Cowboy Indians In South Africa

Cowboy Indians in South Africa

by Nostromo Research, London

26th February 2006

India's Tata Steel has announced plans to build a 120,000 tonnes per year ferrochrome smelter in South Africa's Richards Bay, Kwa Natal, one of the country's premier locations for eco-tourism.

The company expects to begin production by the end of next year; Priyadarshan Roy, head of Tata's ferro alloys and minerals unit says the company is "in an expansive mode.. we are bullish" [Mining Journal, London 24/2/2006].

This announcement follows Tata's abandonment of steel plant construction in eastern Orissa, India, on a site which has now become synonymous with massacre, called Kalinganagar.
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For, on January 2 this year, police brought in by Tata for "protection" opened fire on local tribal people protesting against the plant and lack of compensation for loss of their land. Thirteen died - including a child, several women, and one policeman. Bodies were returned to familes from the hospital with their hands deliberately cut off. According to a BBC World Service report today, Tata's Kalinganagar site has now been abandoned, to villagers' cows and buffaloes [http://news.bbc.co.uk/1/hi/world/south_asia/4686638.stm]

The South African smelter would almost double Tata's ferrochrome output (to 300,000 t/y) and benefit from electricity prices which are lower than back home [Hindustan Times Feb 22 2006]

South Africa is the world's biggest ferrochrome producer - a product which is currently in over-supply but, since Tata also has its eyes on car manufacture in the Republic, the project makes an attractive fit as long as it can keep production costs low.

Currently there's no love lost between India's most powerful domestic dynasty and the country's richest non-resident son, Lakshmi Mittal (he lives in a multi-million dollar house in London), owner of the eponymous company which is the world's biggest steel producer.

Mittal wants to get his claws on Highveld Steel when Anglo American divests it as part of the London-based company's "restructuring" announced in October, which moved into its final stages last week (Financial Times, February 23 2006). Highveld is not only South Africa's second biggest steel maker but also the world's leading producer of vanadium, used in steel alloys.

Not surprisingly, Tata is after Highveld as well. The company is reportedly in the ANC government's good books since buying into the country's second biggest telephone operator. It therefore looks likely to get environmental clearance for the ferrochrome plant, despite local opposition.

Meanwhile, Mittal Steel is on the block - accused by Harmony, one of South Africa's biggest mining companies - of rigging prices within the country, to reflect what it would have to pay on imported steel, rather than on actual production. An adverse verdict on Mittal's pricing practices could scupper its chances of grabbing Highveld.

Also bidding to takeover Highveld is the UK-based Kermas Group which acquired Samancor, the chrome producer, from Anglo American and BHPBilliton last year [Mineweb 17/1/2006; 24/5/2006]. Kermas concluded a "black empowerment" agreement with the South African government and has sales agreements with firms in Russia, Germany and Turkey.