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Tata Steel takes scrap route to scale up long products business

With limited scope for organic expansion of long products capacity, Tata Steel, the country’s oldest producer of the alloy, will be setting up multiple recycling units in the West, South and North to grow in the segment.

“We will be using the distributor-production modal to scale up long product capacity and hence will not be putting any capital. We will be underwriting the capacity and hence there will be no risk but at the same there is a brand promise,” T V Narendran, chief executive officer and managing director, told Business Standard.

Currently, of the total consolidated capacity of 33 million tonnes, Tata Steel has only 3-million tone long-capacity at Jamshedpur and another one million tonnes via the recently acquired insolvent asset of Usha Martin. Jamshedpur could see an addition of another 2 million tonnes long product capacity leaving no further room to add more capacity at the facility.

Steel long products are used in infrastructure and construction segment, an area where the government is laying immense thrust to up investments.

“The plan is to build steel long product centers where iron ore is less and scrap is in abundance. Also, the unit should be closer to the market as it will keep logistics cost lower,” said Narendran. “We already do a million tonnes rebar through this model and to ensure quality, we have our people at those plants,” he added.

Apart from total 10 million tonnes (of which 3 million is long product capacity) at Jamshedpur, Tata Steel’s Angul (5.6 million tonnes) and Kalinganagar (8 million tonnes) facilities in Odisha produce only flat steel, meant for auto sector.

“The East (part of the country) allows us to build integrated steel plants at the existing plants and we can build up to 35-40 million tonnes as land and opportunities are available,” said Narendran.

Naveen Jindal-led Jindal Steel & Power and state-owned SAIL are the two other large steel long product producers in the country but with integrated steel plants.

India’s scrap steel market is scattered with ship-breaking, construction, auto and power sector, among others being the contributors to the same. “We are setting up the first plant in the North next year. If that one becomes a success, we can scale up this project,” said Narendran.

Source: Business Standard / Hellenic Shipping News

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