Corus in bag, Tatas steel plan B

MUMBAI: Tata Steel may have bagged Corus, but there���s a small part of the story that you probably don���t know: all along, the Tatas had a back-up plan ��� or Plan B, if you wish ��� in case they lost out on Corus.

And now, even after bagging the Anglo-Dutch steel maker for an eye-popping $12.2 billion, managing director B Muthuraman is not taking it easy. In fact, the Indian steel giant might still pursue a slightly modified version of the Plan B, which involves chasing other acquisition targets around the globe.

���In such a big acquisition, you always have to consider all scenarios. What to do in case steel prices fell, in case coal prices rose, in case the bid for Corus failed... there was a plan B. We had shortlisted alternate acquisitions,��� Mr Muthuraman told ET late last week. ���This is still there, although in a different form... to meet Tata Steel���s global growth needs,��� he added.

Last week, the Jamshedpur-based steel giant had won the two-month long battle for Corus by offering $12.2 billion for the 20 million-tonne high grade steelmaker to become the fifth largest in the world.


Mr Muthuraman declined to elaborate on Plan B, but sources in Tata Steel said their options included some large steel mills in Europe and Latin America. In the new scheme of things, Tata Steel is likely to hunt for units that would supply large quantities of steel intermediates ��� slabs in technical jargon ��� to be shipped to Corus, to be custom-made for the mature markets of Europe.

Especially, since Tata Steel���s own plans to manufacture slabs in India will take at least three years to fructify. ���The need is to look for regions with abundant (natural) gas reserves so that production costs are contained,��� said a senior executive, on conditions of anonymity. Steel is typically made through the blast furnace route or through the electric arc furnace (EAF) method. In a blast furnace, coal is used to melt iron ore, while the EAF route is adopted by steelmakers to make precision steel products for use in high-end automobile products or in aerospace.

So what could be the possible acquisition targets? According to Henry Cooke, steel editor, Steel Business Briefing: ���If we look at possible targets in the world market, even CSN might become a target since shareholder trust in management is eroded. Other names include US Steel, Nucor and AK Steel in the US and Stelco in Canada (just back from bankruptcy, so might come on the block in a year or so).���

Adds Steve Mackrell of the Iron & Steel Statistics Bureau: ���German companies ThyssenKrupp and Salzgitter are some of the names that immediately come to mind.���

There has been speculation in the steel industry that a couple of units of ThyssenKrupp of Germany and Riva of Italy, situated in Western Europe, might be on the block. Incidentally, before Tata Steel���s interest in Corus was confirmed, market speculation had linked the Indian steelmaker to ThyssenKrupp. The German company���s Italian units, that makes electrical steel, was believed to be up for sale.

For the Tatas, these units could be turned into feeding sources for Corus. For instance, ThyssenKrupp and Riva produce electrical steel, which is used by Corus to manufacture specialised products catering to the white goods industry. Salzgitter has a large product mix of long and flat products that could complement Tata���s product portfolio. The US companies, on the other hand, will enable Tata Steel to book a passage into that market.

Besides, in Latin America, the Tatas may find a ready alternative in Bolivia where the government is said to be looking at new partners for its $2.3-billion plan to develop the El Mutun iron ore mines.

The year-long talks with Naveen Jindal-led Jindal Steel and Power have hit a roadblock with the two sides disagreeing on tax structure of the project. Interestingly, the country���s mining minister had hinted that the government is looking at new partners, ���including another Indian steel company,��� to take over the project. It is also believed to be in talks with Chinese steekmakers.

Other than the 40-billion tonne of iron ore deposits that El Mutun provides, the South American country also has access to cheap fuel, making steel-making a viable option. Moreover, steel demand in the South American economy, driven by auto and housing sectors in Brazil and Argentina, is among the highest globally. Tata Steel���s stock was down 1% at Rs 465 on the BSE on Tuesday.

Additional reporting by Ravi Parwan