Steel prices will be dictated by the movement of iron ore and coking coal prices, which have been rising at “mind-boggling” rates, Tata Group chairman Ratan Tata said.
In Tata Steel’s annual report 2007-08, the company’s chairman said the global steel industry predictably faced pressure in its margins due to cost increase in iron ore and coking coal.
The rates of iron ore and coking coal, the two key raw materials for steel making, have spiralled by 85 and 300 per cent, respectively, in the global market over the last few months.
He said the full impact of the cost increase on steel producers and consequent higher prices of the alloy to user industries will be felt only in the current year, and during this time one might expect some “slow-down in economic activity and consumer demand”.
Tata said three powerful international mining companies control about 70 per cent of the global iron ore and other mineral resources, whereas 10 largest steel producers combined would only account for about 28 per cent of total global
“Tata Steel, thankfully, is self-sufficient in its current iron ore for its Jamshedpur operations,” Tata said.
He added that the company has sought mining leases to support its greenfield projects in Orissa, Chhatisgarh and Jharkhand.
The company will need to invest in or enter into contracts with mining companies to secure the availability of iron ore and coking coal for the Corus operations in the UK and the Netherlands, Tata said. Tata said the demand for steel in developing world will continue to be an important engine of growth and India is uniquely positioned to become a self-sufficient and low-cost steel manufacturing nation.
At present, India produces over 53 million tonne of steel annually, which accounts for barely 4 per cent of the global production. India consumes 59 million tonne of the alloy.
Tata said India has fallen behind its Asian neighbours over the years in keeping pace with investment in infrastructure and added that availability of steel would be one of the important factors in such an essential development plan. “Large public works schemes and infrastructure projects would provide tens of thousands of jobs through construction of roadways, power plants, water projects and agriculture related schemes,” Tata said.