita Shah
The current capacity is around 600kt and the idea is to actually also change the product mix more favorably in the color coded business. We are obviously doing a lot of retail but the idea is to increase that further so there will be an improvement in the overall product mix and in the next stage we will then evaluate capacity expansion in this business.
T.V. Narendran
I think the what it does is apart from giving us the ownership of the JV which was there, it also frees us up from some of the jv, you know, kind of conditions which limited our opportunities to get the most out of all the color coding lines that we got when we acquired Bhushan. So there is an opportunity for us to make better use also of the lines, some of the lines which are underutilized because we were restricted to, you know, participate in the construction market other than through the jv. So I think there are a lot of advantages we are seeing and obviously beyond debottlenecking and increasing production, we will work on the product mix.
We will also want to scale up. We have an opportunity to also expand in Kalinganagar as a downstream. So there are multiple options. We also have an opportunity or an optionality in Jamshedpur where we have a 250,000 ton line to convert the metal coating into color coating. So there are many options that we have and our object or our aim is to actually double the profitability of the business in the next year or two.
Rajesh Majumdar
Thanks.
operator
Thank you. The next question is from Pratik Singh of IIFL Capital. Pratik, please go ahead.
Prateek Singh
Thanks for the opportunity. Again, any, any update or how are we going ahead with the Hisarna pilot project? I understand that Nucor also is looking into it and I think the Department of Energy also proposed a funding for this pilot project. Can we expect any such thing by the Indian government as well in our case?
T.V. Narendran
Go ahead.
Koushik Chatterjee
So I think so. We as we mentioned that it is fundamentally a Tata Steel IP and we will be looking at, we are looking at doing it in Jamshedpur. Yes, the conversations with you Nucor is happening at this point of time and but this is something that we will set it up in Jamshedpur. Nucor, the mechanism or method of participation is under discussion and. And then we will see as to when we can go post the engineering work which is commencing. Then we go for the FID to develop this plant in Jamshedpur.
T.V. Narendran
And yes, we will of course work with the government if there are any opportunities to get some support. But largely the value we see in this project is you have far more flexibility in use of raw materials. You don’t need to have a sinter plant, a pellet plant, Coke plant, etc. The CO2 that you emit is far more amenable to carbon capture and utilization. And we’ve been working on this for more than 10 years and we worked along with Nucor in running the pilot plant in Amodin quite successfully for the last two, three years. So we are very bullish about the prospects of this project and as Kaushik said, we’ll be setting it up in Jamshipur.
Prateek Singh
Thanks. And given the expansion that we’re seeing in the data center space, government also announcing tax holiday. Any plans for electrical steel like crgo? Because I think the transform industry has been kind of complaining for some time that India had short term electrical steel capacity. So new plants there.
T.V. Narendran
There are two aspects to what you said data centers don’t. Data centers in itself offers a lot of opportunities for steel because of the fact that the buildings will use steel, the storage racks and everything else will use steel. So there is a focused effort on looking at what can we supply to the data centers and what are the steels that we can develop and provide. So I think that is one part of it. The second part, yes, CRGO is part of our plans. We are assessing it. Most likely the plant will come up in Jamshedpur but we are still looking at, you know, various aspects of it.
So we are working on it. Yeah.
Prateek Singh
And just one last question. Can we, can, can we get a number of overall deliveries from Europe? Because there might be Inter Sigma deliveries as well between UK Netherlands.
Koushik Chatterjee
No, there are not too many.
Prateek Singh
We can just add them up and take it.
Koushik Chatterjee
Yeah, there is some amount of slabs which goes to the uk but it is not material. I mean it, it is not the biggest part of their transfers.
Prateek Singh
Understood, Understood. Thanks for the opportunity again.
operator
From Siddharth Gar of Equities. Siddharth, please go ahead.
Unidentified Participant
Just on the European side, if we look at the OECD capacities, there are. Around 213,215 million ton while Europe production has been in the range of 130,140 million ton. Any sense of how much is the. Effective actual capacity in Europe and over. The next five, six years, given that everyone will have to transform or go. For the transformation journey, what would be. The effective capacity in the next five, six years that would be.
T.V. Narendran
So, you know, just a minute. Yeah. So, you know, capacity is a very, sometimes a very misleading kind of number. Right? I mean, how much of that 220 is produced? Steel and when, you know, is a question to ask. So. So to me, generally in Europe, you will see that production is roughly around 130 million tons. There is exports and there is imports, you know, and imports has largely been about 30. Exports has been around that level, you know, so that’s been the balance. Right.
Second part is a lot of these capacities are very high cost capacities because if you look at the European cost curve of production, there are efficient or low cost plants, like some of our plants, some of the aslo Mittal plants, etc. And then there are high cost plants and those are the ones which tend to get mothballed. And you know, even in terms of some of them are inland logistics, costs are higher, so on and so forth. So we, like I said, you know, if the quotas are reduced, that means more capacity will come on.
But those capacities which come on or mothball capacities which come back on are higher cost. And that’s why we believe that our plant in Aymodhan is well positioned to have the advantage of, you know, higher prices in Europe. That is one. Secondly, like I said, I think any blast furnace due for realigning in Europe, people will think hard. I don’t think anyone’s going to realign a blast furnace in Europe now. So it’s more a question of run it as long as you can and then if you have the ability, invest in a new process route.
So that’s where I feel there will be over the next five, 10 years, there’ll be a fair amount of restructuring on the supply side in Europe. I think we’re already seeing that. Even some of the bigger guys have announced closures of some of the blast furnaces and, you know, not necessarily replacing all that capacity with new process rules.
Unidentified Participant
But then is it fair to assume. That over the next couple of years we can see if things stand where they are, demand outpacing the production that would be there in Europe?
T.V. Narendran
No, I don’t see demand growing. Demand will grow. So what’s happening in Europe is given. The. Intention to spend a lot more money by European countries. In Europe, we do see a pickup in infrastructure spend, particularly led by Germany. We do see increase in defense expenditure. I’m not even counting what happens if the Ukraine war stops and there’s reconstruction there. Right. So even as it is, we do see growth in some sectors, but there is also a bit of degrowth in some other sectors. For instance, if let’s say we were exporting a lot of automobiles from Europe to the U.S. some of that may get impacted. Right. So you will have some volumes dropping, some volumes increasing but overall I don’t see demand growing very significantly.
I don’t see it shrinking. It’ll go up maybe 5, 10 million tons at best. Right. But it’s more the supply side which we are talking about both from imports being limited to domestic capacities, also going through this transition either to new process routes or closing down blast furnaces.
operator
Thank you sir. I would now like to hand over the conference to Ms. Samita Shah for closing comments. Over to you ma’. Am.
Samita Shah
I think we’ve answered all the chat questions which have been asked will not, you know, raise them again. Thank you very much for joining us today and we look forward to connecting again with you all next quarter. Thank you.
T.V. Narendran
Thank you. Thank you everyone.
Koushik Chatterjee
Thank you very much.
T.V. Narendran
Thanks.