Tata Steel Group, the world's sixth largest steel producer, is consolidating its requirement of raw materials with its international unit Corus signing a long-term iron ore purchase agreement with Australian miner Northern Iron.
According to the agreement, Corus's offtake for an initial term of five years from 1 July 2009, is for six million tonnes of iron ore concentrate from Northern Iron, which operates a mine in Norway.
During the contract period Corus can procure an additional 2.25 million tonnes of concentrate at the mutual option of both parties from the Norwegian mine.
Pricing for the concentrate will be based on the Vale benchmark for similar products delivered into Europe on a free on board (FOB) basis.
Northern Iron has also entered into a Memorandum of Understanding (MOU) with a third party to sell the remainder of the planned base case production. Negotiations are continuing to convert the MOU to a formal offtake contract. The Company's plan is to complete all offtake arrangements by the end of January
Corus is dependent on imported ore and coal to produce 18 million tpa and to meet this, Tata Steel has been acquiring stakes in coal mines in Mozambique and Australia and an iron ore miner in Ivory Coast.
Last October, Tata Steel's wholly-owned subsidiary in Singapore, Tata Steel Global Holding Pte Ltd, had entered into a binding agreement with New Millennium Capital Corporation of Canada to pick up a 19.9-per cent stake in the company for $22.6 million (Rs106 crore) with the option to buy all the ore that is mined by New Millennium. (See: Tata Steel buys stake in Canadian miner for $22 million)
In the same month, Corus tied-up a long-term raw material supplies through the 5-year iron ore supply contract with Brazilian miner Vale. (See: Corus and Vale sign 5-year iron ore supply contract)
Under this long-term contract, which is one of the largest ever signed between a steel maker and an iron ore supplier, Vale will supply approximately 63 million metric tons of iron ore to Corusīs plants over the next five years.
Tatas are shoring up iron ore supplies with various tie-ups, contracts, gathering properties across the world to ensure their supply to their respective factories.