Tata plans output boost at Bhushan Steel

India's private-sector Tata Steel plans to increase crude steel output at its recent acquisition Bhushan Steel to 5mn t/yr in two years' time from around 3.5mn t/yr.

Tata Steel received approval from India's bankruptcy court to take over the 5.5mn t/yr producer at a total cost of $5.21bn in May. The Bhushan Steel acquisition was Tata Steel's second major purchase, after its acquisition of Anglo-Dutch steelmaker Corus in 2007 for $13bn.

The Bhushan Steel acquisition will take Tata Steel's total crude steel production capacity in India to 18.7mn t/yr from 13.2mn t/yr before the purchase.

Tata Steel expects Bhushan Steel to operate at its rated capacity of 5.5mn t/yr over the next 3-4 years. And Tata's new Kalinganagar plant is scheduled to complete a capacity expansion to 8mn t/yr of crude steel from 3mn t/yr in four years.

Tata Steel expects any future steel acquisitions in India to primarily maintain its share of the domestic steel market, especially for auto-grade steel, where it has a 40-45pc market share.

The company is seeking to supply around 3mn t/yr of iron ore to Bhushan Steel's plant in the eastern state of Odisha from its captive Khondbond iron ore mine in the state. Supply could increase in the medium-term as Tata accelerates a capacity expansion at the mine.

Bhushan Steel meets most of its coking coal requirements through imports. It is likely to import 4mn t in the financial year that started 1 April.

Tata Steel's steel exports fell by 43pc from a year earlier in the April-June quarter to 160,000t. A price differential of 2,000-3,000 rupees/t ($29-43/t) between domestic and export prices encouraged Tata to sell more in the domestic market.

The depreciation of the Indian rupee is on the whole beneficial for Tata Steel, said managing director TV Narendran. Indian steel prices largely track international prices, so a weaker Indian currency lifts rupee-based prices of steel products and offsets the higher rupee-based cost of importing coking coal.

The rupee is trading at an all-time low of Rs70 to the US dollar.