Tata Steel at Full Blast with $5.5 Billion Expansion Plans

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Tata Steel’s (BOMBAY:TATA) (Bombay, India) (Tisco) G furnace at the company’s plant at Jamshedpur completed the production of fourteen million tons of hot metal over twelve years in mid-November 2004. The company is claiming this as an Indian national record and a top world-class performance from the furnace that was commissioned in November 1992. Tisco also claims that it has the distinction of producing the lowest cost hot metal in the world. The furnace is now shutdown and is undergoing a three month relining and upgrade, which will see it come back into operation rated at 1.8 million tons of hot metal production a year.

This furnace performance is typical of Tiscor’s aggressive search for new company targets and its forward-looking push into world markets over the next decade. As the markets for steel in the U.S., Europe, and Japan are near saturation, with an average steel consumption of about 300 kilograms per person per annum, the Indian and Chinese steel industries are under pressure, as they are in an expansion and modernization mode to meet global demands with the tag of ‘low cost, best in the world’ steel, says a report from Jamshedpur in the local news today.

It is estimated that from the present level of consumption per annum of 35 to 40 million tons, the Indian economy will grow faster to a level of 150 million tons in the next fifteen years. Managing Director of Tata Steel, B. Muthuraman said that India’s production capacity target of 200 million tons by 2020 is possible only if forward plans are made with a vision in advance of capacity of steel production over the next 20 years. As economic activity with infrastructure projects are shifting to developing countries with populations, the global steel industry has entered a new kind of era, as there would be high growth rate of steel consumption, he said. For related news item see August 30, 2004 – Tata Steel’s $3.2 Billion Project and BHP/POSCO Concept Focus Steel and Iron Plans on India’s Orissa State.

In mid-November, Muthuraman signed a MoU (Memorandum of Understanding) with the government of Orissa to set up a six million ton greenfield integrated steel plant at Kalingangar in the Jaipur district of Orissa state. The $3.2 billion plant will be built in two modules of three million tons each. The first module will include a blast furnace, coke ovens, sinter plant, and caster and rolling mill. It will be completed in four years and will be followed by the second module to be completed two years later. The project will include captive iron ore mines and modern townships for employees. It will provide direct and indirect employment for several thousand people. Tata Steel is also planning a $110 million cold rolled steel processing center at Gopalpur as part of forward integration of its Kalinganagar steel plant. Tata Steel will also take part in a $320 million joint venture to develop a deep water port in Orissa to support the steel plant.

The company is also looking at new locations for another three million ton steel mill, on which a decision will be announced soon. This will be a part of Tata’s $5.5 billion, 15 year expansion exercise, which includes major investment in Bangladesh for a 2.4 million tpa gas fed plant, and possibilities in Iran and Middle East countries, which are rich in raw material feedstock. It is investing $170 million in a 125,000 ton per annum ferrochrome plant at Richards Bay in South Africa, with that country’s Industrial Development Corporation (Johannesburg, South Africa). The plant will process high-grade Indian chromite using low cost South African electricity and export the production to India. It is also doubling the capacity of its Bamnipal ferrochrome plant in Orissa from 50,000 tons to 120,000 tons. For related news item see September 3, 2004 – http://www.industrialinfo.com/showNews.jsp?newsitemID=48841 TATA of India to Pump $2 Billion Project Investment into Bangladesh Industrial Base.

Tisco is also in talks with the government of Tamil Nadu state over the prospect of investing $340 million in a 100,000-ton titanium dioxide plant. A dedicated power plant will sell surplus power bringing the cost of desalinated water down by a factor of 66%.

Relative to the latest boardroom game of spotting the differences between the Chinese and Indian industrial development booms, Muthuraman allayed fears of steel dumping from China. He said that Chinese steel had a higher production cost but their downstream manufacturing process was cheaper in products like autos and white goods because of the mass scale of production and the Chinese ability to work with thin margins.

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