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R Mukundan, MD & CEO, Tata Chemicals, says “the main issue which we will face going forward next year is going to be in terms of exports where compared to the pricing which we got in the export markets, we would see at least a $100 reduction. This is mainly out of exports coming out of the US and Europe. We have operations in the UK, similar to most people, there is going to be a compression of margin of at least a hundred pounds per tonne. Those are the two pressure points.” Your performance has been impacted due to the weak demand trends. We spoke with your peers like GHCL and they said that they expect the European and US markets to recover after two to three quarters only. Is this something that you are experiencing as well?
R Mukundan: The challenge for demand is only from Western Europe. There is no demand issue in North America. In fact, North America is fairly stable and positive. Container sector in North America may have been a little impacted, but certainly the overall demand there is stable. The Latin American market has shown moving out of Western Europe because Western Europe demand is not there.

We think Western Europe will continue to face downward bias at least for the next two-three quarters until rationalisation of capacities and operations happen, which means some people have to cut back. One or two people have announced some bit of a cutback in their operations, which are very high-cost operations. They are actually unviable today at this input cost and price structures. This will play out over some period of time, but the whole issue which we are facing in the industry is an outcome of the Western European situation.

How do you expect soda ash prices to behave in the near term considering the over capacities?
R Mukundan: In terms of pricing, the Indian soda ash prices and the prices worldwide have almost hit the bottom. It has been fairly flat for quite some time and will continue from here or it is going to be a slow climb upward as capacities begin to rationalise. If you look at the US market, our contract for next year, domestic, is more or less stable and we expect that there will be no issue. Indian market prices are also stable.

The main issue which we will face going forward next year is going to be in terms of exports where compared to the pricing which we got in the export markets, we would see at least a $100 reduction. This is mainly out of exports coming out of the US and Europe. We have operations in the UK, similar to most people, there is going to be a compression and margin of at least a hundred pounds per tonne. Those are the two pressure points.

For us, our capacity in Western Europe is smaller, it is about 8% of our overall capacity. So, our pressure point on that piece is much less. The major pressure point is our exports out of Europe because we export close to 45% of the US production to different parts of the world.

Given that your margins have been impacted and have fallen from the recent peak of 25% last year, currently hovering around 15%. When do you see your margins recovering or going back to 25% levels?
R Mukundan: In the medium and long term, margins have to go back to the normal expected range of about 40%. But in the immediate term, when you see the need to rationalise and people doing optimisation of their production, I think the pricing would stabilise. We have to wait for that to happen.

Last year, the Tata Group had signed an MOU with the Gujarat government to set up a gigafactory for lithium-ion batteries. What is the progress on that and what will be Tata Chemicals’ contribution to this?
R Mukundan: Our group company, Agratas, is the one which will be making EV batteries. We are engaging with them to supply various chemicals they would need. We would be a supplier of chemicals into the battery segment and subject to us meeting their requirements and their standards, I am sure that we will make headway there. As and when we have anything specific, we would speak about it. But the entire investment is going to come through a company called Agratas, which has been promoted by the Tata Group.What is your guidance? What is the outlook for FY25? Could it be better than FY24, at least in terms of your parameters for growth and margins?
R Mukundan: I do not want to give a forward-looking statement on that account, but I would certainly say that the domestic markets where we have strong presence, have more or less stabilised and would continue to be range-bound. In terms of exports out of the US and Kenya, the next full year would see a recovery up from the $100 dip which we will see in the next quarter.

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