Tata Steel Gets Approval for Capacity Expansion Signalling Positive Demand Outlook

As reported by SteelMint in November 2017, Tata Steel hinted about its expansion plans of Kalinganagar plant capacity by 5 MnT. Now as per the market sources, the company’s board has approved the implementation of second phase of Kalinganagar project under which its capacity will increase from existing 3 MnT to a total of 8 Mnt respectively in next four years.

Currently Tata Steel has a total capacity of 13 MnT with 10 MnT coming from Jamshedpur and balance 3 MnT coming from phase I of Kalinganagar plant. Now, with the addition of 5 MnT capacity in phase II of Kalinanagar, the company’s total capacity is likely to stand at a total of 18 MnT. The capacity utilization of company’s existing plants is about 98 percent.

Products manufactured in Kalinganagar plant-The Kalinganagar steel project is devoted entirely to the manufacturing of flat steel production. Tata Steel has already invested INR 25,000 crore in phase I of its Kalinganagar steel mill and the commercial production of HRC at Kalinganagar greenfield plant commenced in May, 2016.

The capacity expansion in phase II will add to its CRC capacity, thus increasing company’s share of high-value added product sales.

Industries and markets to be catered-
Ramp-up of Kalinganagar steel capacity is expected to enhance productivity for Tata Steel and potentially position it as the most productive steel unit in the country. The expansion is also poised to bring in cost savings through economies of scale. The targeted industries for the sale of company’s product manufactured in Kalinganagar plant are automotive and general engineering. And although, the company’s major focus is to target domestic market, and plans to export its volume to South East Asian countries.

Investments to be made-
The total investment involved in the same is proposed to be INR 23,500 crore and the project is likely to be financed via both debt and equity route. The company’s board has approved the financial plan to raise a capital of INR 12,800 by issuing equity via rights issue. The fast allocation of finance indicates positive steel demand outlook of the company in the medium term.

Company’s growth strategy
As per Steelmint sources, Tata Steel aims to add 13 MnT by 2022, making it to the company’s total capacity of 26 MnT.

Jamshehdpur plant: the company plans to add 1 MnT by de-bottlenecking existing 10 MnT steel plant in next 2-3 years. However, further expansion would be challenging  given land constraints in the 1,700-acre steel complex. The company’s long-term vision is to add another 3 MnT to total 14 MnT.

Kalinganagar Plant: With the approval of 5 MnT capacity expansion, the company’s capacity of Kalinganagar plant will stand at 8 MnT, and the company believes the site has the capacity to house 15 MnT steel plant in the long term which it will achieve through brownfield expansion.

Tata Steel’s Expansion Plans

Source-Company Reports