With a sizeable footprint in the high-margin flat steel business, going ahead, Tata Steel, the country’s oldest steel producer, will be focusing more on its long products business.
"Between the existing three plants, we have enough flat downstream capacity at present. In long products, however, we are a bit short with just about three million and another one million that we acquired via Usha Martin. Therefore, our focus going forward will be more on long products," informed T V Narendran, chief executive officer and managing director. He was speaking here on the sidelines of the September quarter earnings conference.
With a total capacity of 12 million tonnes at present, Tata Steel's Kalinganagar unit along with its oldest plant at Jamshedpur and the newly acquired Bhushan Steel are integrated flat steel plants.
"All the three plants have land and between these three units we can go to 30-35 million tonnes via brownfield expansion. So with that, we have enough runway for flat products," said Narendran.
Long product steel market, which finds wide application in construction and infrastructure, is fragmented. Long product market has been traditionally growing through consolidation and is typically a million or half a million units at one location.
"We are open to more acquisitions if long products come our way, why not?" said Narendran.
The company was drawing chalking out strategy for its long product division since early this year. At Tata Steel's annual general meeting in August chairman Natarajan Chandrasekaran had told shareholders, “We know we are short on long product production and given the thrust on development of infrastructure segment, Tata Steel is working out a strategy to increase its long product share.”
Tata Sponge Iron, a subsidiary of Tata Steel, is carrying out the acquisition of Usha Martin's steel business. The one million tonne long product plant is based in Jamshedpur and has an iron-ore mine, a coal mine under development and captive power plants.
"Tata Sponge acquiring Usha Martin gives us an opportunity to create a cluster which has a different physical configuration and cost structure than a plant which can focus more on high-end flat products,” informed Narendran.
A distributed production network is needed for long products division and hence Tata steel is looking at separate models for long and flat businesses, he added.
India’s steel market comprises 55 per cent of long products and balance 45 per cent is flat steel. The latter is used in the automobile sector.