Why Tata Steel Share Price is Falling

The stock market is akin to a tempestuous sea, where calm waters can turn into a raging storm in the blink of an eye. Tata Steel's share price journey exemplifies this unpredictability.

Tata Steel, a global steel-making giant, is a significant contributor to India's industrial landscape. The company operates across various segments, including automotive, construction, and energy.

In June 2024, we wrote to you about why Tata Steel share price is rising due to its green initiatives and robust demand outlook on its share price. The stock price of the company was enjoying a steady upward trajectory. In the past one year, it was up 23.8%.

However, the steady trajectory has encountered a headwind, with a 12.2% decline in the past month and a 2% drop in recent days.

What are the factors driving this downturn?

Let's find out...

Supreme Court's Royalty Order

On Wednesday, the Supreme Court allowed states to collect past dues on royalty and mineral bearing land from the central government.

The Supreme Court's decision came from a nine-judge constitution bench, led by Chief Justice DY Chandrachud. The bench rejected the Centre's plea to prospectively apply the court's ruling it gave on 25 July 2024.

In the July 2024 verdict the court had upheld the states' authority to levy taxes on mineral rights and mineral-bearing land. The ruling was significant as it overturns a 1989 judgment, which had previously granted the Centre the exclusive right to impose royalties on minerals and mineral bearing land.

The Supreme Court clarified on 25 July that the power to tax mineral rights resides with the states. Wednesday's decision now allows states to collect royalty dues dating back to 1 April 2005.

The center had argued that the court's ruling should only apply moving forward, but the bench disagreed. It ruled that states could recover dues for the past period, though payments could be made in a staggered manner over the next 12 years.

However, the court also instructed states not to impose any penalties on these payments, which might have otherwise added to the financial burden on mining companies.

What Next?

Tata Steel is focusing on solidifying its position as a key player in the global steel industry. The company is actively working on expanding its capacity in India, through its Kalinganagar plant.

The commencement of the blast furnace at this facility is expected by the end of September 2024, with a projected output of 1.7 million (m) tonnes. This expansion will enable Tata Steel to meet the growing demand in the Indian market.

In addition, the company is progressing with plans for its Jamshedpur plant. The ongoing relining of the G-blast furnace is scheduled for completion in the fourth quarter of FY25.

This will lead to a slight reduction in production volume, but the overall annual target for India remains at 1.4 m tonnes. The company is also on track to commission the continuous annealing line at the 2.2 m tonnes per annum cold rolling mill complex in August 2024.

The company is not just focusing on capacity expansion; it is also making strides in sustainability. In the UK, the company is transitioning its operations towards a more sustainable business model, with plans to close the remaining blast furnace by September 2024.

This move will significantly reduce carbon emissions. Similar efforts are underway in the Netherlands, where Tata Steel is engaged in discussions with the government to support its transition to green steel production.

The company is also looking to enhance its product offerings, particularly in the automotive and special products segments, which saw a 9% year-on-year (YoY) growth.

Tata Steel's retail brand, Tata Tiscon, continues to perform well, with a 15% YoY growth, supported by an extensive dealer network and consumer engagement initiatives. The company's e-commerce portal, Aashiyana, is also gaining traction.

How Tata Steel Share Price has Performed Recently

In the past five days, Tata Steel share price has slipped 3.7%. In the last month, it is down 12.2%.

In 2024 so far, its share price has gone up by 4.8% but it's up 23.9% over the last year.

The stock touched its 52-week high of Rs 184.6 on 18 June 2024 and a 52-week low of Rs 114.3 on 2 November 2023.

About Tata Steel

Tata Steel is Asia's first integrated private steel company.

The company is primarily engaged in the business of manufacturing and selling finished steel goods.

It's present across the value chain, from the mining of iron ore and coking coal to the distribution of steel and value-added products.

The company caters to several industries through its broad product portfolio, including automobiles, construction, agriculture, industrial, and general engineering. It has a global presence and caters to the steel needs of over 50 countries across five continents.

To know more about the company, check out Tata Steel's financial factsheet and its latest quarterly results.

You can also compare Tata Steel with its peers.

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