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Tata Steel plans ferro-chrome unit in Australia

Our Bureau

MUMBAI, Jan. 4

THE Rs 6,943-crore Tata Steel plans to invest $50 million in a 1,20,000-tonne ferro chrome project in Australia, subject to board approval and other requisite clearances, Dr Jamshed J. Irani, Managing Director, said on Thursday.

The move, attributed to cheaper power costs Down Under, rides a promise from Australian authorities to hold power cost at 1.8 cents per unit for 15 years.

Power accounts for 60 per cent of the cost of ferro chrome manufacturing and India's power cost at 9 cents per unit is far higher than the 2-3 cents per unit elsewhere in the world.

The plant, which would be located at Gladstone, Queensland, has the potential for fine port and other infrastructure facilities. The power purchase agreement is yet to be signed.

Australia won over the Middle East as a prospective location, as the latter was not amenable to freezing power tariff over a long period.

Tata Steel, which is opening an office in Gladstone by February 1, expects to complete the project in two years. Unlike in steel, where the company's eventual capacity of 4 million tonnes compares with a global capacity of 800 million tonnes, its current 50,000-tonne strong ferro chrome production already represents 3 per cent of the global production, Dr Irani noted.

He added that ferro chrome production in India would continue despite the Australian plans.

Fall in workforce

As on January 1, Tata Steel's workforce has fallen below the 50,000 mark and the company, which had at one time 78,000 people on its rolls, hopes to end 2000-2001 at 48,000. ``The Early Separation Scheme is proving expensive,'' Dr Irani said, indicating that related financial outgo was projected to rise this fiscal.

Beset with the possibility of fresh duties in the US, Tata Steel would reduce its exposure there and broadbase its export markets to include Jordan, Iraq and South-East Asia. ``We have not been under-cutting,'' he said on the spectre of penalties on Indi an steel in the US.

Nevertheless, export would still be crucial for fortunes in steel, with domestic demand projected to rise by a significant 10 per cent over last year but continuing to be out-paced by production.

Dr Irani expects global steel prices in the next quarter to be lower than in the second half of last year, implying in turn that better earnings for Tata Steel lay in optimum product mix and continued cost cutting.

The company's Rs 300-crore second Cold Galvanising Line (CGL-2) of 3,00,000-tonne capacity, entered cold trial three days ago. It is expected to start commercial production by mid-2001 with full capacity utilisation by the year-end.

While CGL-1 services the construction sector in the main, products from CGL-2 would be largely for the automobile industry.

Dr Irani said Tata Steel was open to a presence through acquisition or otherwise in colour-coated sheets.

Should the Tata Steel-Usinor expression of interest for stainless steel producer Salem Steel Plant be approved, then Tata Steel would be ``more involved in management compared to Usinor, which will largely be a technology and raw material provider in the joint effort,'' he said.

Confirming Tamil Nadu and Tuticorin as the location for the company's planned foray into titanium, Dr Irani said it would shortly sign an MoU with the State Government for the 3-phase project spanning survey, rutile manufacture and final production of ti tanium or titanium dioxide.

With titanium technology being closely held globally, the foray may be a joint venture. Tata Steel has been approached by some of the technology providers, Dr Irani said.

Tata Group's holding in Tata Steel has crossed 26 per cent, the Group spokesperson who was present at the meeting, said. ``This will be one of the best years for Tata Steel,'' Dr Irani said on 2000-2001. All divisions of the company would report net prof it, he said.

With Rs 7,700 crore spent from 1988 onwards on upgrading Tata Steel, the next stage was to attune employees to the company's performance ethics programme, with a change forecast in mindset, organisational software and organisational structure.

Tata Steel intends to abandon the traditional hierarchical structure and go in for a flat, networked structure. ``In India, automation is not that necessary; work practice is more important,'' he said.