Tata Steel to produce half of Corus’ raw materials by 2012

Tata Steel, India’s sixth largest steel producer, has set up a plan to produce half of the iron ore and coking coal, the staples used to make steel, for Corus, its European subsidiary, by 2012.

This action will help downturn-hit Corus, which Tata Steel adopted in the year 2007 for $12 billion, to reduce input prices and run on higher profit margins like its Indian parent.

Mr. B Muthuraman, Tata Steel’s MD announced that the raw materials would arrive from their mines in Mozambique, Canada, South Africa and Cote d’Ivoire.

He also added that the South Africa’s mine will start production by the end of the year 2010, whereas the mines in Mozambique and Canada will be functional by the fiscal
2011. From Cote d’Ivoire, the company needs 5-8 years for production to start.

Industry analysts approximated that the mine in Corus could save up to 60% of the input costs, translating into a cost step-down of around $120 per tonne of steel, if it could attain full self-reliance in raw materials.

Mr. Prasad Baji, senior Vice President, Edelweiss declared that since the company is expecting for only 50% raw material security, the overall input cost reduction will be
30%, or $60 per tonne of steel.

The Tata Steel group, including Indian and European functionings, had spent more than $8 billion for buying raw material in the last financial year.

The industry had assured an equity interest in an iron ore deposit in South Africa in April, from which it requires to mine 2 million tonnes every year. Tata steel also expects to mine 4 million tonnes of iron ore in Canada and 5-6 million tonnes of coal in Mozambique.

Tata Steel purchased 35% in two coal tenements of Riversdale Mining in Mozambique in 2007. It also contracted a $100 million offtake agreement with the Australian miner that gives the Tata the right to purchase 40% of coal made from the 2 fields.

It also purchased a 19.38% stakes in Riversdale in 4 open market share purchases.

Shares of Tata Steel, on Friday, closed at Rs 462.70, up 2.12% or Rs 9.60. The total quantity of shares traded was 3,458,883 on the BSE.

Read more: http://www.stockwatch.in/tata-steel-produce-half-corus039-raw-materials-2012-22938#ixzz0N7u1nTO2