Bloomberg News

Tata Steel Plans to Acquire Chrome Ore Mine in South Africa

June 29, 2011

(Updates with official’s comment in third paragraph.)

June 29 (Bloomberg) -- Tata Steel Ltd., India’s biggest producer, plans to acquire a chrome ore mine in South Africa to secure local supplies for its ferrochrome plant and reduce raw material costs, Managing Director H.M. Nerurkar said.

An acquisition will be announced in two months, Nerurkar told reporters yesterday in New Delhi. The ferrochrome plant at Richards Bay buys chrome ore from India and other countries, according to Tata Steel’s website. Ferrochrome, an alloy of iron and chromium, is used to make stainless steel.

“The cost of electricity in South Africa has gone up and it is absolutely necessary that we have our own mine to run the ferrochrome plant there,” Nerurkar said.

Steelmakers globally are seeking mines to lower the cost of raw materials and energy as surging prices of iron ore and coking coal erode profits. Prices of iron ore, a key steelmaking ingredient, have risen more than 21 percent in the past year, while contract coking coal prices for the quarter beginning April 1 surged 65 percent from a year earlier.

Shares of Tata Steel gained as much as 1.6 percent to 596.50 rupees and traded at 595.75 rupees as of 10:53 a.m. in Mumbai. The shares have declined 12.5 percent this year, compared with a 9 percent drop in the key Sensitive Index of the Bombay Stock Exchange.

Tata Steel, which buys all the raw material required for its European operations from external suppliers, is looking for “early stage investment” opportunities in mineral assets, including coking coal and iron ore, Chief Financial Officer Koushik Chatterjee said yesterday in New Delhi.

The company sees “good” demand from automobile and engineering customers in Europe, while construction orders remain weak, Nerurkar said.

--Editors: Indranil Ghosh, Baldave Singh

To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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