VZCZCXRO6093
RR RUEHBZ RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDU #0121/01 3620612
ZNR UUUUU ZZH
R 280612Z DEC 09
FM AMCONSUL DURBAN
TO RUEHC/SECSTATE WASHDC 1537
INFO RUEHBI/AMCONSUL MUMBAI 0001
RUEHCI/AMCONSUL KOLKATA 0001
RUEHSA/AMEMBASSY PRETORIA 0714
RUEHNE/AMEMBASSY NEW DELHI 0006
RUEHZO/AFRICAN UNION COLLECTIVE
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHDU/AMCONSUL DURBAN 0919

UNCLAS SECTION 01 OF 03 DURBAN 000121 
 
SENSITIVE 
SIPDIS 
 
FOR AF/S, ISN, EEB/ESC AND CBA, AND OES/EGC 
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT, L.PARKER 
DOC FOR ITA/DIEMOND 
 
E.O. 12958: N/A 
TAGS: EMIN ENRG EPET EINV ETRD ECON SENV SF
SUBJECT: TATA KZN - A STEEL PRODUCER THAT AIMS TO BE STAINLESS 
 
REF: A) 05 DURBAN 00019; B) 09 PRETORIA 2498 
 
DURBAN 00000121  001.2 OF 003 
 
 
This message is sensitive but unclassified, not for Internet 
distribution. 
 
¶1.  (U) Embassy Minerals and Energy Officer and Specialist, 
Consul General, and Consulate Pol/Econ Officer visited charge 
chrome manufacturer Tata Steel in Richards Bay, KwaZulu-Natal 
(KZN) on November 16.  This cable is a collaboration between 
Embassy Pretoria and Consulate Durban. 
 
¶2.  (SBU) SUMMARY:  Tata Steel KwaZulu-Natal (TSKZN) is a 
comparatively small, new producer of export charge chrome for 
use in stainless steel manufacture.  Set up in Richards Bay by 
holding company Tata Steel to take advantage of cheap power and 
competitive freight rates, TSKZN brings in ferrochrome ore by 
rail from Mpumalanga and imports Ohio-sourced coking coal for 
its smelting process.  The "niche" producer has been forced to 
find innovative ways of processing low quality ferrochrome, 
customizing its smelter and briquetting unwanted chrome dust, to 
remain competitive during the 2008-2009 global recession.  The 
experienced management team demonstrates a very high level of 
commitment to reducing the facility's environmental footprint, 
assisting affected communities, and empowering women.  Under the 
leadership of Somdeb Banerjee, the team provides a good example 
of local success in overcoming tough challenges.  End Summary. 
 
Tata Chooses Richards Bay for Cheap Power 
 
¶3.  (SBU) Tata Steel, the world's sixth largest steel producer, 
decided to establish the Tata Steel KwaZulu-Natal (TSKZN) charge 
chrome plant in 2000 to avoid the increasing cost of power at 
its Indian operations.  At the time its power bills were 50 
percent of its processing cost.  The site at Richards Bay, South 
Africa's deepest port, was chosen for its cheap power and 
competitive freight rates.  The company was formed in 2003 as a 
subsidiary of Tata Steel and Tata Africa Holdings and R850 
million ($114 million) was invested to establish the processing 
plant.  The plant is in its second year of operation and is 
headed by Managing Director, Somdeb Banerjee, with a team of 136 
employees.  It produces and exports about 150,000 tons per annum 
of high quality charge chrome, a high carbon ferrochrome used in 
the production of stainless steel. 
 
Key Ingredient in Stainless Steel 
 
¶4.  (SBU) Charge chrome is a key "ingredient" in stainless 
steel, making it rust resistant and adding shine and luster. 
Stainless steel is primarily a "lifestyle" product entering 
households as elegant cutlery, tableware and decorative items. 
Consumption for stainless steel has grown at around 4.5 percent 
over the last few years. 
 
Ferrochrome to Charge Chrome 
 
¶5.  (SBU) TSKZN smelts ferrochrome ore to produce an export 
charge chrome product that is shipped to Asian and European 
customers from the Richards Bay port.  The operation comprises a 
ferrochrome ore storage facility for two to three months' 
production, a briquetting plant, two DC-arc furnaces and a slag 
plant.  The furnaces were commissioned in April and July 2008, 
respectively, and the first shipment of charge chrome to 
customers in China was made in September 2008.  The furnaces 
smelt ferrochrome ore using coking coal ("coke", imported from 
Ohio Coal Mining in the U.S.) as a reductant and a small amount 
of quartzite as a flux.  Smelting at 1600 degrees Celsius 
produces a charge chrome matte which is tapped, cast, and 
crushed to produce the charge chrome product for export; and a 
lighter alumina-silicate slag, which is cast, crushed, and 
stockpiled for use in road building.  TSKZN is capable of 
processing lower grade ferrochrome ores than its competitors. 
The company purchases low grade, "lumpy" ore (from Nkomati Mine 
at Machadodorp in Mpumalanga), which it feeds directly into the 
furnaces, and "fines" (ferrochrome dust) which it forms into 
briquettes prior to smelting.  The briquetting plant can process 
400,000 tons of "fines" forming a furnace feed of 200mm 
briquettes using molasses and lime as a binder. 
 
Green Chrome 
 
¶6.  (SBU) TSKZN expressed commitment to its environmental 
 
DURBAN 00000121  002.2 OF 003 
 
 
responsibilities and is active in reducing emissions, 
maintaining ground water quality, and striving for zero waste. 
TSKZN plans to reduce emissions, in line with Tata Steel's 2012 
target, from 1.8 to 1.5 tons CO2 per ton of liquid steel.  "We 
ensured that our environmental standards would meet the emission 
norms and air quality standards likely to be required in the 
next five years," says Banerjee.  Fugitive emissions, the highly 
toxic gas that escapes the furnace when matte or slag is tapped, 
is extracted and filtered in a closed system.  The filtrate is 
bagged and sent to a hazardous waste disposal site.  Ground 
water quality and potential pollution plumes are monitored 
through a series of boreholes drilled at the perimeter of the 
operations.  The company ensures that all of its plant water is 
either contained in lined storage facilities or kept in closed 
circuit.  The most hazardous waste product in the plant water, 
"Chrome VI" (or hexavalent chrome, which is a highly toxic human 
carcinogen), is neutralized in the closed circuit through the 
addition of ferrous sulphate.  According to Banerjee, the 
management team continuously looks for uses and recycling 
opportunities for the plant's waste products and aims to achieve 
zero waste generation.  They are also active with a "greening 
project" aimed at suppressing dust and improving indigenous 
bio-diversity. 
 
Challenges and Innovation 
 
¶7.  (SBU) Key challenges of the cost of power, input transport 
costs, recession-delayed return on investment (ROE), and 
attracting and retaining skills, particularly historically 
disadvantaged South Africans (HDSA) at management level, are 
forcing TSKZN to innovate for survival.  Power accounts for 
about 30 percent of process costs with ferrochrome smelters 
being energy intensive.  With impending 35 percent per annum for 
three years electricity rate hikes, the operations team is 
working on the cogeneration of power from emissions flares and 
the recycling of all process heat.  They estimate that this will 
enable a 15 and 20 percent reduction in their power bill.  The 
transport cost of ferrochrome ore from mines in the North West 
and Mpumalanga is currently more than the price of the ore.  To 
reduce these costs the operations team has started to process 
low quality ore and "fines" (chrome dust) from mines that are 
closer to Richards Bay.  The team is looking at using locally 
produced anthracite as a substitute for U.S. coke, but as yet 
has not been able to replace this input.  Proximity to the sea 
is an attraction and retainer for the highly skilled and 
management level employees, but the company has lost skilled 
employees to the Australian mining industry and to local 
competitors in the Middelberg area.  Mentorship and a 
significant investment into the training of selected local 
candidates as artisans are key strategies employed by TSKZN to 
build its required skills base.  Since 2006, TSKZN has trained 
91 young men and women as operators and apprentices, some of 
whom are currently employed as trainees in the plant. 
 
Good Vision, Resilient Team 
 
¶8.  (SBU) TSKZN appears to have good leadership in Banerjee, a 
highly competent and experienced operations management team, and 
a strong vision.  Of its 136 employees, more than 50 percent are 
HDSA and 30 percent are female.  TSKZN planned to facilitate 
voluntary HIV/AIDS testing in December 2009 and estimates the 
prevalence to be far lower than the region's 25 to 30 percent. 
 
Community Conscience 
 
¶9.  (U) TSKZN is deeply involved with the community at Richards 
Bay, investing in education, skills development, and the 
empowerment of women.  The company does not directly invest in 
HIV/AIDS, believing that other cooperatives in the area are 
better equipped to tackle this issue.  The Embassy/Consulate 
team visited one of three schools that TSKZN had adopted and 
renovated in the area. 
 
Comment 
 
¶10.  (SBU) TSKZN is an example of a "niche" ferrochrome producer 
that relies on innovation, highly experienced operations 
management, and good leadership to create value and compete with 
better placed, larger producers. 
 
 
DURBAN 00000121  003.2 OF 003 
 
 
¶11.  (SBU) The timing of the TSKZN project was most unfortunate, 
with the first consignment of processed charge chrome being 
shipped at the start of the 2008-2009 global recession, 
seriously reducing payback on its $114 million investment.  This 
initial setback appears to have created a sense of urgency and 
"can do" positivism in the company's management team, stimulated 
a cost-conscious culture, and triggered excellent leadership. 
DERDERIANJ