Tata SA Eyes Iran Chrome Ore Deal

A03860318.jpgTEHRAN (FNA)- Tata Steel is in advanced talks to buy chrome ore from Iran for its South African ferrochrome plant.Undeterred by the power supply crunch in South Africa, the R650 million high-carbon ferrochrome plant in Richards Bay on the KwaZulu-Natal coast will start production at the end of this month.

This is according to Dinesh Shastri, executive in charge of Tata’s Ferro Alloys and Minerals division, who told international media this week that the plant was originally scheduled to start production in October last year.

While South Africa is home to almost 80 percent of the world’s chrome ore reserves, the plant’s 135 000-tons-a-year first phase will produce high-carbon ferrochrome from ore imported from India and Iran.

Tata Steel originally proposed to source the plant’s chrome ore requirements from South Africa, but the Iranian and Indian chrome ore resources are reportedly qualitatively superior to those of South Africa.

The Indian steel producer, which plans to export all of the plant’s production, primarily to Europe and Asia, said the chrome ore imports for the new plant would not deprive South African miners of sales nor would its ferrochrome exports compete with locally produced ferrochrome, since both South African-mined chrome ore and locally produced charge chrome are of entirely different grades to that required and produced by the Tata plant.

Tata is expected to make a decision on a further R400-million second phase project, to expand the plant by doubling its size from two furnaces to four after the first year of operation.

Somdeb Banerjee, managing director of Tata Steel KZN, said in 2006 that if the second phase expansion is approved, the company would explore the possibility of mixing South African and imported chrome ore for use in the two additional furnaces.

The Indian steal producer, which is owned by diversified industrial giant Tata, has also indicated that it aims to mine chrome, as well as manganese, coal and iron ore in South Africa.

But the expansion is likely to wait until after 2012 when South Africa’s power utility Eskom expects to have new power generating capacity come on stream.

Eskom has asked the South African government to put a moratorium on new industrial projects for the next five years because it is unable to meet the demand for extra power.

Ferrochrome production is highly power-intensive with power costs constituting around 60 percent of the total cost of production.

South Africa’s cheap electricity was ironically the reason Tata Steel chose to locate its new ferrochrome plant in Africa.

Tata said South Africa was selected from an initial short list of eight countries, with the final choice made between sites in South Africa and Australia.

Indian media reported that South Africa ended being the final choice because of the country’s favorable concessional power tariff, which is reportedly about 20 percent to 22 percent of the electricity tariff per unit charged in India.

Believed to have been offered a deal where power costs could be linked to international ferrochrome prices, Tata needs 150MW of power to run the plant’s furnaces.

Eskom chief executive Jacob Maroga said on Thursday that there would be no problems supplying power to the plant.

But Tata is not taking any chances – it is building a R100 million co-generation plant, which will produce 10MW of electricity in the first phase and a further 10MW in the second phase, using off-gas from the furnaces.

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