Mumbai, March 11: The Tata Iron and Steel Company Ltd (Tisco) has emerged as the lowest cost producer of steel in the world. Speaking to The Financial Express, Tata Steel's managing director, Dr JJ Irani said that, for the year ended March 2000, the company was one of the lowest cost producers of steel in the world among the five major international players at a cost of around $177 per tonne for hot roll coils (HRC).This is as per the report published by CRU internationally. Sources, however, say that Tata Steel has an average operational cost of $150-$155 per tonne for eleven months of the current fiscal. The cost of production, sources say, was the lowest in October and November, at $140-$150 per tonne. Dr Irani said that Tata Steel was on par with the lowest cost producer so far - Posco. Now that costs have been further brought down, it can be assumed that Tata Steel is the lowest cost producer. (Posco's cost of production is around $150 per tonne). However, he did not disclose exact figures.
The present cost of production at $150-$155, it is learnt, has further come down in comparison to the other four lowest cost producer in the world, - Posco (South Korea), CSN (Brazil), CSL (Brazil) and Magnatogorst (Russia), (Tata Steel, India is the fifth).
Dr Irani said that this has been made possible by focussing on various areas affecting the cost of steel. This includes the cost of conversion, the cost of raw material, fuel rate in blast furnace and the mining of coal. Besides, the company has been using the most modern of technologies which have helped cut costs. The yield on every tonne of input used in producing a tonne of steel has also gone up considerably.
The company has also made an effort to cut down costs by negotiating with customers in the supply chain at various stage to take advantage of economies of scale. At present, the company incurs a cost of only $5 per tonne of iron ore as raw material. This is highly competitive as compared with international standards of iron ore procurement costs of around $20 per tonne, Dr Iran said. Right sizing of manpower has also been effected on a continuous basis. The cost cutting exercise has been going on at various functional stages since 1996-97. The company has also effectively incorporated the Tata Business Excellence Model (TBEM) in its quality management initiatives and has attained a milestone score point of 616. This has made it the only company in the Tata Group to cross 600 points, for which it has been awarded the JRD Quality Excellence honour.
These steps have sustained the low cost of steel even when the hiked freight rate has affected the cost structure of other steel companies.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
