The Hindu Business Line : Attempt to tap long steel product market

THE developing world's appetite for long steel products is probably what Tata Steel seeks to capture with its acquisition of the steel business of NatSteel, industry representatives and equity analysts say.

In acquiring NatSteel's steel business, Tata Steel gets hold of two million tonnes per annum capacity of rebars, wire rods, pre-stressed concrete wires and strands, all of which fall into the long products category.

The price at which the acquisition is being made is also seen extremely attractive, according to industry representatives.

"It seems to be an extremely good business sense for Tata Steel to make an acquisition into the long products range," said a senior official of a steel company. Tata Steel has a significant presence in flat products, but does have a small portfolio of long products mainly wire rods.

Typically, demand for steel gradually shifts from the developed world to the developing world, a fact acknowledged by Mr B. Muthuraman, Managing Director, Tata Steel. Developing countries consume substantial amount of long steel, which primarily goes into the construction and infrastructure building. "In the developing countries, consumption of long products would be around 55 per cent while those of flat products would be 45 per cent," said the steel company official.

At present, there is a growing demand for long products especially in the Asian region. "Once this acquisition is through, Tata Steel would have an equal presence in both long and flat products," the official said.

"At a price of Rs 1,300 crore, this would be a very good acquisition for Tata Steel," said an equity analyst tracking the steel sector. Tata Steel, he says, has huge reserves of cash and has made a prudent decision in going in for a steel manufacturing company in the South-East Asian region. "This gives Tata Steel a presence into many of the South-East Asian countries. Going forward, there is a good demand growth for steel especially long products in this region," the analyst said.

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