JOIN USTata Steel likely to expand Jamshedpur facility
Growing imports from China and weakening demand in the country is not deterring Tata Steel from looking at expanding capacity further.
The company is eyeing expansion of its Jamshedpur crude steel capacity to 11 Mtpa (million tonnes per annum) from 9.7 Mtpa currently.
“Tata Steel has filed for Terms of Reference (ToR) with the Expert Appraisal Committee (EAC) for expanding its Jamshedpur crude steel capacity to 11 Mtpa.
EAC has sought some clarifications on the existing capacity before it considers the proposal further," sources told Deccan Herald.
Jamshedpur currently comprises of a 9.7 Mtpa crude steel production facility and a variety of finishing mills. The company is also planning two new greenfield steel projects in Jharkhand and Chhattisgarh.
The Kalinganagar project is underway and set to augment production capacity by 3 Mtpa in the first phase.
Two of the existing blast furnaces will be revamped for expanding the facility and the coke requirement for the expansion will be met via current coke capacities, sources say.
An email sent to the company remained unanswered at the time of going to press.Analysts say the company will not look at immediate expansion in Jamshedpur given the weak demand and the huge debt on Tata Steel’s books.
“The company has gross debt of around Rs 80,000 crore. So, it will be very cautious when it comes to further expanding capacity. Besides, the demand scenario in India is not that great and with cheaper Chinese imports flooding the country, an immediate expansion looks unlikely,” an analyst with a Mumbai-based brokerage firm said.
Concern for investors
The recent stake sales and upcoming ones are not likely reduce the debt on the company’s books significantly due to which an expansion at this point of time would be a concern for investors, he said, adding that the only comfort factor would be the fact that this expansion, whenever it happens, will be brownfield in nature and likely to cost significantly lesser than a greenfield expansion.
Tata Steel has been looking at various options to reduce the debt on its books. The company is said to be in talks with Swiss group Klesch to sell its UK steel plants according to reports.
The company recently sold land in Borivali suburb of Mumbai for around Rs 1,155 crore. It had also sold its stake in Dhamra Port to Adani Ports and is looking to sell stake in more group companies to raise funds.