Mumbai, June 13: The Tatas will ship from Bandar Abbas what is too expensive to ferry from Jamshedpur. At the bottom of the Iran deal forged on Sunday lies billets, the input that is processed into more ubiquitous steel products.
The South East Asian outposts that went Tata Steel’s way when it acquired NatSteel last year will be fed with billets from steel projects that will be set up in Iran at an investment of up to $1.2 billion over the next five years.
“We will first set up a 1.5-million tonne steel plant through a joint venture with an Iranian company,” Tata Steel managing director B. Muthuraman, who flew in from Tehran after signing the deal, told reporters here today.
“The basic idea is to make billets and take it to NatSteel, whose electric arc furnaces in Singapore, Philippines and China will convert them into value-added steel. The move will help the 2-million tonne company emerge as a low-cost producer of steel,” he added.
The Iranian project will save Tata Steel the money it now spends on costly scrap and billets procured for NatSteel from external sources.
Tata group chairman Ratan Tata had recently said the winner in the steel business would be firms which own mines.
Exploration rights to at least 150-200 million tonnes of iron ore in Iran, part of the Sunday deal, takes his firm closer to that goal.
Shipping billets to Mumbai from Bandar Abbas will cost Rs 500 per tonne; carting a similar consignment from the Jamshedpur unit will set the firm back by Rs 2,500.
The Iran venture, Muthuraman said, was the culmination of eight-month-long talks with the authorities there.
“We have gone to Iran because the country is rich in iron ore and gas. That will make steel production competitive. The time-scale for the project is 2008.”
The 98-year-old Tata Steel has joined hands with Iranian Mining Industries Organisation. Among the projects that will be set up under the alliance is a 1.5-million-tonnes-per-annum (MTPA) steel slab making facility, a 1.5 MTPA steel billet making unit and a 3 MTPA export-oriented steel plant.
The Tatas will also work on the Hormozgan Steel project in Bandar Abbas, which is part of the Persian Gulf Special Economic Zone. The two sides will own 49 per cent of the billet unit; the remaining 2 per cent will be with a pension fund.
The exploration of iron ore will focus on the Gol-e-Gohar mines in Iran's Kerman province. A gas-based pellet plant planned at Gol-e-Gohar will use this iron ore. The steel export plant, which will be built in two phases of 1.5 MTPA, is envisaged near the Hormozgan unit.