News: Shift in Tata Steel strategy

(TT 06/10/2006) Calcutta - Tata Steel will adopt a two-pronged strategy to achieve a production capacity of 30 million tonnes by 2015.

It wants to split the steelmaking process according to locations — primary steel making capacities in raw material rich countries, while setting up finishing lines in growing markets.

The company is also planning to acquire iron ore mines as it feels India does not have enough deposits to sustain future growth.

“We are looking at iron ore mines abroad,” said T. Mukherjee, deputy managing director of Tata Steel.

While the quest for raw material continues, Tata Steel is exploring acquisitions in developed markets as well and it is ready to start thinking really big.

For instance, it is in dialogue with Anglo-Dutch steel maker Corus — five times bigger than it in revenues — for a possible buyout. However, it is not Corus alone that excites Tata Steel. The company is sniffing opportunities in advanced markets in the US, eastern Europe and in Southeast Asia.

“Whatever we do has to ultimately fit into the broad strategy of split production facility,” Mukherjee explained.

If Tata Steel manages to acquire Corus, industry observers pointed out it may also shift some of the plants to locations close to mines and ports. Corus has a capacity of 18.2 million tonnes compared with 8.7 mt of Tata Steel (including two acquisitions — NatSteel and Millennium Steel). Recently, it lost out in a race to acquire Highveld in South Africa.

The Indian steelmaker came out with a statement today saying it was looking at Corus among many others but cautioned that there could be no certainty that “an approach will be made and if made, it will result in an offer.”

Corus will help Tata Steel to reach its target of 30 mt fast since most of its greenfield projects are yet to take off.