Tata Steel to Begin Construction of 6 Million-Ton Steel Project in Orissa

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Researched by Industrial Info Resources (Sugar Land, Texas)--Tata Steel (BOM:500470) (Mumbai, Maharashtra) recently announced that it will begin construction on a long-delayed 6 million-ton-per-year steel project in Kalinganagar, a small town in the Jajpur district of Orissa, in the next three months. The $3.75 billion project is scheduled to be completed by 2010. It will be developed in two phases with a target production capacity of 3 million tons per year in each phase.

Tata Steel has procured machinery and equipment worth $1.6 billion from international firms in China, Germany and other countries for the project. In January 2007, Siemens Metals Technologies (Erlangen, Germany), part of Siemens VAI Metals Technologies (Linz, Austria) secured a deal to supply a 3.2 million-ton-per-year blast furnace for the project. The value of the deal was not disclosed. SMS Demag AG (Dusseldorf, Germany) won a contract to develop a steelmaking facility and supply two LD converters with individual capacities of 300 million tons and a 3 million-ton-per-year two-strand continuous slab caster to cast slabs with a width of 2 meters.

In June 2007, Tata Steel awarded a $400 million contract to Hindustan Construction Company (Mumbai) to undertake civil work for the first phase of the project. Hindustan Construction was to begin construction work by December 2007. Nippon Steel Corporation (TYO:5401) (Tokyo, Japan) was appointed as the technical consultant for the Kalinganagar project.

In July 2007, a consortium of Outotec GmBH (Espoo, Finland), a solutions provider for the mining and metallurgical industries, and Larsen & Toubro (L&T) (Mumbai) won a $210 million engineering, procurement and construction contract from Tata Steel to set up a 5.75 million-ton-per-year iron ore sinter unit for the Kalinganagar steel plant. This was to be the largest iron ore sinter plant in India. L&T's share in the contract was valued at $155 million, and it was to be responsible for all local aspects of the iron ore sinter plant, including engineering, local supplies, construction, commissioning, structural and civil work. L&T then secured another contract for civil and structural works to set up a steel melt shop for the project. This deal was valued at $60 million. L&T further clinched a $245 million deal to supply and install a 3.2 million-ton-per-year blast furnace.

In October 2007, Tata Steel signed up with Anshan Coking and Refractory Engineering Consulting Corporation (ACRE) (Liaoning, China) and the Chinese arm of FlSmidth Koch GmBH (Wadgassen, Germany) to import equipment and technology for a 1.5 million-ton-per-year coke oven plant. ACRE was to supply the main battery while Koch was to supply machinery for the coke oven plant. The value of the deal was estimated at $125 million.

Though the company had signed a memorandum of understanding with the state government of Orissa in 2004, it faced opposition from the region's locals. The government has allotted 2,000 acres of land for the proposed steel plant, but the project has been marred by several violent outbreaks. In January 2006, a police-firing incident claimed 14 lives. The company has reached out to tribal and social activists and has set up a grievance redressal group to persuade the locals and quell their opposition to the project. The company has now made progress in its rehabilitation program for 1,200 families and has already helped 700 families relocate. It has also sought the assistance of the state government to complete the rehabilitation work.

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