Tata Steel has decided to focus more on the domestic markets rather than exports from its Kalinganagar steel operations. As of now, the steel major was exporting its two speciality products- hot rolled (HR) coils and Tata Ferroshots (granulated Pig iron) as it was bound by an MoU (memorandum of understanding) with the Odisha government. As per a restrictive clause in the pact, Tata Steel was barred from sales of its products outside of Odisha. The curb though did not apply to exports.
It makes business sense for the steel company to tap the domestic markets where demand for such products was robust. Domestic sales could fetch the company more margins compared to shipping the same products overseas.
Additionally, Tata Steel now faces some obligations under the Export Promotion Guarantee (EPCG) scheme to export products manufactured at its Kalinganagar steel factory. Once the obligations are over, the focus could be wholly on domestic sales.
Last fiscal, Tata Steel exported around one million tonnes of finished steel products from the Kalinganagar mill, inclusive of HR coils and Ferroshots. The South East Asian markets were the key recipients of the material. As a product, Tata Ferroshots has been received very well in the international markets but it is more demand driven implying that the steel maker does not roll out this product consistently.
Tata Steel currently has a hot metal production rate of 2.7 MTPA but it hopes to reach the full first phase design capacity of 3 MTPA shortly. This phase of manufacturing would focus entirely on making flat steel products that find widespread applications in automotives and white goods. In fact, Tata Steel is keen on projecting its Kalinganagar facility as the hub for specialised automotive alloys.
The steel company has been looking to expand its range of automotive alloys, especially the ones that are imported in bulk by the automobile makers from China. However, due to constraints of its Jamshedpur unit that has an obsolete hot strip mill (HSM), the desired product range could not be achieved. But, the Kalinganagar plant with a state-of-the art HSM is effectively positioned to churn out import substitute automotive alloys of wider dimensions.
This is expected to overcome the limitations of the Jamshedpur steel mill and help Tata Steel grab a higher share of the auto components market.
The steel company’s Jamshedpur unit is already one of the leading suppliers to car makers like Maruti Suzuki and Toyota. Of the total nameplate capacity of 10 MTPA at Jamshedpur, 7 MTPA is for flat steel products and the rest 3 MTPA is for long products.
Going ahead, the Kalinganagar plant would diversify to customized steel products for oil pipelines business.
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