Tata Steel sees Europe demand recovering this year

Tata Steel Ltd said it expects demand to recover by the end of the year in Europe, where it derives two-thirds of its 27 million-tonne annual capacity.

The positive outlook marks a turnaround for the company following May's $1.6 billion writedown for the region due to weak demand.

India's biggest steelmaker got a foothold in Europe when it paid $13 billion for Anglo-Dutch steelmaker Corus in 2007. It operates two major integrated steel plants in the United Kingdom and one in IJmuiden, in the Netherlands.

"There have recently been encouraging signs of improving economic conditions in some European economies, the UK in particular," said Tata Steel Europe's chief executive Karl-Ulrich Kohler.

But in India Tata said market conditions had worsened, but added that a fall in the rupee was cushioning weak domestic prices.

Indian steelmakers face a shortage of raw materials, such as iron ore, and rising shipments from neighbouring countries. Imports rose 15 per cent to an all-time high of 7.87 million tonnes in the year to March 2013.

A fall in rupee, which has declined more than 10 per cent this year and hit a record low of 61.80 last week, makes imports less competitive and helps exports.

Tata Steel did not specify the benefits of the weak rupee, and chief financial officer Koushik Chatterjee did not immediately reply to requests for comment.

"Auto sector challenges continue along with the seasonal weakness in construction," the company said in a presentation after reporting June quarter net profit that nearly doubled and beat estimates on lower costs.

Chairman Cyrus Mistry said in June that volatile raw material prices and weak demand in key markets would be "challenging" for the company over the next two years

Copyright: Thomson Reuters 2013