July, 11 2005
Terror cloud on foreign tour
The London blasts have cast a shadow on chief minister Arjun Mu9ndas foreign tour.
The Prime Ministers Office (PMO) is yet to grant Munda political clearance and it is widely being perceived that he will not be allowed to go to London in the aftermath of the terror attack.
Meeting steel magnate Laxmi Niwas Mittal in London is Mundas primary aim. Sources said he would prefer postponing his programme for the time being, instead of going to cities other than London. Emissaries of the steel tycoon have been making rounds of Jharkhand where Mittal Steel intends to set up a 10-million-tonne integrated steel plant.
I dont think the PMO is going to approve his London tour now. His main aim is to meet Mittal. The proposed meetings with the officials of Unicef, WHO, IFAD and World Bank are secondary, said mines and geology minister Madhu Koda.
Mundas foreign tour was due to begin tomorrow. He was to have travelled to UK, France, Italy, Switzerland and the US to fetch funds for his state. But, he applied for a clearance from the PMO in the first week of this month.
The chief ministers secretariat, however, insists the tour will now begin on July 25 and expressed hope that the clearance from the PMO could come through in the next three or four days.
Leader of Opposition Sudhir Mahto has decided not to participate despite the invitation from the chief minister.
Mundas principal secretary, U.K. Sangma, confirmed the changes in Mundas programme. Now we will be going abroad on July 25. But we have not yet received clearance from the PMO. There is no other change in the programme, said Sangma.
Apart from meeting Mittal and addressing investors conferences in London and Paris, Munda wants to go to Rome to impress upon the International Fund for Agricultural Development to extend the tenure of their existing schemes in Jharkhand. In Geneva, he intends to meet Unicef and WHO officials, and in Washington, a meeting with the World Bank is slated
CII urges greater investment in infrastructure
The CII wants at least seven per cent of the GDP to go into gross capital formation in infrastructure. This means investments of about Rs 200,000 crore a year.
The private sector can bring in about 20-30 per cent and the rest has to come from the Government. Currently, only about half this investment is coming into infrastructure, according to a CII release, issued after a meeting of its national council.
Higher growth in core sectors and investment in infrastructure hold the key to sustaining the growth in economy, according to the CII.
According to the release, the CII's National Council is optimistic about the growth in all sectors, including agriculture, manufacturing, and services.
The council is of the opinion that the core sector comprising power generation and coal, cement, and crude oil production must grow faster than the GDP growth, which is expected to exceed seven per cent in 2005-06.
The Government has to ensure that infrastructure projects in roads, ports, power, coal, and airports have to be implemented to ensure growth.
"A regulatory framework is needed to attract such investments. A task force would also be needed to monitor the projects and to ensure that targets are achieved."
In power the focus should be on nuclear and non-conventional energy; and coal mining should be liberalised to attract investments.
The CII's optimism on growth in the current year is based on the reducing trend in fiscal deficit, resilience to high oil prices, increase in VAT collections, and more than 20 per cent growth in non-food credit, the release said
Call to remove salary mismatch
Executives in public sector enterprises have demanded that the pay differentials in public sector enterprises and private corporates should be equitable.
According to the Chairman of the Standing Conference of Public Enterprises (SCOPE) and Chairman of IOC, Sarthak Behuria, the salary structure in private companies has risen so high to create huge disparity between workers and senior managerial personnel. In contrast, in the public sector, the disparity has been shrinking.
Both the trends are moving in opposite directions. There is need for convergence. Pay should be linked with performance.
While inaugurating a workshop on `Emerging issues in pay and reward system in public sector enterprises' organised by SCOPE and International Management Institute (IMI) here, Behuria said PSEs should be innovative in designing new monetary and non-monetary rewards, which will optimise the satisfaction of employees without increasing costs to the companies.
Ramachandran Pillai, Chairman-cum-Managing Director of NTC, said there is fundamental mismatch between the salaries paid by PSEs and those paid by the private sector. Considering the fact that both are competing for the same markets, there is a need for benchmarking compensation levels between the public and private sectors for comparative accountability.
He said a reward system with both financial and non-financial benefits should be evolved.
The Director-General of SCOPE, Dr S.M. Dewan, in his welcome address said the pay and reward system in PSEs needs a paradigm shift. Review of broad trends in compensation system has become inevitable as the pressure of competitiveness is mounting on PSEs. With the same kind of responsibility there is wide range of difference between the remuneration of private sector CEO and public sector CEO. The Chairman of Steel Authority of India Ltd is paid Rs 8.33 lakh per annum compared to Rs 1.23 crore to Tata Steel Chairman, he pointed out.
Dr Dewan said: "A well paid employee with variable incentive based high wages results in higher productivity thus reducing the product or transaction cost which is a must for survival of PSEs in globally competitive market place."
Heady comparisons - The hidden realities in PSU pay
The plea by chief executives of state sector companies on their pay, vis-a-vis their private sector counterparts, is not without merit. Any owner of a company should regularly review the pay of his chief executive and other managers with an eye to market realities. In that sense, the strong demand made by public sector undertaking (PSU) heads the other day, at the meet organised in this regard by the Standing Conference of Public Enterprises (Scope), is unexceptionable. The Scope chairman, for instance, who otherwise heads Indian Oil, gets 90 times less than his chosen benchmark, the chief of Reliance Industries. And the gulf is likely to widen over time.
But there are some riders to the proposition that PSU chiefs have conveniently chosen to gloss over. One is that PSU officials get a great many perks that dont show up in their salary, such as the value of a spacious house in a colony or complex run by the company. Or campus schoolingSteel Authority of India, for instance, runs 200 schools in its various townships, among other things. Apart from this, there are things like free/subsidised medical care, scholarships for children, pension etc. The most important difference, however, is job security. PSU managers are hired for a lifetime, regardless of how badly the company does: the entire ruling coalition in Delhi came to power on a promise to uphold this state of affairs.
The FCIs factory at Haldia, for instance, did not produce a single gramme of fertiliser in its 25-odd years of existence. Yet the 1,500-plus workforce never had to worry about salaries. No one, least of all Scope, thought this was scandalous.
In sum, were all for comparing PSU chiefs return with what the private sector pays. But lets also factor in the fact that private sector managers have their jobs on the line in a manner which PSU personnel do not. We are all for the Scope chiefs reasoning that pay should be contingent on performance. But then, bad performance in a PSU should be paid for by the PSUs managers, not by the taxpayer
Collision damages Myanmarese ship in Visakhapatnam port
A Myanmarese cargo vessel was damaged after a collision with an Indian ship at an eastern Indian port, a port official said on Saturday.
No one was injured but the midship of the vessel was ruptured and water flooded into its number two hold in the accident at the Visakhapatnam port on Friday, port official Sanyasi Rao said.
The 3,309 tonne Myanmarese M.V.Chin Shaw Haw was unloading timber in the outer harbour when the incident happened.
The 47,223 tonne Indian M.V.Uttarkashi, carrying coking coal, suffered engine failure while approaching the harbour, he said
Fire eats into MCL profit
The fire raging in all the seven coal seams of Lingaraj open cast project since May has cost Mahanadi Coalfields Limited (MCL) dear.
About 10,000 to 12,000 tonne of coal burn daily since the fire broke out during peak summer in first week of May.
Though the fire has abated due to rains of late, it could not be put out as the fire tender in the mine is handicapped by staff shortage. The fire is also causing acute air pollution around the mine areas.
Former MP Rabi Narayan Pani, demanding immediate steps to extinguish the fire, has urged MCL authorities to take erring officials to task for causing financial losses to the company and the State Government
Shri Ramrupai Balaji Steels
An investment in the IPO of Shri Ramrupai Balaji Steels (SRBS) can be avoided as the risks seem to outweigh the scope for capital appreciation.
SRBS is a company of the Jai Balaji Group, which makes sponge iron, pig iron, steel rods and bars and serves the markets of eastern India. The company commenced its operations in 2002. It has been in the process of commissioning facilities to manufacture sponge iron, pig iron, and a rolling mill and proposes to go for vertical integration by setting up a captive power plant and a facility for manufacturing rods and bars.
The revenues and earnings of the company jumped in FY-05, on account of higher realisations from the steel intermediates. But these are likely to be put to captive use once the new capacities become operational.
The earnings growth in the near term is likely to be modest as realisations are unlikely to be as high as last year. This is because of the softening of steel prices in recent months, which is likely to continue in the near term. Further, most players are on an expansion spree and some of them have announced production and price cuts considering the glut in the market.
Stiff competition, which is likely to continue in the medium term, may also put pressure on the prices. Any improvement in earnings, driven by volumes, is likely to be reflected only in FY-07 when the new capacity would be fully operational.
A substantial portion of the project cost (over 60 per cent), which is funded by debt, is likely to take the company's gearing to levels higher than that of its peers. The interest outgo may act as a drag on its profitability until new capacities begin to contribute.
The savings on account of installation of the captive power plant and the various fiscal incentives may get partially neutralised by higher input costs. The prices of iron ore and coal are expected to remain at higher levels in the near term, pushing up the production costs, and the company may not be able to fully pass on the increase in costs to customers.
In the light of these factors, investors can avoid the offer. This recommendation is based entirely on the company's medium-term prospects and does not factor in the possibility of short-term gains on listing.
Offer details: The company is offering two crore equity shares of which 1.9 crore would be available to the public. The price band is Rs 20-22. The promoters' stake, post-offer, would be about 69 per cent. The company proposes to use the proceeds from the offer to fund the capacity expansion programme. The lead manager to the offer is Microsec India. The offer opens on July 8 and closes on July 14.
Tatas for boosting power generation
Tata Power had undertaken huge power generation capacity expansion and plans to acquire captive coal blocks to support this effort.
Tata Power had firmed up plans to add up 2,600 MW and had been evaluating another project of 1,000 MW, Tata Power officials said here yesterday. This would increase its footprints in other states of the country.
A 600 MW hydro power plant had been planned in Uttar Pradesh, 1000 MW thermal plant near Mumbai. Another project of 1,000 MW at Maithon in joint venture with Damodar Valley Corporation, Tata Power senior GM (east) Mr Ashok Uppal told reporters yesterday at the sidelines of a CII seminar.
One more project of 1,000 MW had been proposed in Delhi in addition to the above projects but is not yet finalised as due-diligence is not over, he added.
The current generation capacity of the company is 2,300 MW from its units in Mumbai and Jamshedpur.
Mr Uppal said that Tata Power in joint venture with Tata Steel will be acquiring five coal blocks of which three are in Jharkhand, one in Orissa and one in Andhra Pradesh.
The company also said, they are not averse to the idea to buy coal blocks in the overseas locations.
The coal mines would be taken for captive use and estimated coal deposit had been estimated at 2,500 million tonne. The mines would generate assured and regular coal supply for its thermal power projects.
The company had planned to import coal for the Mumbai thermal power project. Being located at a costal belt, importing coal would not be a problem for the project.
Mr Uppal said, the UP hydro power project was yet to get the companys board approval but the due-diligence was complete.
The project cost was estimated at around Rs 1,500 crore including rehabilitation cost.
On the Maithon Right Bank project, Mr Uppal opined that the company was carrying out a fresh due-diligence. Meanwhile, land acquisition for the project is already under progress.
Already, 500 acres had been procured. First clearance for another 450 acres of the forest land had been received and rest 200 acres had to be procured where villages are also located, Mr Uppal said.
The Maithon project would get 450 acres forest land after the company undertakes social forestry of the same size of land at a different location
Padhee assures protection
Trying to instill confidence amongst villagers who have spent many sleepless nights ever since the MoU with steel major Posco has been signed,
Jagatsinghpur district magistrate Dr A Padhee assured that interests of the affected or those who would be displaced shall be protected.
Nobody can ignore the locals and their needs he said while informing that he had communicated the same to the company officials and also requested them not to visit certain areas of the proposed project site until they work out a confidence building programme.
Dr Padhee was revealing these aspects amidst rumours yesterday that a team of experts who wanted to collect material for soil tests had been obstructed by villagers. The district collector said he was not aware of any such visit or protest.
Steps would be taken for proper rehabilitation and to the satisfaction of affected people in Paradip area he said.
He also informed that a lot has to be done before the actual demarcation and process of identifying villages or land oustees is taken up.
Speculations here are that at least seven villages including Dhinkia, Nuagaon, Gadkujang, Noliasahi will be affected by the project.
Vast stretch of agriculture land including the major cash crop such as betel vines and cashew which is the backbone of the local economy will be acquired for the project.
In the meanwhile, villagers have already started mobilizing support to put up a stern protest against the steel plant project. Some of them have warned the government against any attempt to forcibly enter the area.
Villagers led by the sarpanch of Dhinkia Mr Basant Kumar Nayak and sarpanch of Nuagaon, Gadkujang and other villagers held a meeting to chalk out their plan of action against the project.
The district administration has however been trying its best to convince villagers that their interests will be safeguarded. It has sought the cooperation of everybody. At the same time it has warned anti-socials and vested interest groups against attempts to fish in troubled waters and instigating villagers and thus create trouble
Posco considers port away from Paradip
Pohang Steel Company (Posco) may not use the Paradip port for its proposed 12-million-tonne steel plant.
Though Posco initially selected Paradip as the site for the plant, it is not willing to use the existing port facilities. Instead, the company is considering setting up a minor port at Jatadhari, about 7 km from Paradip, sources said.
The memorandum of understanding signed between the state government and Posco has provisions that the company may develop a new minor port adjacent to the existing one at Paradip. According to the agreement, the Orissa government has to provide the necessary infrastructure and logistic support to Posco.
The Korean company needs a dedicated port facility to handle huge volumes of ores and minerals for the Rs 52,000-crore project.
Though Posco had explored possibilities of developing the Paradip port, it found that setting up a new minor port was more feasible.
The state government is keen on a new minor port at Jatadhari because of revenue considerations, sources said.
A minor port will be under the administrative control of the state government. Moreover, the entire revenue benefits will go to the state exchequer.
The new port may be constructed on a build-own-operate, build-operate-transfer or build-own-operate-share-transfer basis.
Meanwhile, the state government is already facing opposition from political parties for recommending a special economic zone (SEZ) status for the Posco plant.
If Posco is awarded a SEZ status, it is expected to get a few thousand crore rupees in tax rebates, alleged state BJP president Juel Oram.
Critics say Poscos claim of generating a revenue of over Rs 1,11,000 crore seems far-fetched as the company stands to gain huge tax benefits from the SEZ status promised to it.
The MoU claimed that the plant will help the Centre garner Rs 89,000 crore and the Orissa government Rs 22,500 crore over 30 years.
The SEZ status will allow the Posco project to derive the benefits of no-licence for imports and exemption from customs duty on import of capital goods, raw materials, consumables and spares.
The status will also exempt it from the central excise duty on procurement of capital goods, raw materials and consumable spares from the domestic market
Is POSCO getting into Orissa quicksand?
The biggest hurdle which the Korean firm can encounter and one which Orissa Government officials will try to gloss over is NGOs' opposition POSCO's proposal to export iron ore has met with opposition, being viewed as sale of family silver
POSCO, THE South Korean steel giant, recently entered into a memorandum of understanding with the Orissa Government to establish a 12 million tonnes a year steel plant. This can turn out to be the biggest foreign direct investment coming into India. POSCO might have decided on this investment on the basis of three factors.
One is India's geographical proximity and the fact that it can become the next China in terms of growth in steel consumption. The second is India's low wages in comparison with South Korea's and the ready availability of steel making skills. The third is Orissa's rich mineral deposits.
The State accounts for around 30 per cent of India's iron ore deposits. The ore is high grade haematite, with a minimum of 58 per cent iron content. The proved recoverable reserves amount to about 1.5 billion tonnes, with another 1.5 billion tonnes probably recoverable. Most of the ore is found just in the two districts of Keonjhar and Sundergarh. Orissa has also substantial reserves of other minerals which go into steel making such as coal 51.57 billion tonnes (24.37 per cent of the national deposits), dolomite 434 million tonnes (10 per cent) and limestone 1.03 billion tonnes (1.36 per cent).
POSCO will have to compete with a number of claimants for Orissa's iron ore. The Central Government owned Steel Authority of India already has its 1.8 mtpa integrated steel plant at Rourkela set up over four decades ago. There are plans to increase this capacity to three million tonnes in the coming years. On top of this, in the past two years, the Orissa Government has received around 40 proposals from various Indian and foreign parties for establishing new steel plants in the State with a total proposed capacity of over 44 million tonnes a year. Obtaining mining leases in India involves a lot of political networking. Can POSCO, a foreign company, negotiate this local political jungle in the face of so many domestic contenders for the ore?
The major qualitative drawback of the Orissa iron ore is that it contains a high amount of alumina. Generally, Indian steel plants tend to counteract the high alumina by charging quartzite in the iron making blast furnaces. This leads to lower productivity in the blast furnaces.
POSCO, it is learnt, plans to tackle the problem by blending it with imported low alumina iron ore and, in exchange, export the Orissa ore. This proposal has become a contentious issue, with the Opposition political parties, particularly those of the Left, viewing the proposed exports as sale of family silver. They have threatened to physically block the movement of export ore to the ports. Even the domestic steel industry does not favour this export, fearing a shortage of ore in future. Ironically, at present Orissa ore is now exported.
Orissa is one of the most backward States in India with primitive infrastructure. With much of the iron ore deposits located in forest areas, getting environmental clearances for road and rail work, mine development, overburden management and other formalities will run into protracted delays. This is because Indian administration runs at an extremely slow place. On top of this, in the last decade, a number of NGOs (non-governmental organisations) have set themselves up as environmental watchdogs which do not hesitate to tie up mining projects in protracted litigation and Indian courts are notoriously slow paced.
Tatas' missed opportunity
In the late 1990s, Tata Iron and Steel Company, had decided to set up a five million tonne plant at Gopalpur in Orissa. That project never took off because the promised rail line from the ore mine in the interior to the port did not come up. It was unfortunate for Tata Steel's fortunes since the new plant was envisaged when steel prices were at the bottom end of the cycle and steel plant equipment were then available at rock bottom prices. If the plant had come up in time, Tata Steel would be reaping the advantages of the current high steel prices.
The biggest hurdle which POSCO can encounter and one which Orissa Government officials will try to gloss over is the opposition from NGOs and naxalite groups. Many of Orissa's mineral deposits are located in areas which are also the home of tribals who form 25 per cent of the State's population. In the early years after Independence, these tribals were innocent and it was relatively simple to coax and cajole them to give up their grazing and agricultural land for mines and industrial projects by offering some compensation.
The circumstances are vastly different today. Educated and organised by NGOs and radical groups, the tribals are longer ready to move out of their ancestral habitat.
Indian media tend to be sympathetic to their cause in reporting confrontation with State authority in eviction cases. This can, in turn, bring up embarrassing global attention.
In the last few years, naxalites have made considerable ingress into tribal areas and these insurgents are against mining and industry. The most famous case of a major project getting stalled in this manner is that of Utkal Alumina International Ltd. The company was promoted by a consortium comprising two large Indian companies and two multinationals to set up a one million tonne alumina refinery using Orissa's huge bauxite deposits.
The Orissa Government granted them a mining lease in 1993 but the project never took off. It ran into opposition from the tribals of the lease area.
There were violent demonstrations, police firing, court cases and the lot. Ultimately, one of the foreign companies and an Indian partner withdrew from the project, which is still languishing in the paper stage. Similar opposition has impacted other proposed bauxite mining projects in the State.
It will be interesting to see whether POSCO can negotiate through such quicksand considering the fact that the Chief Minister, Navin Patnaik, who has been quick to welcome the company, faces considerable opposition within his own party
Small steel companies dwarf sector majors in growth efficiency
A comparison of percentage growth in sales and operating profits for steel manufacturers in India and abroad shows that globally the bigger players have been more effective in growing while in India it is the smaller players who have grown more than the bigger players
The star performance this fiscal has been from Mittal Steel, whose sales has grown by 132%. Operating profit growth has been even more spectacular at 373%. It has close competition from global giant Arcelor whose operating profit has grown by 333%. For Arcelor, this comes even as sales increased by only 16%. Both of these giants are way ahead of other players. Globally it appears that size matters.
The trend is reversed when we look at the Indian industry. Here it is the smaller players who are leading in terms of growth. JVSL, with a 104% growth in net sales, is the only player giving company to Mittal Steel for the over 100% growth mark. Essar and Ispat have clocked twice the growth in sales as compared to SAIL and Tata Steel. The later have maintained their growth levels of the previous year.
However, these figures must be tempered with data on the absolute size of these firms. Among the foreign players, even a growth of 16% means Rs 22,500 crore. In India, a 104% sales growth for JVSL only equals Rs 3,000 crore. The foreign firms range from five to twenty times the size of our largest players. If we take SAIL, the largest Indian steel maker, and compare its sales to the rest of the field, Arcelor is almost five and a half times larger in sales, while Nippon is four times. Mittal comes in at 3.3 times SAIL
The nearest foreign comparison is Nucor which is 1.7 times SAILs size. In stark contrast the Indian players weigh in at almost one-fifth of SAIL. Tata Steel, the nearest competitor, is still less than half the size of SAIL.
The figures for operating profits are a better indicator for the performance of a player in a market. If we look at these figures, the leader is once again Mittal Steel, which has shown top performance in operating profit growth in the last two years. It leads with a four-fold increase in operating profits in FY05, while it was second only to Nippon last year with 85% growth.
Other players showing more than three fold increase in operating profits are Arcelor and Essar. However both of these have had negative growth in operating profits in the preceding year. Apart from these, the rest of the field shows that Indian firms have outperformed their global competitors this year.
Last year was a different scenario all together when Indian firms lagged behind the global majors in operating profit growth. In India, Essar leads operating profit growth with 311% growth in FY05. Ispat and SAIL follow with 203% and 185% growth in operating profit respectively.
However operating profit for SAIL is almost 10 times that for Ispat. JVSL registered a 182% growth in operating profit for the fiscal. Tata Steel clocked the lowest among them at 89% growth.
Pvt firms can get into lignite mining
The government has decided to break the monopoly of public sector Neyveli Lignite Corporation (NLC) in mining of lignite and open the doors for private sector entry.
The government last week issued orders for awarding the first lignite coal mine in the country to a private company for captive use. The Gurha (east) lignite block in Bikaner district of Rajasthan has been awarded to Marudhar Power for generating power in the state
In yet another decision, the Union coal ministry also decided to allocate two lignite blocks of Kharsalia II and Surka III in Gujarat to state government-owned Gujarat Power Corporation which is setting up a 375 mw capacity power plants at the two places
Hyderabad-based KSK Energy Ventures-promoted Marudhar would be setting up a 150 mw group captive power plant at Raneri in Rajathan at a cost of Rs 750 crore. Rajasthan has the second largest deposits of lignite after Tamil Nadu.
The mining lease has been granted for 30 years within which the block would produce about 40 million tonne lignite translating into a production of 1.33 mt annually
S Kishore, director, KSK Energy Ventures, told Business Standard that work on the first stage of plant for 75 mw would be completed in two years time while the second phase would be commissioned in the following six months. He said that the power plant would be developed with debt-equity ratio of 70:30.
Loans of about Rs 500 crore would come from banks and financial institutions. The parent company KSK would hold 37 per cent equity and KSK-controlled venture fund Small is Beautiful would put in another 26 per cent equity.
Another 33 per cent would be held by the power plants consumers including cement, steel and other metal companies. The company was in talks with foreign companies for a picking 11 per cent equity in the project.
Since,lignite in contrast to coal has a high sulphur content. Kishore said the company would be using circulating fluidised bed combustion technology for generating power
The technology would include mixing limestone with lignite in a boiler. Limestone with sulphur comes out as gypsum while the remaining product is used for power generation
Largest pipe mfg. project operational in Mahshahr
Steel pipes required to be used in Irans oil, gas and petrochemical projects, specially those needed for the giant project of transferring Irans natural gas to India via Pakistan, will be manufactured in a huge pipe making factory, recently commissioned in Mahshahr, a portal city in southwest Iran.
The mill, located in Mahshahr Special Economic Energy Zone will produce about 300 million dollars worth of steel pipes, the results of which would annually save a sum of about 45 million dollars for the country, Iranian Students News Agency (ISNA) quoted the factory managing director Sardarnia as saying.
He also said, This year, some 70,000 tons of pipes are planned to be produced in the plant, 45,000 tons of which are to be delivered to National Iranian Oil Company (NIOC) for its use in the 62.5kilometer steel pipeline with a diameter of 56 inches.
Baosteel Will Weather China Steel Glut
Early signs of a steel glut in China are starting to emerge, but the country's largest steel maker Baoshan Iron & Steel is likely to weather potential upcoming storms.
After three years of rising, a domestic steel price index compiled by China Iron & Steel Association, a barometer for steel prices, hit a high in March and has been sliding since, having lost about 14% from its peak. Analysts expect the index to continue sliding for the next two to three years as a result of overcapacity and weaker demand.
High steel prices and soaring demand in China have lured massive investments in recent years, and industry executives have been concerned the build up in steel mills would eventually drive prices down.
But glut isn't across the board. China still lacks high quality, technology and investment intensive steel, especially steel sheets used for cars and home appliances. That makes Baoshan Iron, which has been producing more and more high-end steel, an attractive investment, say analysts.
Slabs rain down in front of motorist
The gigantic cement slabs came down like a bolt of lightning and with a thunderous crash right in front of motorist Tan Chuin Boon. I couldn't see anything. My vision was blurred when the elevated interchange crashed onto the road, said the 23-year-old cellphone technician from Damansara, who instinctively swerved his car into a nearby emergency lane.
At about 1.50pm, as he neared the Meru Link flyover, where the ill-fated elevated interchange was under construction, it collapsed right in front of him.
Bandar Setia Alam Sdn Bhd, the developer of a housing area here, has been asked to do an immediate and thorough assessment of the NKVE-Jalan Meru portion following the collapse of one of its interchanges.
Malaysian Highway Authority deputy director-general Datuk Ghazali Md Nor said the collapsed portions of the interchange measuring almost 20m would be cleared immediately by the developer and Projek Lebuhraya Utara Selatan (PLUS) Bhd.
A thorough assessment will also be done to ascertain the stability of the remaining structures over the NKVE, said Ghazali, who came to the site. We will study why it failed. A bridge engineer will be called in to find out what actually happened. He said investigation on the disaster would be conducted immediately and a detailed report would be completed within three days.
The Public Works Department will take over the project after investigations are completed, he said, adding that he was sad that such a disaster could have happened. He said the project was due for completion this December
Ore juniors at full bore to cash in
FORECASTS of cooling iron ore prices do not seem to have dented the enthusiasm of Australia's emerging producers. Evidence keeps mounting that companies with iron ore deposits have thrown the exploration and development switch to full-ahead. They all want to get iron ore out of the ground while the price boom lasts - and, presumably, before any more big mines come into production. The industry is still digesting the surprise alliance a week ago between Rio Tinto and Hancock Prospecting to develop the huge Hope Downs deposits in the Pilbara.
Atlas Gold, which has tenements adjoining BHP Billiton in the Pilbara, was granted its licence just a month ago -- and started drilling on Thursday. Managing director David Flanagan said Atlas was going as fast as it could manage to prove up a mineable resource: "This is speed of light stuff."
Apart from Atlas, Polaris Metals, Gindalbie Metals and Murchison Metals have all gone public with bullish announcements about their plans. But analysts are now saying that prices should come off next year -- and that the Chinese will be wanting a bigger say in what they have to pay for iron ore.
UBS analyst Fleur Grose said the Chinese were unlikely next year to allow the Japanese steel mills to negotiate alone with the big suppliers, BHP Billiton, Rio Tinto and Brazil's CVRD. "We think they'll want to co-ordinate with the Japanese," she said. There have also been recent press reports that Chinese steel mills had been deferring inward shipments of iron ore although BHP and Rio have not seen any sign of slowing.
Goldman Sachs JB Were has revised its 2006 iron ore fines forecast down 10 per cent, with sharper falls for lump ore and pellets. The firm said steel mills around the world were cutting production in the face of falling steel prices and rising inventories.
Tyre shortage bogs miners down
PT Bumi Resources, Indonesia's largest coal exporter, plans to raise output 20 per cent a year through 2012 as Chinese demand for the fuel pushes world prices to records. That is, as soon as it can get tyres for its trucks.
"I've got the coal and the market is there," president director Ari Saptari Hudaya said in an interview in Jakarta. "But I have a big problem: we have the trucks but no tyres."
Miners worldwide, including Bumi and Rio Tinto, face shortages of the giant tyres as mine expansions outstrip supply from Bridgestone and other manufacturers.
The lack of the tyres, which can cost more than $US35,000 ($47,000) and weigh up to five tonnes, is slowing minerals output, adding to record prices of iron ore and metals, say investors.
Cops to quiz steel firm's clients
POLICE are preparing to interview every company on a Welsh steel firm's client list in connection with their probe into the firm. Dyfed Powys Police last night said it was at the start of a lengthy investigation of Dyfed Steels Ltd in Llanelli, South Wales.
Detectives visited the company's offices a fortnight ago as part of their inquiry into alleged irregularities in respect of quality certificates for steel products issued by the firm, claims strenuously denied by the company.
Officers will contact all of the company's customers, some of whom have built the Millennium Plaza multi-cinema and bar/restaurant complex, next to the Millennium Stadium, the new 27m 20,000-seater Morfa Stadium in Swansea and helicopter parts for the Ministry of Defence.
Police are looking into allegations that original impact steel test certificates were later falsified for upgraded "passes".
Air Liquide signs a partnership agreement to set up the largest air separation unit in Russia
Already one of the world's leading steel-producing countries, Russia is expected to play a major role in this sector. Its well-known competitiveness will allow its industry's main companies to significantly grow through both facility modernization and development outside Russia.
Air Liquide has just signed a major contract with Severstal, a leader in the Russian steel manufacturing and one of the most competitive steel producers worldwide after its acquisition of a controlling interest in Rouge Steel (US) and Lucchini (Europe).
The agreement provides for the creation of a joint venture, "ALS", in which Air Liquide will hold 75% and Severstal 25%. The joint venture is designed to set up and operate its own strong>air separation unit to meet the increasing requirements in oxygen of the strong>Cerepovetz site, located between Moscow and St Petersburg in the Vologda region.
This unit, which is to be designed and assembled at Cerepovetz by Air Liquide's engineering department is scheduled for commissioning in the summer of 2007. It will be the largest air separation unit in Russia and the largest in the world dedicated to steel production. With a capacity of 3,000 tonnes of oxygen a day, it will supply the steel mill with high purity, high-pressure oxygen, as well as nitrogen and argon. The total investment for the joint company, which is currently being financed, will amount to approximately 100 million euros
Russia Slips in Retail Rating
India has displaced Russia as the most attractive destination for overseas mass product and food retailers, consultant A.T. Kearney said in a report Friday.
The report, an annual study of the attractiveness of 30 emerging markets, attributed India's rise to a government proposal to allow foreign investment in the retail industry.
Russia, Ukraine and China followed India in the Global Retail Development Index, while Pakistan, Brazil, Indonesia and the Philippines were at the bottom of the list.
Work aplenty before coal mines can reopen
The NSW Government says there is still a long way to go before mining can resume at two Illawarra coal mines.
Indian company Gujaret NRG has expressed interest in reopening the Huntley and Avondale collieries for coking coal in India.The company has bought the West Bellambi mine at Russell Vale and is expected to resume mining at the end of the month.
The director of minerals development with the Primary Industries Department, Tony Callaghen, says exploration work needs to be done to determine the viability of the mines.
"They would have to do some exploration, they would have to look at closely the coal quality and then they would have to look at sites where [they] might be able to get in to get the coal out or even sites to get people in and out of a potential mine," he said
Basque steel industry announces major increases in 2004 steel production figures
Production at steel companies based in the Basque Country, excluding investees outside the region, totalled seven million tons in 2004, up 11.36 per cent on the 2003 figure.
The Basque industrys 2004 total accounted for 40 per cent of the 17.6 million tons the Spanish industry as a whole produced during the year.
The Arcelor steel group registered the biggest individual increase in heats, upping production 16.5 per cent to a total of 4.5 million tons, 64 per cent of the total produced in the region.
Sidenor Industrial also had an exceptional year, with tons produced up 9.5 per cent to nearly 650,000. Aiosa, the regions only stainless steel producer, came close to a figure of 100,000 tons, 7.8 per cent up on the previous years figure, while Tubos Reunidos joined in the fun with an increase of 6.7 per cent to 419,962 tons. Finally, Nervacero maintained its position as the second common steel producer with 1,155 million tons, up 1.85 per cent, despite a temporary shutdown at the steel mill. GSB registered the only reduction with production down 1.5 per cent, largely as a result of extensive maintenance work at its facilities in Azkoitia and Legazpia, in Gipuzkoa
XSTRATA - World beater
XSTRATA Coal, which has seven mines in the Hunter Valley, is officially the world's largest producer of export thermal coal and Singleton coal mines are making a significant contribution.
Xstrata Coal NSW chief operating officer Mick Buffier said overall the company was the world's second largest exporter of coal with 64 million tonnes per annum.
The top global exporter was BHPB particularly due to large coking coal exports out of Queensland. Xstrata Coal's largest customer was Japan with Malaysia, India, and Europe other customers.
Six myths about the benefits of foreign investment James Petras
There are several myths about foreign investment propounded by orthodox economists, publicists for multinational corporations (MNCs), which are repeated and widely circulated by mass media journalists and editorial writers:
[u]Myth #1 - Foreign Investment (FI) creates new enterprises, gains or expands markets and stimulates new research and development of local technological know-how.
[/u]
In fact most FI is directed toward buying privatized and profitable existing public enterprises and private firms, taking over existing markets and selling or renting technology designed and developed at the home office. Since the late 1980s over half of FI in Latin America was directed toward purchasing existing enterprises, usually at below market valuation. Instead of complementing local public or private capital, FI crowds out local capital and public initiative and undermines emerging technological research centers.
With regard to market expansion, the record is mixed: in some sectors where public enterprises were starved for funds, like telecommunications, the new foreign owners (NFO) may have expanded the number of users and enlarged the market. In other cases, like water, electricity and transportation, the NFOs have reduced the market, especially to low-income classes, by raising charges beyond the means of most consumers.
The experience with FI and technological transfers is largely negative: over 80% of research and development (R and D) is carried out in the main office. The transfers of technology is the rental or sale of techniques developed elsewhere, rather than local design. MNC usually charge subsidiaries excess royalty fees, service and management costs, to artificially or fraudulently lower profits and taxes to local governments.
[u]Myth #2 FI increases the export competitiveness of an industry, and stimulates the local economy via secondary and tertiary purchases and sales.[/u]
In reality FI buy up lucrative mineral resources and export them with little or no value added. Most of the minerals are converted into semi-finished or finished value added goods - processed, refined, manufactured - in home countries or elsewhere, creating jobs, diversified economies and skills. The privatization of the lucrative giant iron mine Vale del Doce in Brazil in the 1990s has led to huge profits for the new owners and the sale of raw ore overseas, particularly to China in the 21st century. China converts iron ore to steel for transport, machine industries and a host of job-generating metallurgical enterprises. In Bolivia, the privatization of the gas and petrol industry in the mid 1990s has led to billions in profits in the 21st century and the loss of hundreds of thousands of jobs in processing and conversion of petroleum and gas into value added goods. In addition the MNC export oil and gas failing to supply local low-income consumers. The extraction of raw materials is capital intensive using few workers. Processing and manufacture is more labor intensive and job creating.
[u] Myth # 3 Foreign investors provide tax revenue to bolster the local treasury and hard currency earnings to finance imports.
[/u]
The reality is FI engages in massive tax frauds, swindles in purchasing public enterprises, and large scale money laundering.
In May 2005, the Venezuelan government has announced massive billion-dollar tax evasion and fraud committed by major overseas petroleum companies who signed on to service contracts since the 1990s. The entire Russian petroleum and gas sector was literally stolen by a new class of billionaire robber oligarchs, associated with foreign investors, who subsequently evaded taxes. The trial and conviction of two oligarchs, Platon Lebedev and Mikhail Khodorkovsky for $29 billion tax evasion facilitated by US and European banks is illustrative.
The impact of the MNC on the balance of payments over the long run is negative. For example, most assembly plants in export zones import all their inputs, machinery, design and know-how and export the semi-finished or finished product. The resulting trade balance depends on the cost of the inputs relative to the value of exports. In many cases the imported components charged to the local economy are greater than the value added in the export zone. Secondly most of the revenues from the export platform accrue to the capitalists since the key to success is low wages leading to the creation of personal empires.
The Brazilian experience over the past decade and a half is illustrative of the negative external balances resulting from FI and external funded investment. In 2004 Brazil paid foreign bankers $46 billion (USD) in interest and principle while receiving only $16 billion dollars in new loans, leading to a net outflow of $30 billion dollars. (2) Between January and April 2005 Brazil was bled for $4.6 billion (USD) in interest payments, $3.7 billion in profit remittances by MNC, $1.7 billion for external services and $7.3 billion in payments of principle in the debt. (3) The total drain of $17.3 billion dollars far exceeded the positive commercial trade balance of $12.2 billion dollars. (4) In other words, the FI led export model led to new indebtedness to pay for the shortfall, the loss of employment by small and medium farmers at the mercy of the agro-business elites and the destruction of the environment.
[u]Myth #4 - Maintaining debt payments is essential to securing financial good standing in international markets and maintaining the integrity of the financial system. Both are crucial to sound development.
[/u]
The historical record reveals that incurring debt under dubious circumstances and paying back illegally contracted loans by non-representative governments jeopardized the long-term financial standing and integrity of the domestic financial system and led to a financial collapse. The Argentine experience between 1976-2001 is illustrative.
A substantial part of the public external and internal debt was illegally contracted and had little development utility. A lawsuit launched by an Argentine economist, Olmos, against payment of the Argentine foreign debt revealed that the foreign private debts of Citibank, First National Bank of Boston, Deutsch Bank, Chase Manhattan Bank and Bank of America were taken over by the Argentine government. (5) The same is true of debts of subsidiaries of overseas banks. The Olmos lawsuit also documented how the Argentine dictatorship and subsequent regimes borrowed to secure hard currency to facilitate capital flight in dollars. The foreign loans went directly to the Central Bank, which made the dollars available to the rich who recycled the dollars to their overseas accounts. Between 1978-1981 over $38 billion USD fled the country. Most of the foreign loans were used to finance the economic openings, luxury imports and non-productive goods, especially military equipment. The Olmos case pointed to a perverse source of greater indebtedness: the Argentine regime borrowed at high interest rates and then deposited the funds with the same lender banks at lower interest rates leaving a net loss of several billion dollars, added to the foreign debt.
[u]Myth # 5 Most Third World countries depend on FI to provide needed capital for development since local sources are not available or inadequate.
[/u]
Contrary to the opinion of most neo-liberal economists, most of what is called foreign investment is really foreign borrowing of national savings to buy local enterprises and finance investments. Foreign investors and MNCs secure overseas loans backed by local governments, or directly receive loans from local pension funds and banks drawing on the local deposits and worker pension payments. Recent reports on pension fund financing of US MNCs in Mexico shows that Banamex (purchased in the 21st century) secured a 28.9 billion peso (about $2.6 billion USD) loan, American Movil (Telcel) 13 billion pesos ($1.2 billion USD), Ford Motor (in long-term loans) (9.556 billion pesos) and one billion pesos (in short term loans), and General Motors (financial sector) received 6.555 billion pesos. (6) This pattern of foreign borrowing to take over local markets and productive facilities is common practice, dispelling the notion that foreign investors bring fresh capital into a country. Equally important it refutes the notion that Third World countries need FI because of capital scarcity. Invitations to FI divert local savings from local public and private investors, crowd out local borrowers and force them to seek informal money lenders charging higher interest rates. Instead of complementing local investors FI compete for local savings from a privileged position in the credit market, bringing to bear their greater (overseas) assets and political influence in securing loans from local lending agencies.
[u]Myth #6 The proponents of FI argue that the entry of FI serves as an anchor for attracting further investment and serves as a pole of development.
[/u]
Nothing could be further from the truth. The experiences of foreign-owned assembly plants in the Caribbean, Central America and Mexico speak to the great instability and insecurity with the emergence of new sources of cheaper labor in Asia, especially China and Viet Nam. Foreign investors are more likely than local manufacturers to relocate to new low-wage areas, creating a boom and bust economy. The practice of FI, in Mexico, the Caribbean and Central America, faced with competition from Asia is to relocate, not to upgrade technology and skills or to move up to quality products. Finally a long-term study of the impact of FI on development in India has found no correlation between growth and FI. (7)
Conclusion
Reliance on FI is a risky, costly and limiting development strategy. The benefits and costs are unevenly distributed between the sender and receiver of FI. In the larger historical picture it is not surprising that none of the early, late or latest developing countries put FI into the center of their development scheme. Neither the US, Germany and Japan in the 19th and 20th century, nor Russia, China, Korea and Taiwan in the 20th century depended on FI to advance their industrial and financial institutions. Given the disadvantages cited in the text, it is clear that the way ahead for developing countries is through minimizing FI and maximizing national ownership and investment of local financial resources, skills and enlarging and deepening local and overseas markets through a diversified economy.
Because the negative economic, social and political costs of FI are evident to increasing numbers of people in the Third World, particularly in Latin America, it is a major detonator of mass social movements, and even revolutionary struggles, as is the case in Bolivia during 2005. Since FI is a direct result of political decisions adopted at the highest level of government, mass social struggles are as much or even more so directed against the incumbent political regime responsible for promoting and mollycoddling FI. The increasing turn of social movements toward political struggles for state power is directly related to the increasing recognition that political power and
I are intimately connected. In the 21st century, at least in Latin America, all of the electoral regimes, which have been overthrown by popular majorities, had deep structural links to FI: Gutierrez in Ecuador, Sanchez de Losada and Mesa in Bolivia and Fujimori in Peru.
The leader with the greatest sustained support in Latin America, President Chavez in Venezuela, is precisely the only one who has increased regulations and taxes on FI and redistributed the increased revenues to the poor, working class and peasants. The question still remains whether this new infusion of energy and class awareness can go beyond defeating pro-FI regimes to constructing a state based on a broad alliance of class forces, which goes beyond nationalization and toward a socialist economy
