- Steel major aims to increase NINL’s capacity to 10 mnt by FY’30
- Company plans to raise share of long products in portfolio to over 50%
- Captive iron ore production to rise to 48 mnt by FY’25
Tata Steel subsidiary Tata Steel Long Products (TSLP) has recently acquired a 93.71% stake in Neelachal Ispat Nigam Limited (NINL), an asset owned by central and state public sector undertakings (PSUs) for INR 12,100 crore.
Strategic acquisition
Although analysts have suggested that the deal was an expensive one, the long-term benefits for the company are significant. Tata Steel proposes to increase the NINL steel plant capacity from the present 1.1 million tonnes (1.1 mnt) to 4.5 mnt in the near term and then to 10 mnt beyond FY’30.
Sources in Tata Steel told SteelMint that the NINL acquisition is a step in raising the company’s long products portfolio. The share of long steel in the company’s overall steelmaking is proposed to be increased from the present 20-25% to over 50% in the long term with the government’s sustained thrust on infrastructure development in the country.
NINL is a strategic acquisition for Tata Steel. While the company has defined its journey in the flat products segment through expansion at the Kalinganagar and Meramandali sites in Odisha in addition to the existing capacity in Jamshedpur, it was important to develop a dedicated long products site, company sources said.
Neelachal, with 2500 acres of land and around 100 million tonnes of iron ore reserves, fits the strategy very well and will the company tap into the significant growth opportunities as India builds its infrastructure and drives industrialisation through the Atmanirbhar Bharat Programme of the government.
The acquisition will also facilitate growth in downstream solutions and specialty high-end products catering to customers in the construction, heavy engineering, and automotive space, sources said.
Neelachal is next door to Tata Steel Kalinganagar which will enable the company to leverage the proximate synergies of shared infrastructure as the company expands both the sites in the future.
The global steel major is looking to ramp up overall capacity to 40 mnt in India over the next decade. This acquisition provides the enablers for that.
The acquisition of NINL provides a significant opportunity for Tata Steel to not only restart the steel plant expeditiously but also begin work immediately to build a 4.5 mnt/year state-of-the-art long products complex in the next few years.
Boost to raw material capacity
The company’s vision of expanding to 40 mnt in India will be built on rapid expansion in steelmaking capacity in Odisha. Anxious to expand raw material capacity to sustain growing needs, the steelmaker bid very high for the Gandhalpada iron ore block in the Odisha auctions in 2021 that it eventually won for a steep premium of over 140%.
Of all the virgin blocks that were auctioned last year, Gandhalpada had the highest reserves of over 314 mnt. The greenfield reserve will be developed over the next few years and will be ready for 2030 when the company’s legacy mines come up for re-auction.
Sources divulged that Gandhalpada is strategically valuable to Tata Steel for multiple reasons. It has a very large reserve that will drive economies of scale. The ore quality is distinctly good with low alumina that will provide cost efficiency. It is also close to the company’s Kalamang mining reserve, which will help Tata Steel develop an iron ore hub around Gandhalpada with scalable infrastructure. This will enable sustained supply of high-quality iron ore for steelmaking operations.
Tata Steel is planning to augment its iron ore production from the current level of 30 mnt per annum to 48 mnt by FY25. Total iron ore production from the company’s captive mines in Noamundi in Jharkhand and in Katamati, Joda and Khondbond blocks in Odisha, is about 30 mnt per annum.
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