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Last Updated: Wednesday, 15 June 2005, 04:18 GMT 05:18 UK
Tata Steel in $1.1bn Iranian deal
Steel slab
Asia has a big appetite for steel
Tata Steel has said it will invest $1.1bn to $1.2bn (0.61bn-0.66bn) in building three steel plants in Iran and developing iron ore mines there.

India's Tata Steel plans to increase output to cater for growing demand from India, China and other parts of Asia.

The deal was announced shortly after Monday's $22bn (12bn) deal under which Iran will supply India with five million tonnes of gas a year.

The deals highlight the two countries' growing dependence on each other.

Interdependence

We plan to take advantage of the low-cost gas and...availability of iron ore there
B. Muthuraman, Tata Steel managing director

India produces only half the natural gas it needs and imports 70% of the oil it requires, currently at very high cost.

The steel agreement also makes sense for Tata Steel, part of India's giant Tata group, as it expects to see a sharp rise in demand as its government has promised to spend $15bn on huge infrastructure building projects.

The firm has said it intends to raise its total steel production to 15 million tonnes by 2010, nearly four times its current capacity.

Iran is likely to welcome the cash on offer from the Indian investors, as political risk has made many investors unwilling to do business there.

Deal terms

Under the terms of the deal, Tata Steel will develop iron-ore mines, currently controlled by Iranian Mines and Mining Industries Development and Renovation Organization (Imidro), a government-aided company.

Each company will own a 49% stake of their joint ventures, with an Iranian pension fund owning the rest.

Steel coils
Indian domestic demand is strong and China also beckons

The Iranian mines are thought to have reserves of two to three billion tonnes of iron ore.

Tata and Imidro will build a 1.5 million tonnes a year steel-slab plant and a 1.5 million tonnes a year billets plan, as well as an export-oriented steel plant. The first steel plant to be completed will come on stream in April 2008.

They will also co-operate in the exploration and mining of unexplored iron ore mines.

"Owing to favourable factors in terms of production, the envisaged steel plants would emerge to be amongst the lowest-cost producers of steel in the world," Tata Steel managing director B. Muthuraman told a news conference in India.

"We can even bring the steel billets from Iran to Bombay at a cheaper rate than from our own facilities in India," he added.




SEE ALSO:
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13 Jun 05 |  South Asia
India fires up steel production
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Merger creates biggest steel firm
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