Tata Steel, the world's seventh-largest steelmaker, said it would boost aerospace steel production in Europe by 30% in an attempt to win a bigger share of a fast-growing market.

Tata Steel's European branch, the second-largest steelmaker in Europe, said it would invest 6.5 million pounds ($10.4 billion) to start two new vacuum arc re-melting furnaces due to begin production of aerospace steel in early 2012.

The investment comes at a time when worries about global economic growth and concerns over the sovereign debt crisis in Europe are weakening demand for basic steel grades, hitting steelmakers' margins and forcing producers, including Tata, to cut output.

"We are now entering the testing phase of this major investment programme, and will begin trials later this year," Tata Steel Engineering Director Andrew Douglas said.

"This process will ensure the new equipment is capable of producing the technically demanding and safety-critical steels our aerospace customers require."

Special steel demand from the aerospace industry has been growing dramatically in the last few months, however, and is expected to continue increasing as airlines continue to buy planes and need to retool to meet emissions standards.

Boeing's new Dreamliner planes for example, which can cut fuel costs noticeably, have been much in demand.

Vacuum arc re-melting furnaces are very small and specialised. They use vacuum conditions to purify ingots that have been created in electric arc furnaces, and the material they produce is high-end in both quality and value.

Material for the new vacuum furnaces will be sourced from Tata Steel's own electric arc furnaces in Rotheram, which are fed almost exclusively with scrap sourced in the UK.

Last month, Tata closed one of its blast furnaces as part of its shift towards the high end of the market in the last couple of years.

European steel plants need to focus on high-end products as they cannot compete with lower cost countries such as Turkey or Russia and Ukraine on basic steel grades, the CEO of Austrian steelmaker Voestalpine said earlier this month.

Earlier this month, the CEO of Tata Steel in Europe said the company may cut steel production further in Europe in the next few months if steel orders weaken.

The company had already cut production to 80-85% of its annual capacity of 18 million tonne from 85-90% in the first half this year, it said.