Tata Steel to Invest $1.2 Billion on Expansion Projects in 2010-11

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Researched by Industrial Info Resources (Sugar Land, Texas)--Tata Steel Limited (BSE:500470) (Mumbai), India's largest steelmaker, unveiled plans to invest $1.24 billion on expansion projects in the next financial year, April 2010 to March 2011. About $805 million, or 70% of the total amount, will be earmarked for domestic projects.

The firm aims to augment the capacity of its steel manufacturing unit at Jamshedpur in Jharkhand, from 6.8 million tons per year to 10 million tons per year by August 2011. It also will expand domestic iron production to 17 million tons, a 55% increase over current levels, with an investment of $239 million over the next two years. This move is aimed at ensuring reliable supply of raw material and insulation from volatility in prices for its steel plant at Jamshedpur. The firm recently entered into a memorandum of understanding with state-owned NMDC Limited (BSE:526371) (Hyderabad, Andhra Pradesh), India's largest producer and exporter of iron ore, to explore opportunities for acquiring, exploring and developing iron ore mines, and for development of technology to use domestically available lower grades of iron ore for manufacture of steel.

Overseas, Tata Steel plans to develop coal and iron ore mines in Mozambique and Canada through joint ventures. Tata Steel is also developing a mini blast furnace for Tata Steel (Thailand) PCL (BAK:TSTH) (Bangkok, Thailand), the company's local subsidiary.

In November last year, Tata Steel entered into a joint venture with New Millennium Capital Corporation (CVE:NML) (NML) (Quebec, Canada) and LabMag Limited Partnership for developing a direct shipment iron ore project in Canada. Through subsidiary Tata Steel Global Minerals Holdings Pte Limited (Singapore), Tata Steel proposed to invest $279 million in the project and will hold an 80% stake of in the venture, while the Canadian firms will own 20%. The project is expected to begin initial production by the second quarter of 2011. Production is expected to be about 4 million tons per year, and Tata Steel will have off-take rights for the entire output.

In Mozambique, Tata Steel is engaged in a joint venture with Riversdale Mining Limited (ASX:RIV) (New South Wales, Australia) for the Benga coal project, which is expected to yield more than 20 million tons per year of dry fuel. The joint venture secured a mining contract from the government of Mozambique in May last year. Tata Steel owns a 35% stake in the venture and has off-take rights for 40% of the output to feed its Corus facilities in the United Kingdom and Europe. Coal production is expected to start by 2014.

In Thailand, Tata Steel owns a stake of 67.1% in its local subsidiary TSTH. Tata Steel is developing a mini-blast furnace to produce 500,000 tons per year of hot metal or pure liquid iron. The project entails an investment of more than $108 million and was scheduled to come into operation in the second half of 2009.

Tata Steel is also setting up a $5 billion steel plant in Vietnam, in collaboration with local partners. The firm owns a 65% stake in the venture, while Steel Corporation (Hanoi, Vietnam) and Vietnam Cement Industry Corporation (Hanoi, Vietnam) hold stakes of 30% and 5%, respectively. The plant will have a manufacturing capacity of 4.5 million tons per year. The partners acquired land in the Ha Tinh province in November last year.

Tata Steel recently entered into a 51:49 joint venture with Nippon Steel Corporation (TYO:5401) (Tokyo, Japan) for the production of automotive cold-rolled flat steel products at its plant in Jamshedpur. The facility will have a manufacturing capacity of 600,000 tons per year, and will enable Tata Steel to supply high-grade automotive cold-rolled steel sheets suited to the localized requirements of Indian automotive manufacturers. India relies on imports to meet more than 75% of its high-grade automotive steel requirements. The venture brings together Nippon Steel's technology and Tata Steel's manufacturing capability. Tata Steel will invest about $392 million in the venture. The two firms expect to conclude the deal by June this year and bring the facility online before March 2013.

For the October-to-December 2009 quarter, Tata Steel posted a net profit of more than $259 million, which is more than double the firm's net profit of more than $101 million in the same quarter of 2008. Steel production in the last quarter rose 37% year-over-year to 1.68 million tons, while saleable steel output rose 49% year-over-year to 1.6 million tons. Tata Steel figured in the list of the top 100 most sustainable organizations in the world, recently drawn up by Corporate Knights, a quarterly Canadian business magazine.

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