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Tata keeps a steely defence of purchase of UK company
en India's Tata industrial group paid $13 billion (Dh47.75 billion) for Corus last year Ratan Tata, the company's chairman, said the purchase of the British steelmaker was part of a long-term plan to become much more global.
- By Peter Smith, Financial Times
- Published: 23:30 November 21, 2008
When India's Tata industrial group paid $13 billion (Dh47.75 billion) for Corus last year Ratan Tata, the company's chairman, said the purchase of the British steelmaker was part of a long-term plan to become much more global.
In spite of the recent difficulties affecting the steel industry - the result of a sudden drop in demand since the summer, especially in the US and Europe - the chief executive of Tata's steel arm is at pains to insist these plans remain intact.
"We continue to think this was a very good deal for us," says a relaxed looking B. Muthuraman, speaking at Corus's London headquarters. "This [the Corus] acquisition is like a marriage. You don't suddenly think that marrying your wife is a mistake just because of some other event that's happened in the world."
As well as being a long-time lieutenant of Tata, the 64-year-old Muthuraman is one of the world's most experienced steel industry executives, having started work at Tata Steel's Jamshedpur plant near Kolkata in 1966. He took over as chief executive seven years ago.
Muthuraman is reluctant to talk about the state of the steel industry in Europe, where orders from sectors such as construction, engineering and vehicles have fallen sharply, forcing Tata to reduce output at Corus plants in the UK and the Netherlands by 30 per cent at least until next March.
Cutting costs
But he says that employees in Corus's steel operations will have to "brace themselves" in the next few years to bring profit margins closer to the levels being seen at Jamshedpur.
The Indian site has the benefit both of cheap iron ore, mined locally, as well as operating procedures that are, he says, more advanced than in most parts of Corus's plant network.
"Through measures such as improving the flow of raw materials and steel through the production system, there is a lot the Corus plants can do to increase efficiencies and cut costs," says Muthuraman.
He adds that all four of Corus's main production sites - three in the UK and one in the Netherlands - are "good plants", scotching fears that, over the long term, Tata might close at least one.
Another part of his plans to improve margins at Corus is to start using iron ore sourced from its own mines, which Muthuraman hopes Corus will open over the next few years.
"Corus needs about 30 million tonnes of iron ore a year," he says. "I hope that, by 2013, it will get about half of this from its own sources - as a result of mine exploration projects it is starting in several countries - compared to the situation at present where it has to buy virtually all its supplies from outside vendors."
Corus plans to spend about $140 million opening two mines in South Africa and Canada.
Between them, these could produce 10 million tonnes of iron ore a year by early next decade.
Corus is also considering another mining project in Ivory Coast. Having its own mines would insulate Corus from the steep rises in ore prices in the past few years, and give the company a similar position as the Jamshedpur plant.
Muthuraman tries his best to dispel some of the gloom surrounding the steel industry, which has entered its difficult period after a long spell of sharply rising prices and profits on the back of rampant global demand, especially in China.
He says the fall in recent orders has to be put in context with the 25 years running up to 2000 when steel demand rose slowly.
"Human beings have very short memories," he says.
"The steel industry has had a wonderful few years which some people thought could go on for ever."
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