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| Edited By: Promit Mukherjee |Source: DNA |Updated: Mar 30, 2018, 04:07 AM IST
Tata Steel is looking to increase production and sales of high-end automotive steel to cater to the strong demand from local and overseas automakers.
“Anticipating almost 20% growth in the automotive sector we have adopted a three-pronged approach to grow the business. Firstly, production of more high-end steel products. Secondly, sale of more skin panels and other automotive steel and lastly, ensuring optimum quality for the auto sector,” Tata Steel managing director HM Nerurkar said.
Out of its total expected domestic sales of over six million tonne per annum (mtpa), the company plans to sell close to 1 mtpa to the automotive sector by the end of fiscal 2011.
It plans to further increase this by another 0.6 to 0.7 million tonne in the next fiscal, the company’s director of finance Koushik Chatterjee said.
He said, in the next two years, Tata Steel’s sales to the automotive sector can only go up to nearly 2 million tonne by some bottlenecking. Beyond that, it would need fresh manufacturing capacity.
As part of this move, the company has signed a joint venture agreement with Japanese steel giant Nippon Steel to set up a 0.6 mtpa auto-grade steel plant at its Jamshedpur facili ty which is likely to come up by 2013. Both the companies together will invest Rs2,300 crore in the facility.
“We are currently working on the modalities of the joint venture and will be forming the company and constitute its board by March. After that, the construction of the plant can take off,” said Chatterjee.
He said that once the plant is ready the company can address a larger chunk of the domestic market which is currently serviced by foreign companies.
An analyst with a brokerage said that India auto companies import their entire cold-rolled steel requirement. “About 80% of an automobile is made of steel, but of various grades. While, most of it is locally sourced, the outer skin panels are imported from players like Posco and Nippon,” he said. Sometimes, imports also happen if there is a price arbitrage, he said.
Therefore, with a foray into cold-rolled, Tata Steel can look to tap the huge market.
Prakash Diwan, head of institutional business, Networth Stock Broking, said another benefit for Tata Steel is that the company has a ready market in the form of its captive requirement of Tata Motors.
“Automotive requiring a specialised technology offers higher margins, too,” he said.
Nerurkar said with booming automotive sales in India, the demand for auto-grade steel is growing at a scorching pace. “The current demand in the country is close to four mtpa, out of which less than 50% of it is met by the India steel companies and rest all goes to specialised steel manufacturers overseas,” he said, adding this demand is expected to grow even further buoyed by an expected 20% growth in the automotive sector.
