Corus, the European arm of Tata Steel, is to face a cost push of $140-150 a tonne on account of surging raw material prices.
H M Nerurkar, managing director of Tata Steel, said coking coal prices had increased by $125 to around $220 a tonne, while iron ore increased from $65 to $110 a tonne. Corus accounts for about two-thirds of the group’s steel production, at 20 million tonnes.
Corus has no captive mines and its raw material has to be sourced from the market. The company is still negotiating with mining companies for these two major inputs.
More, other raw material prices were also on the rise, as were freight costs. Nerurkar indicated steel prices would continue to increase for the next quarter. Tata Steel expects global demand to return to the pre-crisis level in 2010.
Global steel demand is now 70 per cent of installed capacity. Nerurkar said, coupled with hardening raw material prices, it would have a bearing on steel margins in the coming period.
Tata Steel’s Indian operations were fully covered for its iron ore requirements and about 45 per cent for coking coal. At present, Tata Steel’s capacity at Jamshedpur is 6.8 million tonnes, to go up to 10 mt by 2012.
However, Nerurkar said, it might not be possible to expand capacity further at Jamshedpur. “We can add capacity of half a million to one million tonnes, but it will not be possible to add a 4-5 mt plant at the existing site on environment and congestion grounds,” he said.