Pre-Diwali Friday became fabulous, a great day for those Indians, who keep track of the Indian Industry moving global that also in big deal. Tata Steel with Corus in league will become the fifth largest steel makers of the world. Tata Steels, as such on its own, has unique strength, its lowest cost of steel production. Tata steel makes primary steel at its Jamshedpur plant at $ 160 a tonne, whereas Corus makes the same at $540 a tonne.
As Ratan Tata confirmed, the acquisition, at $8.1 billion, would get the maximum advantage, as the companies would compliment each other. If complimented properly, the acquisition will make the company strategically very well positioned in steel business. As I understand, Corus has steel for industries such as automobiles, electrical, and engineering’s special sector (aeroplanes). With supply of steel slabs from Jamshedpur, Corus can produce its present products at much cheaper cost. As per one thumb rule estimate, at the current selling price of primary steel in UK, Tata Steel, Jamshedpur will make a clean profit of $120 and Corus will save $130 for very tonne of steel used.
Tata Steel has another overseas steel project, and is close to signing of a MOU with the Iranian government to set up a 5 million tonne steel unit. The project will make Tata access to cheap iron ore and low cost power of Iran. All are great happenings for the company.
Steel sector in India is very much in media with appearance of Posco of South Korea on the scene through its Orissa project. Even Mittal-Acelor is also in fray to set up plant in India. Tata has MOUs for setting up Greenfield projects of steel production in Orissa as well as Jharkhand.
Historically, Tata Steel was the first Indian steel company in India and very soon it will be completing its century. As Tata Steel didn’t expand its capacity, and other private entrepreneurs didn’t enter the sector, it was left to PSU SAIL to meet the country’s steel requirements. SAIL gradually added many plants, but because of government control couldn’t reach the heights that it could have, if it would have been a private company. Tata Steel took advantages of all the concessions granted to PSUs, but failed to expand as other private companies in the world were doing it. Even today, Tata Steel remains at position 56 globally by capacity. I feel bad today because of this, and so must be many. India will not have the world’s largest steel plant in India that it had the potential. Tata with its own energy wing for power production and cheap access to India’s iron ores could have built the capacity in India. That is my agony as Indian. I don’t know if with financial pressure of the huge acquisition, even those MOUs signed by Tatas would materialize or not. Acquisitions are great, but having production facilities provide many other benefits to the nation and its people; and that must be important for business house such as Tatas too.
With changes in industrial policy in favour of globalisation, Tata Steel has found the logically easier route of acquisition to come in the first ten steel manufacturers of the world. Now it is fifth. With Mittal, first and Tata, now, as every one says, India Inc. has arrived.
How Business World Reacts:
Corus Agrees to $8B Tata Steel Offer
Indian Steel Maker Is Ready to Acquire Much Larger British Rival
World’s 5th Largest Steel Co
Steeling for the future
Crowning glory: Tata buys up big chunk of UK ‘jewels’
Announced steel projects on course
See what a great media response
What’s next for Tata Group: An interview with its chairman: Ratan Tata explains how the company is expanding abroad while cultivating an emerging mass market at home.BY Ranjit V. Pandit