India's largest private steel firm, Tata Steel Ltd, has always had its captive iron ore and coal mines to bank on to control costs. This is again reflected in the results for the quarter ended Dec 2008, but its realisations have taken an unexpectedly severe beating which has come as a surprise to analysts.

Realisations have fallen 20.5 per cent compared to the previous quarter. These are lower than SAIL's realizations which fell 18-20 per cent on a quarter-on-quarter basis.

Tata Steel has traditionally enjoyed higher realisations than the public sector steel units thanks to a higher proportion of value- added products and lower spot sales.

With its medium-to long-term contracts with customers, the company should have been in a position to better insulate itself from impact of the free fall in steel prices, according to analysts.

The fall in price realisations which comes on top of a 7-per cent slump in production has resulted in an erosion of as much as 54 per cent in operating profit on a sequential basis, they add.

According to analysts, the operating profit is as much as 35 per cent lower than expected. However this did not dampen investor interest as Tata Steel shares rose 3 per cent after results were announced.

The outlook for Corus appears equally lacklustre according to analysts. Corus' profitability will take a hit because of its long term contracts with suppliers for coal and iron ore, they add.

The company's UK subsidiary has cut production 30 per cent with more cuts expected till at least March.

Meanwhile according to managing director B Muthuraman, the company has renegotiated coking coal rates this quarter. He did not quote figures, however.

Chief operating officer HM Nerurkar said the company has plans to export 330,000 tons this quarter as local demand has declined.

According to analysts metal prices will continue to remain weak. In this backdrop Tata Steel's renegotiation of coking coal rates could be a big positive as fuel costs are the biggest concern for steelmakers.

According to CNBC, quoting Tata Steel results, Q3 standalone net profit was down by 56.37 per cent at Rs466.24 crore from Rs1068.58 crore. The company's standalone net sales also declined at Rs4,735.68 crore from Rs4,973.92 crore. Its margins declined to 29.8 per cent versus 40.2 per cent, YoY. The company reported forex loss of Rs126.8 crore versus gain of Rs 47.9 crore. Its raw material cost increased to Rs1,611.2 crore from Rs902.3 crore. Its sales volumes have reduced by 13.8 per cent and its steel inventory increased to Rs 636 crore from Rs61 crore, YoY.

CNBC quoted B Muthuraman, MD, Tata Steel, saying, although the markets in India are in a better situation, all over the world the situation is indeed tough. He added that in the European Union, demand for steel has fallen by 40per cent. He added that they do not have any short-term refinancing requirements in the EU or India.