Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019

Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22

Name/s of the student Vihaan Sachin Vadnere Roll No.3625

Commerce Assignment for Year: 2021-22

Class: TYBA

Semester: 5

Paper Code: RUACOM503

Paper Title: Export Management

Topic of Assignment Study of Tata Steel Ltd.’s Export Management

Roll No. 3625

Email ID: vihaanvadnere1@gmail.com

Date of Submission: 20th August 2021

 Composition and
1
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

direction of trade
 Trade barriers
 Trade Blocks
 WTO Trade
agreements and 
challenges
 Impact of Covid on
market performance
of exports
 Initiatives to tackle
problems/issues (covid
or no covid scenario)
https://www.thehindu.com/business/Industry/tata-eu-steel-firms-brace-for-tariff-
war/article24049654.ece
https://www.ibef.org/download/Tata_Steel.pdf
https://www.tata.com/newsroom/tata-steel-uk-reaches-agreement-with-trade-unions
https://www.business-standard.com/article/companies/a-global-first-tata-steel-hsbc-do-blockchain-
enabled-paperless-trade-deal-121042100658_1.html
https://economictimes.indiatimes.com/markets/expert-view/trade-war-impacts-tata-steel-in-europe-
but-not-in-india-tv-narendran/articleshow/69822695.cms
https://timesofindia.indiatimes.com/business/india-business/tata-steel-scraps-sale-of-se-asian-
biz/articleshow/70564861.cms

Introduction

2
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

Tata Steel was established in 1907. It represents the country's single largest, integrated steel plant in
the private sector. The company has a wide product portfolio, which includes flat and long steel,
tubes, bearings, ferro-alloys and minerals as well as cargo handling services. While in terms of size,
Tata Steel ranks 34th in the world; it was ranked first (for the second time) among 23 world class
steel companies by World Steel Dynamics in June 2005. With its plant located in Jamshedpur
(Jharkhand) and captive iron ore mines and collieries in the vicinity, Tata Steel enjoys a distinct
competitive advantage. The main plant at Jamshedpur manufactures 5 MTPA of flat and long
products, while its recently acquired Singapore-based company, NatSteel Asia, manufactures 2
MTPA of steel across Singapore, China, Philippines, Malaysia and Vietnam. Apart from the main
steel division, Tata Steel's operations are grouped under strategic profit centers like tubes, growth
shop, bearings, ferro alloys and minerals, rings, Agrico and wires.

The company has many firsts to its credit and has been honored multiple times at various national
and multinational forums for its operational efficiency, quality standards, labor relations, corporate
social responsibility, corporate governance, leadership, knowledge management and other key
aspects. It has constantly reinvented itself technologically and updated its product portfolio to meet
changing market dynamics.

Composition and Direction of trade

3
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

Steel is a capital-intensive industry and hence its profitability is dependent on its operating rates.
Thus, producers need to maintain a minimum level of capacity utilization to recover fixed costs.
With the Indian market having an inadequate demand for steel, Tata Steel was one of the pioneers in
accessing the export market to improve its sales and realizations. Its cost-competitiveness in the
international market has further helped it to improve its market share in the export market. Some of
the markets targeted by the company included USA, Canada, China, South and Southeast Asia,
Middle East and Europe. The major items of steel export include hot rolled coils and plates, cold
rolled and galvanized products, wire rods and wires. While initially the company channeled its
exports through its in-house Export Division, it currently exports through a group company, Tata
International Ltd; having trading offices at Chicago, New York, London, Ukraine, Turkey, Dubai,
Saudi Arabia, Iran, Johannesburg, Kathmandu, Bangladesh, Colombo, Hong Kong, Thailand and
Singapore.
Export performance:
Initiatives taken to increase exports: -
 Steel Products: Tata Steel increased its share of business with key customers in neighboring
markets by 50% and also exported products to countries in SE Asia, Middle East and South
Africa.
 Wires: The Division obtained approval for supplies of PC Strand wires to select markets in
the Gulf and also developed NatSteel Holdings, Singapore as a channel partner for sales to
the construction segment in Singapore and Malaysia. Wires Division strengthened its
presence in the construction segment in the Middle East, which is a market of strategic
importance and of interest to the Company. There has been a three-fold increase in sale of
wires for this segment.
 Ferro Alloys and Minerals: Trials were undertaken at NatSteel and TSTH for use of a new
product- Silico Manganese 50 grade, a Manganese alloy. In Ferro Alloys, DDU (Delivered
Duty Unpaid) service was established at Korea, with 10,738 MT being sold to POSCO SS
through this mode. New customers were also acquired in Korea and Japan.
Development of new export markets for products and services: -
 Flat Products: The Company developed several new customers in countries including
Thailand, South Africa, Bangladesh and Sri Lanka. Approximately 20% of total export sales
came from these new customers.
 Wires: The Company developed 15 new customers this year, with supplies being affected for
the first time, contributing ~ 23% to total sales. The Company also entered into new markets
in the EU and Canada for sales of GI Wires.
 Ferro Alloys and Minerals: The Division established DDU (Delivered Duty Unpaid) service
in Korea, achieving 10,738 MT sales through this mode. The Company entered into a Long-
Term contract with M/s Nucor in US for sale of Ferro Chrome. The Division reported its
highest ever export of Silico Manganese at 46,700 MT.
Export plans: -
 Flat Products: Export of Flat Products - approximately 180k tons primarily of H.R. Coils and
98k tons of CR coils are planned to be sold to SAARC countries, South East Asia, Middle
East and South Africa.
 Long Products: In the near term the Company intends to maintain a presence with some key
relationship customers in the SAARC region.

4
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

 Wires: The Division will further develop existing markets and seek product approvals from
new customers and new geographies.
 Ferro Alloys and Minerals: The Division plans to develop more customers in Japan & Korea
and to increase tonnage under long-term contracts for Ferro Chrome. In Manganese alloys, it
will also drive development of end users for the Silico Manganese 50 grade and remain a
dominant supplier to in-house customers in South East Asia.

Increasing trade co-operation through countries in the form of trade agreements has led Tata Steel to
incorporate changes in its strategy. While exports currently constitute about 14 per cent of the
turnover, the company has also started looking at overseas acquisitions / joint ventures to cater to
lucrative markets by having appropriate production facilities in their vicinity. Tata Steel undertook
its first major overseas investment in NatSteel Asia, which will give it a manufacturing footprint in
the Asia Pacific region, including China. The company has also announced the commencement of
necessary modalities for other global projects, some of which are:

 Definitive Agreements signed with Cementhai Holding Company- A 100 per cent subsidiary
of the Siam Cement Company, Thailand to acquire its shares and invest additional equity in
Millennium Steel Company subject to certain conditions. It is the dominant steel producer in
Thailand and the three operating units of the company have a cumulative capacity to produce
1.2 MTPA of steel through the electric arc furnace route and a long product rolling capacity
of 1.7 MTPA

 Joint Venture Agreement with Iranian Mines and Mining Industries Development and
Renovation Organization (IMIDRO) to join them in their proposed steel-making projects and
mining operations in Iran. The company would partner IMIDRO in establishing a 1.5 MTPA
steel slab making facility, a 1.5 MTPA of steel billet making capacity, a separate 3 MTPA
export oriented steel plant and in exploration and mining of iron ore mines.

 Agreement to buy a 5 per cent interest in the Carborough Downs Coal Project located in
Queensland, Australia; a large global producer, shipper and trader of high-grade metallurgical
coal.

The company has also had a long association of having technical collaboration for best-in-class
technology processes and product development with international steel companies and technology
partners. An example of such collaboration is the development of 'galvannealed' cold rolled steel
with technical assistance from Nippon steel and Arcelor for high-end auto applications. Similarly,
the company has entered into a 50:50 joint venture with BlueScope Steel, an Australian firm with
expertise in the area of flat steel solutions. The new company, christened Tata BlueScope Steel Ltd.
would manufacture and supply flat steel products and provide building solutions. The joint venture
will manufacture zinc / aluminum metallic coated steel, painted metallic coated steel and roll-formed
steel products and deliver pre-engineered buildings and other building solutions, across four
locations in India.

In 2016 Tata Steel UK reached an agreement with trade unions on a number of proposals that would
structurally reduce risks and help secure a more sustainable future for its UK business. The company

5
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

and trade unions have also agreed on the principle that subject to the structural de-risking and de-
linking of the British Steel Pension Scheme fund from the business, Tata Steel UK will continue the
existing blast furnace configuration in Port Talbot until 2021. Further, based on achieving the
necessary financial performance and cash flows as per the transformation plan of the UK business,
the company will continue to invest across the UK sites to enhance the competitive position of Tata
Steel UK in the European steel industry. The company has also offered an employment pact until
2021 which supports employees through future changes by investing in their skills to support further
plant upgrades, automation and other digital initiatives. Tata Steel is the UK’s largest steel
manufacturer. It supplies almost 50 percent of UK carmakers’ steel requirements, including body
panels and chassis, and a range of advanced steels for the UK construction industry which help to
reduce buildings’ energy use.
In April of 2021, Tata Steel, along with HSBC, has executed a blockchain-enabled paperless trade
transaction. According to the company, this is a global first for the steel industry. The end-to-end
paperless transaction, executed over the Contour platform, was made possible by a unique
collaboration pivoted by Tata Steel across the spectrum over the Contour and essDOCS platforms.
The letter of credit was issued by HSBC UAE for Universal Tube & Plastic Industries, UAE
(importer), with HSBC India as the advising and negotiating bank for Tata Steel, India’s Exporter.
Tata Steel has also signaled its intent to explore similar opportunities in other geographies as well.
With trade documents digitized, corporates can reduce the costs associated with handling paper-
based documents, its reconciliation and streamline the processing flow. The use of blockchain
technology in trade finance enables comprehensive visibility for all involved parties and enhanced
security. It helps to significantly reduce the document negotiation and banking transaction cycles
from weeks to a few days. It also speeds up the velocity of trade, particularly in situations where
shipping routes are relatively short.

6
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

Trade barriers and blocks

U.S Tariffs
Tata Steel Europe and other manufacturers of the alloy faced 25% tariff on their exports to the U.S.
in 2018. European steel makers are braced themselves for the full force of U.S. steel and aluminum
tariffs and a potential trade war as a deal on exemptions for the EU, Canada and Mexico fell through
ahead of a Thursday midnight deadline. The EU has expressed its strong disappointment and
announced plans for retaliatory measures. U.S. Commerce Secretary Wilbur Ross announced that the
exemptions would be allowed to lapse, meaning EU steel makers exporting to the U.S. would face
tariffs of 25% and aluminum producers 10%. The U.S. represents a major market for EU steel
producers. For Tata Steel Europe, the U.S. accounts for 10% of its sales. Alongside the loss of high
quality, value-added steel sales into the lucrative U.S. market, the tariffs are also likely to result in
part of an estimated 20 million tons of steel which would have otherwise gone to the U. S. flooding
markets elsewhere. Tata Steel Europe urged the EU Commission to take swift and robust action to
combat the indirect effects of the tariffs. Following the U.S.’s surprise announcement of the tariffs on
steel and aluminum earlier this year, the European Commission warned of the possibility of
retaliatory action in the forms of tariffs on U.S. imports to Europe such as on Harley Davidson bikes,
and Levi’s jeans.
A US tariff on laminated steel used in packaging will not apply to Tata Steel products manufactured
in the Netherlands according to the Dutch foreign trade minister. US had agreed the products would
be exempt from a 25% tariff announced by the administration of President Donald Trump in June
2018, saving consumers and the company up to 100 million euros annually in tariff costs. Since
2018, US companies wishing to import the type of steel, which is not produced in the US, had been
forced to seek tariff exemptions on a case-by-case basis. A spokeswoman for Tata Steel, whose
Dutch operations are based in the city of Ijmuiden, said that around 100,000 tons of the company's
531,000 tons of steel exports to the US were covered by the exemption. The trade actions of Donald
Trump impacted Tata Steel in Europe because from Europe, they sold about a million tons of steel
into the US. But it does not impact Tata Steel much in India. The steel industry in India is impacted
because of the divergence of material which should have otherwise gone to the US, into markets
where India could have been exporting. So, sometimes, there is an indirect impact of trade actions
rather than direct impact. Countries like South Korea, Turkey who have traditionally sold a lot into
the US are looking for alternate markets and that could be in South East Asia, Europe or India. As it
is, the biggest exporters into India are South Korea and Japan with whom we have FTAs. There are
concerns there about the flow of material into India and 90% of the steel which comes into India are
very ordinary grade. They are commercial grades and not really the high-end grades which everyone
talks about. There is a concern that we will be impacted directly or indirectly by the US actions.

Brexit Impact
In 2016 Tata Steel halted the sale of its U.K assets in the wake of Brexit, with at least four
shortlisted potential buyers pulling out over uncertainty, after many of the shortlisted bidders pulled
out due to uncertainty in the wake of the Brexit vote, people with knowledge of the matter said.
Potential buyers told Tata Steel that the U.K.’s surprise vote to leave the European Union raised
uncertainty about the viability of its operations there, the people said. At least four shortlisted bidders
pulled out of the process, according to one of the people, who asked not to be identified because the
information isn’t public.

7
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625

Tata Steel is still keen to sell the business and might resume the process after the effects of Brexit
become clearer, the people said. The assets, which include the Port Talbot facility, had attracted
interest from at least seven potential buyers including India’s JSW Steel Ltd. and Hebei Iron & Steel
Group, people with knowledge of the matter have said. Britain’s steel industry has been hit by high
energy costs, inefficient output and a flood of cheap Chinese exports. That led to Tata Steel in March
of that year saying it planned to sell its U.K. operations after years of losses, putting 15,000 jobs at
risk and raising the alarm for British politicians. Representatives for Tata Steel in India didn’t
immediately respond to e-mails seeking comment, while a spokesman for the U.K. business declined
to comment. The BBC reported that Tata Steel will soon announce a pause in the sale of most of its
U.K. business, without saying where it got the information.

WTO Trade Agreements and Challenges

India secured partial relief in its major trade dispute with the US at the World Trade Organization
(WTO) over countervailing duties imposed by the United States Commerce Department on certain
hot-rolled carbon steel flat products exported by Indian steel companies. The US had imposed CVD
duties on five steel companies from India. They include Essar Steel Ltd, Ispat Industries Ltd, Steel
Authority of India Ltd (SAIL), Tata Iron and Steel Co. Ltd (now, Tata Steel Ltd) and JSW Steel Ltd.
The US countervailing duty orders targeted various Indian government programmes such as sales of
input products, licensing schemes for mineral extraction, and financing arrangements. US also
targeted entities established by the Government of India such as National Mineral Development
Corporation (NMDC) and the Steel Development Fund. On one major issue concerning whether the
NMDC is a public body, the highest court disagreed with the US. Washington had argued that
NMDC is a public body that is capable of acting at the behest of the Indian government to help the
domestic steel companies. The Appellate Body has pointed that the determination of the US
Department of Commerce that the NMDC is a public body is inconsistent with Article 1.1 of the
Subsidies and Countervailing Measures (SCM) agreement. But on other major issues raised against
the earlier panel ruling, the highest court sided with the US’ actions. The Appellate Body, for
example, has agreed with the earlier panel’s findings regarding whether India’s captive mining rights
and Steel Development Fund (SDF) loans constitute financial contributions with the meaning of the
SCM agreement. Both captive mining rights and SDF loans, according to The Appellate Body,
amount to a form of subsidy. The highest court also rejected India’s appeal on several issues
concerning the US code of federal regulations that decide the US benchmarking mechanism for
calculating benefit.

8
 Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019
Class TYBA Sem 5 Commerce Assignment RUACOM503 2021-22
Name/s of the student Vihaan Sachin Vadnere Roll No.3625