Tata Steel begins Corus backward integration with Port Talbot study

There’s some way to go still, but Tata Steel’s plant in Port Talbot, South Wales, UK, will eventually become the only steel maker in Europe with its own captive coal mine.

The company is spending six million pounds to conduct a geoseismic study to develop a pit-head mine near the plant.
Bob Jones, group head of media relations, Tata Steel Group, told DNA Money from London, said, “We are conducting the feasibility study at the Margam mine, which would eventually lead us to develop the mine to feed our Port Talbot unit.”

He did not have a timeline and declined to comment on the exact extent of reserves, but said the company is looking forward to drawing up to one million tonne of coal per annum to feed the plant. The mine could have several million tonnes of coal, Jones said.

Tata Steel could invest up to 500 million pounds in the mine and is likely to employ close to 300 people.

After several cost-cutting measures, backward integration is being looked as the most important and vital step for Corus to increase its profitability and the company is scouting for various resources across the world.

Prakash Diwan, head of institutional business at Networth Stockbroking points out that while Tata Steel’s India operations have raw material security of up to 40% in coking coal and 100% in iron ore, Corus completely lacks in backward integration.
The company had been taking several initiatives to cut down costs at its European plants and bring in raw material security too, he said.

“The company plans to start mining iron ore from its Canada-based Direct Shipping Ore project, which will provide 4 million tonnes per annum of ore to its plants in Europe from next year,” said Ravindra Deshpande, analyst, Elara Capital. He said that it would lead to savings of up to $400 million for the company’s European operations.

The Margam mine at Port Talbot will also lead to huge cost savings but said it will take several years to bring it to production.