Tata Steel has announced its ambitious target of achieving net zero emissions by 2045, 25 years ahead of India’s target of 2070. The company’s journey towards decarbonisation will be heavily focused on India, where 65% of overall volumes are produced. With production set to double to 40 million tonnes by 2030, the business case for decarbonisation will depend on the company’s ability to invest, government support, and customers’ ability and willingness to pay for green steel. The company plans to invest Rs 16,000 crore in capex this year, with about Rs 7,000 crore going towards the ongoing 5mt Kalinganagar expansion. In addition to the expansion, Tata Steel plans to build low carbon modular configurations of scrap-based electric arc furnace steel manufacturing of long products in Punjab.
The company plans to bring down the carbon emission intensity of the steel produced by its India operations to global best in class levels, even as it grows its overall capacity. To do so, Tata Steel plans to make multiple interventions in terms of the quality of raw material input, the trial and adoption of new technology paths, and the implementation of alternative lower carbon intensity process routes.
The de-carbonisation journey in India will be different relative to Tata Steel’s Netherlands operations, where the company is being incentivised to decommission its existing blast furnaces and replace them with new non-coal using assets in the next 10 years. Any transition out of legacy production processes will need to be supported by a sound business case. Replacement of coal with either natural gas in the short term or hydrogen in the medium term will require significant investments in new technology, as well as the availability of substitute fuels and pipeline and other infrastructure capacities to be made available to steel companies.
The business case for making these investments and for switching into higher cost fuels will require three things: the ability of the company to invest in the new transition, policy and infrastructure investment from the government, and the ability and willingness of customers to pay for the green transition on a fair market basis. Tata Steel is engaged with the Netherlands government on its transition pathway from its legacy 2 Blast Furnace configuration to one that uses non-coal based technology.
Tata Steel plans to continue its strategy of deleveraging, even though its net debt increased compared to the previous year due to acquisitions. The company’s future strategy is to prioritise investments towards growth in India in long-term value accretive projects, with available land and infrastructure capacity to be able to grow across its sites in Kalinganagar, Meramandili, and NINL near Kalinganagar. The first phase of expansion of capacity in long products in NINL is the next priority, followed by expansion in flat products capacity in Kalinganagar and Meeramandli.
In conclusion, Tata Steel’s journey towards decarbonisation will heavily focus on India, where 65% of its overall volumes are produced. With a focus on multiple interventions such as the quality of raw material input and the implementation of alternative lower carbon intensity process routes, Tata Steel plans to bring down the carbon emission intensity of the steel produced by its India operations to global best in class levels. A sound business case, policy and infrastructure investment from the government, and the willingness of customers to pay for the green transition on a fair market basis will be required for the business case to succeed. The company plans to continue its strategy of deleveraging, prioritising investments towards growth in India in long-term value accretive projects.
