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Rediff News  All News  » Business » China's Wuhan to invest in Tata-CSN venture

China's Wuhan to invest in Tata-CSN venture

July 12, 2010 16:59 IST

After signing on Tata Steel in 2007 and Brazil's CSN in 2009, Riversdale has roped in China's Wuhan Iron and Steel Corporation (Wisco).

Tata Steel and CSN hold 21.8 per cent and 16 per cent stake, respectively, in the company, while Wisco would subscribe for an eight per cent stake.

"This is an investment for us, with a direct purchase option. The coal will be used to service our group operations," said a Tata Steel spokesperson.

All the three companies are looking to secure raw material supplies in a volatile market. Apart from the stake in Riversdale Mining, Tata Steel holds 35 per cent in the former's Benga and Tete projects in Mozambique.

Last year, Riversdale announced an updated resource and reserve statement for the Benga coal project in Tete province. Based on the data collected, a coal resource of four billion tonnes has been estimated.

Tata Steel's India operations have 100 per cent iron ore and 50 per cent coking coal security, while its European arm, Corus, which accounts for 65 per cent of the group's production capacity, has no captive mines.

Though raw material prices have softened to some extent the past couple of months, the year started off with a dramatic shift on the supply side. Resource majors dumped the 40-year old annual benchmarking contracts for quarterly ones, as prices soared on a resurgent demand.

The shift was possible as key inputs for the steel makers are controlled by three to four companies worldwide. Of the $200-billion iron ore industry, BHP Billiton, Rio Tinto and Brazil's Vale control two-thirds. Coking coal is controlled by BHP, Rio, Anglo American and Xstrata.

CSN, which has iron ore but no coal, is looking to secure raw material for its operations and so is Wisco.

Ishita Ayan Dutt in Kolkata