After ArcelorMittal, Tatas join scramble for Chiria

Barely two days after forming a joint venture with Steel Authority of India Ltd, the world’s fifth largest steelmaker Tata Steel today hinted...

Barely two days after forming a joint venture with Steel Authority of India Ltd (SAIL), the world’s fifth largest steelmaker Tata Steel today hinted that it wants a piece of the disputed Chiria mines as well. The Tatas have asked the Jharkhand government to provide proven reserves of iron ore for its proposed expansion at the Jamshedpur steel plant and for the 12 million tonne (mt) greenfield project planned in the state.

“We have asked the state government here to provide us with extra iron ore for our 5 million tonne expansion plan in Jamshedpur and our greenfield project,” said Tata Steel managing director B Muthuraman.”We don’t have any preference for the location of the mines but we do need proven reserves of high grade ore.” There are two iron ore reserves in the state at Ankua and Chiria but prospection work has not been done at Ankua and the estimated reserves of 1 billion tonnes have not been proven.

With steel capacity of 23 mt coming up in the next five years, Tata Steel needs over 1 billion tonnes of iron ore reserves for the next 25 years. Its expansion process at the Jamshedpur plant is already underway and the plant will have a capacity of 7 million tonnes by June this year and 10 million tonnes by 2010.

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With reserves of over 2 billion tonnes, Chiria has been a battleground between SAIL and ArcelorMittal, with the former reiterating its right over the entire reserves. With Tata, too, throwing its hat in the ring for half of the disputed reserves, the competition is set to get more intense.

Last Thursday, Tata Steel and SAIL signed an agreement to form a joint venture company for coal mining in India, following which there has been hot speculation that the two companies will broaden the deal for iron ore as well. However, Tata Steel today denied any such plans. “The JV with SAIL was a result of our intention to synergise our operations in the search for coal. There is no such thinking for iron ore and exploration for it will happen individually,” Muthuraman clarified.

The company is also commissioning a Rs 250 crore colour-coated galvanised steel production plant at its special economic zone (SEZ) in Gopalpur, Orissa. The plant is scheduled to be operational in 24 months and the Tatas are scouting for partners to develop the rest of the SEZ.

With Corus in its bag, Tata Steel expects a turnover of Rs 100,000 crore ($25 billion). “In the short term, Corus will result in our EBITDA margins falling a bit. But in the longer run, Corus will bring us markets, customers and high levels of research and development (R&D). Going forward, our average EBITDA margin will improve and in five years it will double,” forecast a confident Muthuraman.