David Christianson
28 September 2007
Johannesburg — TATA's high-carbon ferrochrome plant under construction in Richards Bay is expected to start operating in January.
However, the anticipated final cost of this phase of the project is R734m -- nearly 11% higher than the initial projected cost of R662m.
During a construction site visit by Business Day, Somdeb Banerjee, the MD of Tata Steel KwaZulu-Natal, provided details of cost increases involved. The site is in the Altron industrial suburb.
Banerjee said about R25m of the cost increase was directly related to the impact of the rand exchange rate on imported components. The rest was accounted for by increases in the cost of copper and steel, and in design modifications made during construction. The last factor set back the finishing date from October this year.
The company started construction of the first phase of the plant in August last year. It is designed to produce an initial volume of 135000 tons of high-carbon ferrochrome briquettes for export. Using a model reminiscent of BHP Billiton's aluminium smelters in Richards Bay, Tata Steel KwaZulu-Natal intends importing all production inputs.
Chrome and chrome concentrate will initially be imported from India's Orissa province while "lumpy ore" will be sourced from Iran. No locally mined chromium will be used. Nor will there be any sales to the South African market. The plant will employ 129 permanent staff and 70 contract workers.
Banerjee said local purchases during the construction phase, at 80%, exceeded initial predictions of 76%. The first two furnaces had been installed with work on furnace B "running about 10% behind furnace A".
A phase two -- yet to be given the final go-ahead -- may see the construction of two more furnaces on the same site.
The company's chief operating officer, Willem de Villiers, said SA's cheap electricity was the primary reason for building the plant locally.
Banerjee stressed Tata's "commitment to SA", which the company saw as both an important market in its own right and the gateway to the continent.
If the third and fourth furnaces were built, Banerjee said the total cost would be R1,1bn, which compared favourably "to the R1,3bn which is pretty much the standard in SA for the construction of this kind of plant".
The projected cost of the 265000-ton International Ferro Metals plant in Rustenburg is R1,4bn.
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