NEW DELHI, Oct 10 (Reuters) - Tata Steel’s Europe unit will receive the first iron ore shipment from its Benga project in Mozambique by end-October, a top official said, a first step towards addressing the cost volatility affecting its European operations.
The first shipment of about 35,000 tonnes is expected to land at Immingham Port near Tata’s Scunthorpe plant in Britain. It will be followed by five to six further shipments in the December quarter that could add up to about 200,000 tonnes .
“This is not so much of an impact on the economic side. The main benefit is stability in sourcing of a very high quality coking coal, which will be increasingly scarce in the future,” Karl-Ulrich Koehler, head of Tata Steel Europe, told Reuters on the sidelines of a World Steel conference.
Tata holds a 35 percent stake in the Benga project, while the rest is held by Riversdale Mining, which is now almost entirely owned by global miner Rio Tinto.
The Indian steelmaker, whose Europe unit accounts for two-thirds of its global capacity of about 28 million tonnes, has posted a loss or lower profit for the past three quarters, in part because it does not own captive raw material supplies for its operations there.
“Our difficulty is volatility and how to tackle that. It is a major problem and our European supply chain is long because we don’t have our raw materials,” Koehler said.
Tata also signed an agreement last year with Canadian miner New Millennium Capital to develop a taconite iron ore deposit in Canada.
Steelmakers are struggling globally because of the debt crisis in Europe and weak growth in China, the world’s largest producer and consumer. Europe, which is oversupplied, has responded by cutting production and shutting down some plants.
Earlier this month, ArcelorMittal, the world’s No.1 steelmaker, said it will permanently close two furnaces in France.
Tata, which has itself cut capacity utilisation, expects to remain under pressure until the market situation improves.
“My perception of the last quarter is not as negative, but certainly it is still difficult,” Koehler said.
“There is no short-term improvement for the market, but we are undertaking what we can to make ourselves ‘weather-proof’,” he said.
Last week, a company official said it would invest 400 million pounds in the Europe unit, earlier known as Corus, in 2012/13 to improve performance.
Tata is also moving its focus to growth markets in Asia, including its home Indian market, where demand is growing in near double digits.
It recently boosted capacity at its plant in eastern India by 30 percent to 9.7 million tonnes, and is also constructing another 3 million tonnes a year plant in the region.