Coke sourcing key driver for Tata Metaliks merger with Tata Steel Long Products

Tata Steel has announced the merger of country’s leading producers of high-quality Pig Iron (PI) and Ductile Iron Pipes (DIP) maker, Tata Metaliks into Tata Steel Long Products.

The merger, likely to be completed in 6 to 9 months, is based on Tata Steel’s vision to operate in 4 clusters - long products, downstream, mining and the utilities and infrastructure cluster.

Other major reason behind the move is cost savings as close to 60 percent of Tata Metalik's costs consists of coke which it needs to procure while Tata Steel Long Products has excess coke capacity.

While, as part of key cost optimisation initiatives in FY20, the company initiated coke plant expansion to reduce dependency on purchased coke, that project is yet to be commissioned though work is progressing.

The company has a ‘related party’ sourcing pact with TS Global Procurement Company Pte. Ltd for coal and coke but such transactions are done at arm’s length pricing.

To reduce dependency on coke, Tata Metaliks is also using technology, Pulverized Coal Injection (PCI) in Mini Blast Furnaces leading to replacing high cost coke by coal.

“Your company sourced almost 7580 percent of its coke requirements through a combination of its captive unit and long-term supplies from Tata Steel, thereby helping partially offset input cost volatilities,” Koushik Chatterjee Chairman of the company had said in annual report for FY20.

Tata Metaliks, state-of-the-art manufacturing plant near Kharagpur enjoys strategic locational advantage due to its proximity to iron ore mines in Odisha and Jharkhand, the Haldia port for import of coal and the PI and DIP markets of eastern India.