Tata Steel looks to expand key product beyond BMW to volume brands

Hurt by rising steel imports from China, Tata Steel in Europe is aggressively pushing its higher-margin tailored blanks business to generate more income. A recent 4-million pound (4.7-million euro) investment at the Indian company’s UK plant has tripled production of tailored blanks, which are primarily used by premium automakers such as BMW Group.

Tata Steel is looking to expand its business with volume automakers by showing them the weight-saving benefits of the technology. “We’re seeing more and more use among automakers as they look to reduce CO2 levels,” said Lee Coates, head of Tata Steel’s automotive center at its factory in Wolverhampton, central England.

Hampering the sales pitch is the fact that it’s a costly process. Tata Steel rival ArcelorMittal, the self-proclaimed world leader in supplying laser-welded blanks, estimates that the cost of a tailor-welded door blank can be 30 percent more than the cost of the coil material to make the door. However, overall savings can range from 5 percent to 20 percent once the wider benefits -- less time and effort spent welding and seam-sealing in the body shop -- are factored in.

Laser welding two or more thicknesses of steel together has been around since the 1990s, but the cost is dropping as the technology improves. The newest of Tata Steel’s two laser-welding machines can produce 2,500 pieces an hour. Combined, the two machines can make 2.3 million pieces a year, up from 750,000 in 2014. “What has developed is the speed and accuracy of the laser technology,” said Kevin Edgar, Tata’s head of marketing for automotive, who added that the company’s first machine functioned at one-tenth of the pace now possible. “There’s a real economy of scale,” Edgar said.

Right now, the plant’s biggest customer for its tailored blanks is BMW Group, which takes about half the output. The end products include the doors for the new Mini and the rear-seat back for the BMW 5 series and 7 series. The BMW models have five separate thicknesses of steel welded together, the most the plant can combine. The two lines are now running at 90 percent capacity with three shifts during weekdays.

Coates admits that mainstream manufacturers are proving harder to convince. “If you’ve not worked with laser welding you might think there’s more of a risk. It’s about education,” Coates said. ArcelorMittal claims a laser-weld seam makes a part stronger rather than creating a weakness.

The benefits to Tata Steel are easy to see. Coates estimates that tailored blanks account for about 7 percent of the automotive output by weight from the firm’s plant but bring in about 20 percent of the factory’s revenue.

Expanding higher-margin sales was a key aim stated in the Indian supplier’s financial report for its 2015-16 financial year, in which it talked about “unlocking the potential of steel.” The pressure from cheap Chinese steel imports had become so bad that Tata Steel planned to sell its money-losing UK business last year. That would have had a huge effect on UK automotive manufacturers, which buy a third of their steel from Tata.

But China has also moved into tailor-welded blanks. In 2013, Chinese steel giant Wuhan Iron and Steel Corporation (WISCO) bought German steelmaker ThyssenKrupp’s tailor-welded blank business for an undisclosed amount. At the time of the deal the firm claimed to have a 40 percent global market share.