Tata Steel suffers severe ‘financial distress’

THE two-edged sword of high electricity tariffs and low global ferrochrome prices might have dealt Tata Steel KZN a deathblow.

As of last Wednesday, the company launched a business rescue operation in an attempt to eliminate its rising debts.

This follows Tata’s Richards Bay plant shutdown for the winter months.

Tata Steel KZN Managing Director Ashwani Kumar Lal said the temporary closure was necessary owing to the increase in electricity costs, ‘too steep for the unit to absorb given the current market conditions’.

The legal ‘Notice of Beginning of Business Rescue Proceedings’ also indicated the fluctuation between the Rand and US Dollar denominated loans from external funders.

To add more fuel to the fire, the sole shareholder of the company recently advised the board that it is no longer able to support it financially.

Debt stress

The company has now been declared ‘financially distressed’ and not able to pay all of its debts as they become due over the next six months.

‘There exists a reasonable prospect that the rescue proceedings will result in a better return for the company’s creditors or shareholders as opposed to liquidation of the company,’ said the notice.

‘But no jobs were lost. Salaries have been, and will continue to be paid,’ Lal recently assured the Zululand Observer after the plant shutdown.

Tata’s Richards Bay facility has 194 employees and produces 150 000 tons per year of high carbon ferrochrome from locally supplied ores.

Its alloy of chromium and iron is exported to stainless steel manufacturers in Asia, Europe and the USA.

However, product has not been shipped to customers since the end of last month when stock ran out during the plant’s shutdown.

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