Tata Steel's raw material costs may go up by $1 bn

Tata Steel Group on Thursday said its expenses on key raw materials were likely to go up by $1 billion in the current financial year to $7 billion due to a rise in input costs.

“We expect a $1-billion rise on raw material expenses to $7 billion this fiscal on account of floods in Australia and increased activity from China,” Tata Steel Group Director (Procurement) Kees Gerretse said on the sidelines of an event here.

The costs on inputs would further escalate by around 15 per cent next financial year over 2010-11 levels, he added, attributing the rise to higher iron ore and coking coal prices, which went past $300 a tonne as a result of a global scarcity in the wake of floods in Australia’s Queensland.

Steel prices, as a result, will go up next financial year as the manufacturers of the alloy are unlikely to absorb the escalated input costs on the back of increased demand for the alloy, he added.

Queensland contributes over 60 per cent of coal exports from Australia, the world’s largest supplier of coking coal.

As a whole, Tata Steel Group, with a total steel-making capacity of 28.1 million tonne per annum (mtpa), buys around 17 million tonne coking coal and up to 27 million tonne of iron ore a year.