No image 5paisa Research Team 13th December 2022

Tata Steel to Expand Iron Ore Capacity by 50%

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The flagship steel manufacturing company of the Tata group, Tata Steel, is planning to enhance its production of iron ore by 50%. It plans to raise the iron ore output from the current 30 million tonnes per annum (MTPA) to 45 MTPA.

Iron ore is an important input that goes into the manufacture of iron and steel and hence the availability of iron ore and the cost of procuring iron ore is an important element of cost in the steel industry.

Currently, Tata Steel has captive iron mines spread across the states of Jharkhand and Odisha. Its key captive mines include the Noamundi mine in the state of Jharkhand and the Katamati, Joda and Khondbond mining blocks located in the state of Odisha.

These mines combined have an iron ore production capacity of 30 MTPA and they broadly cater to their two major steel plants located at Jamshedpur in the state of Jharkhand and Kalinganagar in the state of Odisha.

This expansion of iron ore capacity from 30 MTPA to 45 MTPA will be phased out over the next 5 years and it hopes to reach 45 MPTA capacity by year 2026. This will also sync with the expansion of steel capacity by Tata Steel.

Incidentally, the iron ore mining operation at Noamundi in Jharkhand started way back in 1925 and the mine will complete 100 years of operation in the next 3 years. It has consistently been a star rated mine in India.

Tata Steel operates an end-to-end value chain stretching from mining to finished steel products. Tata Steel also caters to a number of OEM industries like automobiles, construction and engineering.

The robust presence across the value chain allows Tata Steel to get much better economies of scale. Tata Steel also has steel making facilities spread across UK, the Netherlands, Singapore and Thailand.

In the last 2 quarters, the prices of iron ore and most other minerals have gone up sharply. In these conditions, it would be tough for Tata Steel to keep costs under control unless it has most of its iron ore needs supplied internally. The expansion is targeted at greater control over the steel value chain.

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