Tata Steel Europe to get Mozambique ore supplies by end-Oct

NEW DELHI, Oct 10 (Reuters) - Tata Steel's Europeunit will receive the first iron ore shipment from its Bengaproject in Mozambique by end-October, a top official said, afirst step towards addressing the cost volatility affecting itsEuropean operations.

The first shipment of about 35,000 tonnes is expected toland at Immingham Port near Tata's Scunthorpe plant in Britain.It will be followed by five to six further shipments in theDecember quarter that could add up to about 200,000 tonnes .

"This is not so much of an impact on the economic side. Themain benefit is stability in sourcing of a very high qualitycoking coal, which will be increasingly scarce in the future,"Karl-Ulrich Koehler, head of Tata Steel Europe, told Reuters onthe sidelines of a World Steel conference.

Tata holds a 35 percent stake in the Benga project, whilethe rest is held by Riversdale Mining, which is now almostentirely owned by global miner Rio Tinto .

The Indian steelmaker, whose Europe unit accounts fortwo-thirds of its global capacity of about 28 million tonnes,has posted a loss or lower profit for the past three quarters,in part because it does not own captive raw material suppliesfor its operations there.

"Our difficulty is volatility and how to tackle that. It isa major problem and our European supply chain is long because wedon't have our raw materials," Koehler said.

Tata also signed an agreement last year with Canadian minerNew Millennium Capital to develop a taconite iron oredeposit in Canada.

Steelmakers are struggling globally because of the debtcrisis in Europe and weak growth in China, the world's largestproducer and consumer. Europe, which is oversupplied, hasresponded by cutting production and shutting down some plants.

Earlier this month, ArcelorMittal , the world'sNo.1 steelmaker, said it will permanently close two furnaces inFrance.

Tata, which has itself cut capacity utilisation, expects toremain under pressure until the market situation improves.

"My perception of the last quarter is not as negative, butcertainly it is still difficult," Koehler said.

"There is no short-term improvement for the market, but weare undertaking what we can to make ourselves 'weather-proof',"he said.

Last week, a company official said it would invest 400million pounds in the Europe unit, earlier known as Corus, in2012/13 to improve performance.

Tata is also moving its focus to growth markets in Asia,including its home Indian market, where demand is growing innear double digits.

It recently boosted capacity at its plant in eastern Indiaby 30 percent to 9.7 million tonnes, and is also constructinganother 3 million tonnes a year plant in the region.

(Reporting by Prashant Mehra; Editing by David Cowell)

((prashant.mehra@thomsonreuters.com)(+91-22-6180 7029)(ReutersMessaging: prashant.mehra.thomsonreuters.com@reuters.net))

Keywords: INDIA TATA/