Black beauty

Calcutta, July 18: Tata Steel will pick up a 5 per cent stake in an Australian mine to ensure sustained supply of metallurgical coal.

The company today signed an agreement with AMC Australia Pty. This is the first time that an integrated domestic steel company is buying a strategic stake in coal mines abroad.

?This is in line with our policy to secure raw materials for the long term,? a Tata Steel spokesperson said.

Steel Authority of India Ltd (SAIL), too, has tied up with BHP Billiton to acquire coal blocks abroad, but no deal has been finalised yet.

Calcutta-based Gujarat NRE Coke Ltd (GNCL) is the only other domestic firm to have stakes in iron ore and coal mines in Australia. However, GNCL is a non-captive producer of met coke.

According to the agreement, Tata Steel will have a 5 per cent stake in the Carborough Downs Coal Project in Queensland, Australia.

The 14-year project is likely to yield approximately 58 million tonnes of raw coal.

Production will start in 2006, by which time coal shipments to India will start.

The mine also has a potential resource of 100 million tonnes of raw coal in the unexplored areas and deeper seams. The clean coal produced will have low ash content, which is highly suitable for steel making.

Tata Steel?s internal requirement of coking coal is pegged at 5 million tonnes. Since Indian coal is high in ash content, the company imports 35-40 per cent of its requirement to blend with the domestic variety for use in blast furnace.

It currently produces 5 million tonnes of steel per annum at its Jamshedpur plant and has recently invested in NatSteel Asia, which has a capacity of about 2 million tonnes per annum of finished steel.

The company plans to set up manufacturing units in Iran and Bangladesh. In India, Tata Steel has also signed MoUs with the governments of Orissa and Chhattisgarh for setting up a steel plant in each state. Moreover, it intends to scale up the capacity at the Jamshedpur plant.

The company has set a capacity target of 30 million tonnes in the next 10 years. In the first phase, it is aiming for a 15-million-tonne capacity by 2010. ?As we expand, the requirement of raw materials will grow. This is one way to step up our sourcing,? a Tata Steel executive said.

The development is significant as coking coal prices shot up last year and supply became erratic. Companies like SAIL faced procurement problems. Coal prices shot up to $125 a tonne from $60 a tonne last year. To tackle the problem and meet growing internal demands, the company is also setting up a merchant cokery at Haldia in Bengal. It will produce 0.8 million tonnes of coke and 55 mw of power.