Tata Steel Limited (500470) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tata Steel Earnings Call. Please note that this meeting is being recorded. [Operator Instructions] I would now like to hand the conference over to Ms. Samita Shah. Thank you, and over to you, ma'am.

Thanks, [indiscernible] . Good afternoon, everyone. I'm wishing you all a very happy Diwali, and thank you for joining us today on this call to discuss our results for the sector of FY '27. We have with us Mr. T.V. Narendran, CEO and Managing Director; and Mr. Koushik Chatterjee, ED and CFO, the results have been sent to the stock exchanges as well as a presentation, which gives you a little bit of the background. And to answer any questions you may have, we will do it on this call. I would just like to remind all our participants that the entire proceedings of this call will be governed by the safe disclosure clause, which is on Page 2 of the presentation. I will now request Naren to make a few opening comments, and then we will move on to caustic as well. Thank you, and over to you, Naren.

Hi. Good afternoon, everyone. Happy Diwali to all of you and sorry to drag you out on a weekend, but that's what it is. Commentary on the results, Tata Steel delivered an improved performance in a seasonally softer quarter despite significant cost inflation across the value chain due to the ongoing conflict in West Asia. And since the conflict has started, the oil and freight rates have risen by about 40% and spot coking coal prices have also moved from over $235 to $280 to has come down a bit in the last few days while key inputs used in value-added and downstream products such as zinc have also gone up. The disruption has also resulted in higher logistics costs through elevated vessel charter rates, demericharges and insurance premium across key shipping rules while currency movements in India has also added to the cost pressures. At the same time, Chinese steel exports continues to be over 10 million tonnes a month, and that has an impact on global trade flows. However, we were able to successfully navigate this higher cost environment and generate close to 90 bps improvement in EBITDA margin from 15% in Q1 to 16% in Q2 on a consolidated basis. Let me now take you through geography. In India, we focused on maximizing volumes to offset the pressures. And India's deliveries grew 16%, outpacing production growth of 7% on a quarter-on-quarter basis. Higher deliveries reflect healthy demand and our ability to translate market opportunities into performance despite the seasonal headwinds of the monsoons. Our extensive market reach, combined with the sustained focus on product mix and customer centricity have enabled us to maintain strong market traction across chosen segments. Automotive and Special products vertical continues to deepen presence in advanced applications with higher sales growing 26% year-on-year. We secured approval for CRIFHS340 great for automotive skin panels, developed a chrome-free [indiscernible] in product for 2-wheeler fuel tanks and progressed on customer approvals for specialized suspension and transmission applications. These developments reflect our ability to co-create solutions with our customers. Our flagship retail brand, Tata Tiscon, grew 13% year-on-year, supported by a distribution network that reaches nearly 97% of India's districts. In the last 12 months, stated discount sold 2.7 million tonnes to around 500,000 customers. And embedded within Tata Steel, we now have a Tata [indiscernible] retail franchise of about $1.8 billion. And the recently commenced 4.8 million tonne per annum [indiscernible] expansion will support further growth of our retail business. Our digital platforms help us improve market access from districts of India to PIN [indiscernible] across the country. We have also focused on strengthening our presence in solution-oriented and value-added businesses. moving beyond steel supply to provide next-gen construction solutions that address customer pain points and create mutual value. Our expanding portfolio, including smart fab ready bill, which is a cute bend and oil cages and plate fabricated sections, all of which are seeing strong market acceptance. Overall, ready-to-use Construction Solutions grew 32% year-on-year in the second quarter. And we launched India for CBRI certified mesh masonry reinforcement as an alternative to conventional RCC bond beams. We also secured the first order for low carbon steel at a green premium from our Ludhiana facility. In addition, tinplate and Tata Steel colors grew 17% and 49%, respectively and we are making good progress in sectors such as oil and gas, shipbuilding including supplies for Saga month and the Ocean research vessel being built under the government of India's deporting vision. Moving to the U.K., deliveries were about 0.38 million tonnes. And while prices remain firm, volumes were impacted by elevated imports under the transitional safeguard arrangements. And orders booked before 14 March 2026, we exempt from quota utilization and during July, September '26. This led to a surge in ports and inventory accumulation across the supply chain, which is taking some time to be flushed out. In addition, U.K. exports to the EU are now subject to quota restrictions, creating a further constraint on market access. We remain engaged with the authorities on the trade framework, including CBAM, that better reflects product level demand and market dynamics. And in Netherlands, liquid steel production was 1.52 million tonnes, while deliveries were 1.3 million tonnes and the direct steel plant restarted in early August under the terms agreed with the regulator and the technical measures implemented are delivering the intended outcomes with chromium 6 emissions reduced materially and currently remaining below prescribed limits. We continue to closely monitor developments regarding to the EU ETS, CAM and other regulatory matters that could influence the operating environment. With this, I will hand over to Koushik for his comments. Thank you.

Thank you, Naren. Good afternoon to all who have joined in. Before we begin, I would like to wish you all a very happy Diwali. The first half of this financial year was characterized by significant external volatility. The conflict in West Asia continued to disrupt the global trade flows with vessels rerouted around the Cape of Good Hope, extending transit times by about 10 to 14 days, increasing fuel consumption by about almost 40% and keeping more risk insurance cost materially above pre-conflict levels. Freight rates remained elevated and the European gas prices were more than twice the January 2026 levels. Meanwhile, the Chinese exports in steel remained consistently high at 86 million tonnes year-to-date and are expected to again exceed 100 million tonnes this calendar year. Against this backdrop, we in Tata Steel, our focus has been the same, strengthening the earnings, maintain operational agility and cost efficiency to improve the cash generation. Our performance in the first half of this financial year is base assessed through this lens. Consolidated revenues stood at about [ INR 12,231 ] crores and EBITDA was INR 2,035 crores, a which translates to a consolidated EBITDA margin of 16%. Consolidated EBITDA improved by 21% or INR 2,160 crores per tonne on a Y-on-Y basis. These results reflect the strength of our India business, supported by disciplined cost management and capital allocation. I would like to now elaborate on 3 themes: firstly, the quality of our India earnings and plans to grow both volume and product portfolio; second, our assessment on evolving situation in the Netherlands and the U.K. And finally, our focus on cash generation and contribute continued cost transformation with the launch of [indiscernible] program to drive efficiencies, operating model resets and cost takeout to sustain competitiveness. Let me start with India, which continues to be the anchor of our performance and accounts for nearly 3/4 of our crude steel production. In a quarter that is traditionally impacted by monsoons and weaker construction activity, as Naren mentioned, we delivered our strongest ever second quarter performance. Healthy demand enabled growth of 16% quarter-on-quarter in deliveries and outpaced the highest ever second quarter production. At the same time, raw materials and logistics costs increased meaningfully during this quarter. The total raw material costs were higher by about INR 2,400 crores. while the benchmark coking coal prices increased by 12% between July and September, the impact on our imported coal consumption cost was limited to around 3% or approximately INR 250 crores, reflecting the benefits of our total blending strategy and our increased focus on leaner coal. The balance of the increase was primarily driven by higher inbound logistics cost, reflecting elevated freight rates, [indiscernible] and vessel charter expenses as well as higher purchases of coke and scrap. Inventory drawdown of around 680 in the second quarter compared with the buildup of the first quarter, led to a further increase of INR 2,000 crores. Overall, material costs were up by about INR 4,475 crores or INR 4,128 per tonne on a quarter-on-quarter basis. However, this was partly offset by improvement in the conversion cost to the extent of INR 3,300 per tonne, driven by operating leverage on account of higher volumes and cost takeouts. As a result of the above, the stand-alone EBITDA per tonne moderated to about INR 17,256 per tonne, while the absolute EBITDA increased 10% quarter-on-quarter to INR 10,315 crores. INL recorded an EBITDA of INR 318 crores and a margin of 21%. The 4.8 million tonne expansion project has entered the execution phase, and remains on track for commissioning in FY 2030. Site development work, including road and area grading are underway while ordering of key equipments such as the blast furnace package, et cetera, continues to advance. The project comprises of 4 long products rolling mints, including rebar and wire rod facilities. Although the overall ramp-up will be aligned with the commissioning of the steelmaking complex, one rebar well is expected to come onstream earlier, enabling an initial production ramp-up ahead of the upstream facilities. The amalgamation of NIL with Tata Steel remains on track for completion in this financial year subject to the final NCLT approval, which is scheduled for hearing later in November. Volume growth remains important for us but equally so increasing the value intensity of our portfolio. Our downstream projects are progressing well. The 0.7 million tonne HR PGL project has entered the construction phase with structural erection and piping work underway. This first of its kind facility in India will serve the energy, automotive and construction segment and introduced galvaline products, enabling Tata Steel to address customer segments and support import substitution. The doubling of the template capacity is also advancing with civil and structural works and will aid the market consolidation in the Packaging segment. Along with this, we recently launched Color Court our globally recognized prepainted steel brand in India, bringing proven European technology to the country's growing construction sector. We also continue to expand our use business and ready-to-use construction solution to address evolving customer needs. Our downstream growth will continue to get priority as we move forward. Let me now turn to Netherlands. The key development during the quarter was the restart of the direct sheet plant. In the first quarter, we effectively lost almost the entire output of this facility, which represents around 1.4 million tonnes of annual processing capacity and it's about 18% of the total volumes in Netherlands. The plant successfully restarted in early August against the terms of agreement with the regulator and is presently operating at rated capacity subject to period periodic review. Importantly, the technical measures implemented are delivering the intended outcomes with Chromium 6 emission reducing materially and currently remaining below prescribed image. The significance of the restart extends really beyond volumes. It strengthens our product mix improves the efficiency of the integrated production and lower deconversion cost. As a result, the EBITDA increased from EUR 4 million in the first quarter to EUR 72 million in the second quarter, both in euro terms. As a result, the EBITDA increase was above translates to about [ EUR 56 ] per tonne. Turning to broader situation in Netherlands. Since the signing of the joint letter of intent in September 2025, we have completed engineering and technical work on the integrated health and decarbonization project. While this work has further matured the DRI EF pathway, it has also reinforced our view that the long-term competitiveness of the amount in site will be determined by the resolution of a number of critical external factors rather than the project design alone. First, the discussion with the regulator and the province of North Holland regarding the timing and sequence of the proposed closure of the coke and gas plants 2 and 1. Our position remains unchanged. Any closure process must be executed in a safe, responsible and operationally controlled manner. We have provided detailed technical assessment and continue to engage constructively with all stakeholders to support an orderly transition. However, the timing and outcome of the process remains uncertain at this point. Secondly, we remain engaged on the evolving framework governing the steel slag management. Temporary disruptions to the slag offtake has resulted in additional stockpiling at site. A range of mitigation measures are being pursued, including technical assessment, alternative storage and disposal solutions and ongoing stakeholder engagement. More broadly, the economics of both the existing business and any future decarbonization pathway will depend on the resolution of these matters together with greater visibility on the long-term energy affordability, capital requirements, permitting time lines and broader investment framework. Many of these factors are external to the company and their timing and outcome remains difficult to predict. Against this background, Tata Steel, the government of Netherlands and the province of North Island have agreed to extend the joint letter of intent by 5 months to March 2027. The extension provides additional time for the parties to work towards a more comprehensive framework that supports both the decarbonization and long-term competitiveness of the site. Importantly, while the DRI EF pathway remains the reference case under the [indiscernible] we continue to assess a range of strategic alternatives and sequencing options. The optimal pathway will ultimately depend on how various external factors evolve and the implications they have for future cash flows and competitiveness. Given the extent of uncertainties, it is difficult to form a reliable view on the range of potential outcomes or assign probabilities to them. The Board and the management, therefore, believes currently we realize any change in the carrying value of the business would not faithfully represent the company's position given the uncertainty of the outcomes. We continue to monitor the development closely and reassess the position as key uncertainties are resolved. We expect greater clarity by the first of March 2027, the revised maturity date of the joint letter of intent. The extension is intended to provide time to conclude discussions on critical issues, establish a clear direction and enable a more definitive assessment of the long term. Moving to the U.K. The market has become very challenging while the second quarter net realization improved by about GBP 72 and quarter-on-quarter, deliveries declined to about 0.4 million tonnes. The key point is that the effective market available to U.K. producers has essentially become smaller. Domestic demand remains weak with automotive and construction activity expected to decline by 2% to 4% in the current financial year -- sorry, the calendar year while import pressures remain elevated. Between April and July 2026, imports averaged around 738 Kt per month, about 22% above the 2025 levels. This has resulted in flat steel inventories in the U.K. rising roughly 865 kt by September, nearly 60% above normal levels and equivalent to almost 3 months of demand. With the change in quotas, the market is rebalancing, but it is taking longer than what we had initially estimated to liquidate the old inventories. Having said that, it is important to view the U.K. business through a lens of a broader Tata Steel system rather than a stand-alone operations. While the U.K. continues to report EBITDA losses during this transition period, its downstream assets provide strategic access to customers and end markets and in many respects, operate as an extension of Tata Steel India's value chain. As India steel production continues to grow, these assets effectively represent the fifth hot shipment for the Tata Steel Group, enabling steel to convert its substrate into high-value products closer to customers. Consequently, while Tata Steel U.K. is currently loss-making on a stand-alone basis, the wider system economics and the value creation for Tata Steel remain materially more positive than what is reflected in U.K.'s stand-alone performance. Further, the export from the U.K. into the EU are now subject to quota restrictions, creating an additional constraint on the market access. We continue to engage closely with the government of U.K. and the trade authorities on measures that improve market balancing and ensure that the trade framework better reflects the prevailing market conditions. Turning to the transition project. The execution remain on track. The Land pickle line has fully ramped up. and the 3.2 million tonne EF project continues to progress in line with the plan. Major enabling works have been completed, and the key contracts have been awarded as project activity ramps up, our engagement with the U.K. government and other stakeholders is increasingly focused on ensuring an appropriate investment framework, trade quotas, competitive energy prices and timely grid connectivity, all of which are important to the long-term competitiveness of the site. Overall, the operating cash flow before CapEx was INR 5,160 crores for the quarter. Capital expenditure was about INR 3,280 crores in this quarter, taking the first half spend to about INR 6,800 crores. During the quarter, the company also paid a dividend of about INR 5,000 crores and [indiscernible] Consistent with our capital allocation framework, the cash flows continues to be prioritized towards growth opportunities in India. This is reflected in the strong returns generated by the business with the return on invested capital of the India operations at about 27% and the consolidated return on invested capital at about 14%. The net debt stands at about INR 91, crores in part of the rise in the debt of about INR 2,200 crores was on account of increase in the leases post the acquisition or consolidation of TMILL, the transaction. Net debt to EBITDA remained stable at 2.4x, well within the stated threshold, and the group liquidity remains strong at about INR 40,000 crores. Before I conclude, a brief update on the cost transformation. During the first half, the crisis in West Asia, the planned shutdown in India, the direct sheet mill outage in Netherlands, and the unfortunate fire in Tata Steel U.K. has distorted some of the cost takeout profile. As a result, the benefits of our cost transformation were not fully visible on the reported numbers. Our FY '27 target remains unchanged at about INR 7,000 crores of savings primarily across India and Netherlands. In the first half, we have delivered about INR 1,800 crores. The program is generally weighed on the second half. The specific levers such as coal blend, procurement optimization, energy and logistics, inland waterways, amongst others, are progressing. With that, I'll end my commentary and open the floor to questions. Thank you so much.

[Operator Instructions] The first question is from Ashish Kejriwal of Nuvama.

Sir, 2 questions from me. One is from India. If you look at in India, we have been talking about that we want to maintain our competitiveness and margins on that front. So in that regard, before that, are we going to increase our sales volume in iron ore also for next 3 years? And what kind of value addition at least in pipes and new segment we are trying to do because are we open for inorganic expansion also over there? That's my first question on India.

No, I said iron ore sales, yes, this is very much part of our plan. And I think this year, Kashi, if I remember that we'll be doing about 8 million tonnes or something like that and that.

Just 10 million tons.

Yes, about 10 million tonnes of iron ore sales. And last year, I think we did about 2 million tonnes or something. So that's very much part of our plan. And we optimize on the qualities of words that are available for our use as well as what is available for sale, and we'll continue to grow that side of the business going forward. As far as growth in downstream is concerned, yes, we are always looking at growth opportunities. And today, a lot of our growth has come from what we call conversion partners who convert the steel for us, and that's been the capital-light way of growing for us for both tubes and wires. So -- but otherwise, yes, we will constantly look at opportunities that there are. Kashi, do you want to add anything?

No, I think I just gave the commentary on the downstream growth, which also includes what we have done in cubes growth in the last couple of years. through the 2 partners. And in the other areas, some of them are organic currently on the way. And so I gave a commentary on that. I don't want to add anything to that.

Great. Sir, second question, the way we have done in our Indian business, in fact, in this quarter also 17,000-plus EBITDA per tonne is really, really worthy. So my question is, one, whether we are going to sustain and if you can guide for second quarter also the way you guided and in case of Netherlands, when we have done $60 plus to EBITDA, do we see a further increase in that till the time we go for next phase of expansion in Netherlands? And lastly, any sense on U.K. operation, whether we are going to be breakeven ever.

So let me talk of India. I think we -- last quarter -- I think you're probably asking you for Q3, right? I mean, Q2 end. -- and half second half. Second half, sorry. Okay. yes. I think second half, we expect second half to be stronger than first half for 2, 3 reasons. One is from a Tata Steel point of view, we'll have more volumes, a bit more volume in the second half than we had in the first half. And secondly, even in the first half, prices went up in April, May, then dropped in June, July, August and then again started going up in September. So we've come into this quarter at a reasonably high level of prices. And normally, Jan to June is always the best period for the steel business because monsoons festivals, everything is behind us and the activities at its peak. So for many reasons, we expect second half to be better than first half. As far as Netherlands is concerned, we expect a better Q2 and I mean Q3 and Q4 than Q1 and Q2. So again, the second half will be much better than the first half. And as far as U.K. is concerned, yes, I know this is something we've been struggling with for multiple reasons. I mean, well, we've taken a lot of action internally. Currently, the problem, as Koushik said, is we are selling only about 40,000 tonnes a quarter as against 600,000 tonnes a quarter that we want to be selling in the U.K. And that's largely because the imported material lying in the U.K. market, is quite high, and we'll see through this quarter and next quarter before most of that gets flushed out. So while the prices are good, the spreads are good, but the volumes are not good and hence, that has a negative impact on our cost because despite taking out almost GBP 400 million of fixed costs, we still are a business which has reasonably FX costs. We can't defer the volumes to be at 2/3 of where it should be, right? So our own expectation is we come close to breakeven in Q4 when most of the stocks would have got flushed out of the system. But yes, we've had a few setbacks in the U.K. And so obviously, until we are there, it doesn't look like the -- our promise is are happening. But I think we are expecting that Q4 will be close to breakeven.

If I can just add. We also see the reason why the Netherlands and the U.K. improvement is forecasted is because the prices are increasing and especially due to the contract renegotiation in both geographies and therefore, the spread impact is more positive than where we are today. And that will be the key reason why we expect certainly much better Netherlands and also lower losses as far as U.K. is concerned. And if by the fourth quarter, the inventory is washed out, then I think the volumes will also start coming back.

The next question is from Vibhav Zutshi of JPMorgan.

Just wanted to follow up on the inventory situation in Europe. Any sense that you can give on Europe volumes for second half both in decades and the U.K. And obviously, pricing has improved a little bit, but some of the peers have tried to take pricing as far as EUR 78, EUR 800 per tonne, but that has not really come in through. So with the contract negotiations have bid in November, how is the environment looking like?

Sure. So I think the inventory issue that we described is for U.K., not for Europe. Because Europe has already implemented quotas. So the imports have come down. CPAM is coming in. So the prices in Europe are strong. The inventory of imports, which we are dealing with the new case not there in Europe. So that's why you see a better flow through not only of the prices, but the volumes in Netherlands. The inventory issue that we described is mainly for U.K., where the imports orders which were booked before, I think 14th or 15th of March was allowed to be imported till in the July, September quarter, and that brought in a lot of material. That's the material which we think some of it is getting flushed out now, but it will be March by which most of it will get flushed out and in some categories until June next year, right? So the price is there. In fact, the U.K. prices are actually higher than European prices just now, but the problem is more of volumes. So we need to get to or 60,000 tonnes a quarter of volumes to really come to that breakeven level that we've been discussing. As far as Netherlands and U.K. is concerned, this is the time when we do the price negotiations for next year. So the packaging contracts, auto contracts, et cetera. And this negotiation is currently being done in market conditions which are quite strong. So we expect a good outcome out of that. And that will get reflected in the Q1 realization -- I mean, Q4 realizations. And that's why we said Q4 for both U.K. and Netherlands should be better than the previous quarters. As far as specific prices are concerned, the price levels that you indicated are around the levels at which it is in Europe just now.

Got it. Second question is on India. So 2 quick questions. Firstly, if you can highlight if there are any auto contract positive price divisions, which can come in -- which have come in or can come in this quarter? And just secondly, Construction & Infrastructure sales volumes have declined in 2Q on a year-over-year basis from 1.4% to 1.2%. So any reasons these [indiscernible]

So auto contracts, actually, we saw a lot of the benefit in because a lot of the contracts which are negotiated for Q1 also, we got the realizations in Q2. So Q2 got a bump up. So while there are negotiations going on for Q3, Q4, I'm not seeing while there may be price increases, but the bump up in Q2 or Q1 and coming together and Q2 may offset. So sort of contracts per se volumes, for us, more importantly, the auto volumes are very strong and which is reflected in the release that we gave and that helps us. And not only annotate product mix is very good. So we have a 50% share, which we continue to maintain. As far as construction is concerned, I would assume that's because we have sold more in retail because that is always our preferred segment. Samita can later clarify the numbers. But we are now selling, I think, last month, we sold 270,000 tonnes of data discount in the retail segment. So that eats into what we typically sell to the bigger construction companies because we get a far better price than we sell in the retail than we do when we sell to big construction companies. So that's the only reason I can think of us optimizing the market. Yes, Samita?

Yes. So [indiscernible] if you look at our segments, there is retail shown separately from construction. So when you think of the construction, I mean, retail is essentially construction, so you might want to club those together and see.

The next question is from Rahul Gusta of Morgan Stanley.

So 2 questions. So one, on Netherlands, we saw sharp moderation in volumes quarter-on-quarter. Can you help us understand what drove that? And also with the capacity now running at full operations and with inventory build up quarter-on-quarter, how should we look at the overall volumes in Netherlands in the second half? That's my first question.

Yes. So in Q1, we lost most of Q1 as far as the DSP is concerned. The DSP is about 20%, 20%, 25%, 20% of our production. And that was closed because of some of the regulatory issues we are dealing with, that started coming back in August. So we got most of August and all of September, the DSP production, and that's why the volumes got better in Q2. Second half of the year, hopefully, the DSP is going to be running all the time, and we are also looking to drive better stability in the rest of the plant. And I don't think we give a quarter-wise volume guidance, but like I said, overall, we expect second half to be better than the first half. Koushik, do you want to add anything?

No, I think that's fine. I think overall, we should be from a production point of view for the full year, we should target more around 6.5% and delivery is around 6%. So that effectively would mean that the next 2 quarters will go back to an average of what we normally do [indiscernible]

I got it. So what I wanted to understand was that your volumes are materially lower than production in the second quarter as well. So I understand production got impacted because of DSP shutdown, but what impacted sales volume during the quarter?

Because we don't keep so much inventory. There is a [indiscernible] between the production and the deliveries, it travel. So if we aren't able if production numbers are lower. So we had this quarter also issues on production on the at metal side. The DSP was chart for 1.5 months, and that is in the March end. We had inventories which got liquidated in the first quarter, which is why the sales volume was not correlated to so much with the volume production. So if you look at the flushing of the inventories did happen in the first quarter, not out of the production of the first quarter itself, but because where it carried forward. And then in the second quarter, we had that being liquidated. So you can see the change in stock.

Got it. So my second question is just an extension of the U.K. business that we discussed earlier. I understand that the profit or the breakeven of the business hasn't pushed out to later this year. But I just want to have more on the fact that now you discuss about U.K. distances which should not be treated as a stand-alone business but as an extension of the overall data steel. How should we look at the profitability of the business beyond fiscal '21 and I mean does that mean the profitability of this business may remain a drag vis-a-vis the entire group profitability?

So if I tell you -- if I can explain the reason why I made that comment is that today, we supply a significant part of the substrate from India to U.K. until the EF is being built. So when you do that, if you look at the reason why I said it's an extension because when you look at the combined profitability of the EBITDA of the volume that gets supplied from India to U.K. The part in India makes about, say, INR 8,000 per tonne of EBITDA margin. It goes up to the U.K. for subsequent rolling, finishing downstream, et cetera. The same while if you extend further, as of last quarter, it was say about crore to INR 5 to INR 6 per tonne. So therefore, if I add the same, it is somewhere around INR 1,000, INR 14,000 per tonne. That is the reason why I said that. It will change once in the EF comes in because then again, the profitability will be measured based on the cost of steel that the EAF makes and the only that it does.

The next question is from Sumangal Nevatia of Kotak Securities

First question is on steel prices and costs, if you could guide how are we seeing prices and costs move across geographies in 3Q versus 2Q?

Yes. So in India, we expect the realizations to be about INR 3,500, INR 3,600 per ton higher in Q3 compared to Q2. in U.K., it will be about GBP 2, GBP 2 to GBP 3 per ton higher in Q3 compared to Q2. In Netherlands, while on a product-to-product level, it will be about EUR 30 higher. But because of the mix that we are selling. It will -- we are expecting it to be about 11 -- EUR 11 lower in Q3 compared to Q2 because of the mix rather than at a product-to-product level, it's about EUR 30 higher, but because of the mix. And annual contract benefits will only come from Q1 next year, while it's being negotiated this quarter. As far as costs are concerned, coking coal impact is expected to be about $15 a tonne both in Netherlands and in India, Q3 compared to Q2 on a consumption basis. The U.K., as you know, we don't back wall. So it's not relevant. And Netherlands will get the benefit of $5 per tonne reduction in iron ore consumption price.

Understood. That's very helpful. I just wanted to understand on the iron ore sales, during the first half, how much have we sold, I believe, for the full year, we are looking at 8 million to 10 million tonnes. And generally, I understand there's a higher royalty if you are selling. So if you could just share some economics as to what is the contribution at the EBITDA level per tonne of iron ore?

So I think we don't do because of various reasons, we don't want to give this separately. But all that I can say is it is the same iron ore, which get charged to the plant for steelmaking. So based on the price that we get in the market as set by the domestic iron ore prices, we are able to sell it. but I wouldn't -- I'm sorry, we wouldn't want to do that at this point of time.

Sure. But on the volumes, we are looking at 8 to 10 this year and what would be the next 1, 2 years?

Should be -- we should ramp up to, say, about 1 to 1.