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The Tata Group initiated talks on Thursday for a joint venture with South African company Increase Coal (Pty) Ltd. The company was part of a trade delegation visiting India.
The proposed venture can produce about nine million tonnes of metallurgical coal which is used largely by the steel industry. This coal can also be exported to Tata Steel's subsidiary Corus, according to sources. Tata Corus is completely dependent on imports for its raw material.
Talks are at a preliminary stage and a lot of details need to be finalised, said the sources.
Increase Coal's mine is situated about 500 km from Richard Bay Coal Terminal, which handles coal exports of 91 million tonnes a year . The world's largest coal export terminal, Richard Bay is positioned between the Atlantic and Pacific coal markets.
Cost advantage
The Indian steel industry has been hit by coal shortage, and most companies are dependent on imports. Tata Steel has two collieries in West Bokaro and Jharia, in Jharkhand. The coal mines are about 150 kms from the steel plant at Jamshedpur.
Tata Steel manufactures high-carbon ferrochrome (used to make Stainless Steel) at its plant in Richards Bay on the KwaZulu-Natal coast in South Africa. This is through a subsidiary in that country, with a production capacity of 0.15 million tonnes a year . This is exported to Tata Steel customers in Asia, Europe and the US.
South Africa is among the largest coal producers with a production cost relatively lower than in other countries. Coal seams in that country are relatively thick and close to the surface, which allows for low-cost mining, said an analyst.
South Africa's economically recoverable coal reserves are estimated at 55 billion tonnes. About half of coal production comes from opencast mines. Five major global coal mining companies — Anglo-American, Exxaro, Sasol, BHP Billiton and Xstrata — control 80 per cent of the coal production in South Africa, said the analyst.
Other Tata Group companies such as Tata Consultancy Services, Tata Motors and Taj Hotels have a presence in Africa.
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