July, 14 2005
Dumping probe into China steel imports likely
Even as the recent rise in steel imports has resulted in a tug of war between primary steel makers and consumers, the commerce department has begun an investigation to ascertain whether the surge had hit the Indian steel industry below the belt.
Finished steel imports have risen by about 34% during April-June period of current fiscal (2005-06).
The ministry has written to the steel ministry, the customs department and the Indian Steel Alliance to provide it with relevant data on imports of steel. We are in the process of gathering information. We intend to suo motu initiate a dumping probe into such imports, provided there is a prima facie case of injury to domestic producers, said a senior commerce department official.
The official added that the concern was mainly about imports from China, which are said to be at very low prices.
Sources said that though the official line is that imports from CIS countries like Russia, Ukraine and also Iran have gone up, it is believed that the Chinese producers are diverting a part of their huge steel inventory at low prices to India.
The rise in imports has been despite Indian primary steel producers reducing prices twice this fiscal by about 18% or Rs 5,000 per tonne. The average price of HR coils in the country is hovering around Rs 22,000 to Rs 25,000 per tonne at present.
Meanwhile, primary and secondary steel producers in the country are at loggerhead over the issue.
The ISA, representing big steel producers, had shot off a missive to the steel ministry asking it to restore customs duty on steel to the earlier level of 20% from 5%, on the grounds that global steel prices have declined.
However, the Cold Rolled Steel Manufacturers Association has opposed any such move and has termed the softening of steel prices as mere correction as steel prices shot up by over 150% from $220 to $630 per million tonne in the past two years.
India-Pak pipeline to cost over $7-bn
The ambitious Iran-Pakistan-India gas pipeline is likely to cost upwards of $7 billion, 75 per cent more than previous estimate of $4.16-billion, mainly due to rise in steel price.
According to the latest estimate presented to the Indo-Pak Joint Working Group, which met here on July 12-13, the cost of laying 2100-km of pipeline from Assaluyah port in Iran (on Persian Gulf) to Indian border (Barmer district in Rajasthan), may be $7.42 billion to be spent over the construction period of five years.
The cost has also gone up on account of higher cost of acquisition of land for laying the pipeline in Iran and Pakistan with New Delhi suggesting that the pipeline pass through thickly populated areas to avoid sabotage, an official said.
A further increase in cost by 10 per cent would see the pipeline ending with an expenditure of $8.16 billion while a 10 per cent reduction in raw material cost would bring capital expenditure down to $6.67 billion.
"The previous estimate of $4.16-billion was made some years ago by BHP Bhiliton of Australia, which was engaged by Iran to do a pre-feasibility study of the pipeline. Steel prices have since nearly doubled," the official said.
New Delhi at the meeting suggested the Iranian state-run firm National Iranian Oil Co or National Iranian Gas Export Co own the gas till the delivery point at Pakistan and India border and the pipeline be either owned and operated by the same company or by a consortium of Iranian, Pakistan, Indian and international firms.
Alternatively, New Delhi suggested that India and Pakistan buy gas from NIOC/NIGEC at Assaluyah and move it through a pipeline operated by consortium of international/Indian and Pakistani firms, the official said.
However, Pakistani side said it was not open to NIGEC owning the gas in Pakistan.
"The Indian side insisted that the title of gas should be held by NIGEC through the entire length of 2100-km and delivery at India border should be made by NIGEC so that New Delhi's obligations remain with NIGEC alone," he said.
New Delhi also suggested consortiums for construction and operations of the pipeline - either NIGEC could do it or a consortium of NIGEC-GAIL India-Indian Oil Corp-Sui Gas of Pakistan. It could also be done by NIGEC and any other international company.
Sumeet Industries to set up a steel plant
Sumeet Industries Ltd on Wednesday said that, it has decided to set up a steel plant to manufacture MS Billets and TMT bar with installed capacity of 80000 ton per annum. This project will come at Kutch District in Gujarat where various government incentives are available such as 100% excise exemption for five years and 100% sales tax exemption for seven years.
Total projected capital investment in this project is about Rs385mn the same shall be financed by term loan of Rs255mn and the balance will be through raising capital and internal accruals. Term loan has already been tied up with the banker.
The Company has said that, it has commissioned polyester POY plant of installed capacity 12000 ton per annum with the capital investment of Rs300mn. So the total production capacity of Company has increased more than three fold from 3900 tons per annum to 10900 per annum.
The Company has further said that, it has installed a 2.5 MW coal based captive power plant for their own use, which will reduce company's power cost substantially.
Steel producers face dishonor by Chinese banks
Steel manufacturers exporting to China have reported that Chinese State-owned banks are going back on their Letter of Credit (LC) commitments.
Following, the recent decline in global steel prices. Chinese buyers are increasingly adopting the practice with support from their banks.
As a result, these companies are being forced to offer heavy discounts on the price that had been agreed upon at the time of entering into the contract.
It is being reported that China buyers are forcing Indian companies to renegotiate the price once the consignments reach Chinese ports. If the Indian exporter is reluctant to offer a discount and approaches the bank concerned to encash the LCs, they are being told that the LC is invalid.
A number of publicly listed steel companies have faced such a situation and have had no choice but to agree to the discount demanded. Otherwise, their consignment is at risk of being attached by the courts as the importer, Chinese State-owned Minmetal, raises other issues.
Steel plants faces administrative woe
SAILs Durgapur Steel Plant that is set to enhance capacity to 3m tons in phases by 2012 has also started facing certain administrative changes. At least four top executives of the plant have been directed to change their locations by the end of this year and the head of the DSPs main hospital has resigned.
The changes under the SAIL directive, however, are made to help DSP perform better towards a positive direction. The plant since last two years has been trying hard to ensure a positive net worth. The DSP presently has a capacity to produce 1.86m tons of crude steel. The plant according to the top officials, has been asked to route its entire production through the way of Continuous Casting to help the cost of production and improve the product mix.
DSP now has got 50 percent semis which according to the experts in the field is undesirable for a sustainable growth in the long run.
By 2012 as per the perspective plan, DSP is slated to enhance the percentage of finished component in the product mix to over 90 percent.
A senior DSP official said: DSP will have a fresh investment spell by SAIL worth Rs 2800 crore and the first steps towards this have already been taken with the work of Bloom Caster. The 0.85 m tones per annum Bloom Caster worth Rs 271 crore is being made by a Daneili Centro of Italy led consortium. He added, This is expected to be commissioned fully by March 2006. This will have a ladle furnace and a reheating furnace. The work is in the advanced stages.
Meanwhile the DSP has been facing lot of administrative difficulties which are feared to hit the projected sustained growth of the plant in the near future. The plant since two years has been facing severe unruly and audacious attitude by a section of workers backed by both the Citu and the Intuc time to time. The plant heads have failed to control the workers aggressive gestures and the executives have suffered assault which has got adverse effect on its work culture.
As stated by Mr Falguni Dawn, the Intuc secretary with DSP, the audacity in a section of workers irrespective of their trade union affiliations increased due to falling governance with the plant administration. We have never seen such a governance that remains indifferent against anything surrounding the plant sometimes which has hurt the moral of the general workers of the pant.
The plant remained indifferent in cases of rampant theft of articles from the plant side under the supervision of the CISF. The police nabbed the culprits but the DSP felt no courage to seek explanation from the security contingent. Everyday the plant incurs a loss of imported coal worth lakhs of rupees when the illegal operators loot sweeping the railway wagons indiscriminately. The company heads did not seek police assistance. The SP, Burdwan, Mr NK Singh said, The DSP never sought our cooperation. The material is owned by the DSP and we are not supposed to poke our nose unnecessarily especially when the owner of the consignments remain indifferent. The DSP officially has reserved comment in this regard.
On the other hand the SAIL board has cleared the selections after an interview in New Delhi. Mr VK Gulati, the executive director (personnel & administration) of the plant has been offered the post of the managing director replacing Mr SK Bhattacharya the present MD. He is going to retire from his services by the end of this year.
Mr Gulati was handed over the charge of the ED (PA) after Mr Nilotpal Roy was promoted to MD of SAILs new child the Indian Iron & Steel Company, Burnpur. The director, medical services with the DSP, Dr VR Ramanan incidentally has resigned from his services. His resignation was accepted two days ago. Dr S Kumar, the HOD of the steel hospitals ENT department has been asked take charges as officiating director. The DSP is yet to recruit a new director, medical services.
Jharkhand to set up steel park
Jharkhand has decided to set up a steel park to promote small and medium scale industries, the industry secretary said.
The park will come up in Chandil in Sarikela and Kharswa districts and is to be set up by the Jharkhand Industrial Infrastructure Development Corporation (JIIDCO). The decision was taken on Tuesday.
"The government will appoint a consultant to prepare the detailed project report of the steel park," said S.K. Sathpathy, the industry secretary.
The park is being set up to promote small and medium scale steel producing companies for better producing end products. It will have basic infrastructure like roads, water and power.
The Steel park plan assumes significance in light of steel companies showing interest in the state.
The state government has signed a Memorandum of Understanding (MoU) with Jindal Steel which will set up a 5 million tonne steel producing company in Chandil at the cost of Rs.115 billion.
Mittal Steel has also shown interest in setting up a 10 million tonne steel producing company in the state.
If the Jindal and Mittal companies set up their plants, Jharkhand will produce half of the country's steel.
Foreign companies banned from taking controlling steel stakes
China, the world's No 1 steel manufacturer and consumer, is expected to change the rules governing foreign investment in its fast-growing steel sector.
The nation will forbid foreign steel producers from taking controlling stakes in domestic steel companies, Qi Xiangdong, deputy secretary general of China Iron and Steel Association, said yesterday.
Foreign steel producers, if they want to invest in China's steel sector, must "have independent intellectual property in steel-making technologies and have an annual output of 10 million tons," Qi told China Daily.
These restrictions will be included in a national steel industry policy, which is to be released next week, he said.
They come as foreign steel giants are speeding up mergers and acquisitions (M&As) in China's steel industry, and even seeking majority stakes in domestic steel mills.
Mittal, the world's biggest steel group, will buy a 36.67 per cent stake in Valin Iron and Steel Co Ltd - a Shanghai-listed steel maker in Central China's Hunan Province, the Chinese company said last month.
The figure will be less than it previously intended.
In January, Mittal and Valin's State-owned parent agreed to each having a 37.17 per cent stake in the Shanghai-listed firm.
Arcelor, the world's No 2 steel company, has also been seeking a controlling stake in Laiwu Iron and Steel Co Ltd - a Shanghai-listed steel maker in East China's Shandong Province.
Both Valin and Laiwu are among China's top 20 steel makers.
Analysts said the expected steel policy indicates that the Chinese Government is unwilling to see foreign steel giants control the steel sector.
"The steel sector is one of backbones of China's steadily-growing economy. Therefore, it should not be controlled by foreigners ," said Tian Shuhua from China Galaxy Securities Co Ltd.
However, Tian said foreign steel giants still have many opportunities because China's steel sector and market will continue to grow rapidly, although they will be banned from having majority stakes in domestic steel mills.
"Foreign steel giants could also accelerate technical collaborations with Chinese partners," he added.
China produced 272.8 million tons of steel last year, up by 22.7 per cent from 2003.
The steel association predicted earlier that the nation's steel output will reach 300 million tons this year.
Qi said the expected steel policy will boost associations between Chinese steel makers in different regions through cross-shareholding and other measures to form bigger groups that will improve the fragmented sector's competitiveness.
Zhou Xizeng, from CITIC Securities Co Ltd, said, "The new steel policy also indicates that the government hopes to put China's steel sector in order, instead of letting foreign giants do it."
There were 871 steel producers in China by the end of last year, of which only 15 had an annual crude steel output of more than 5 million tons.
Shanghai Baoshan Iron and Steel Corp, China's biggest steel maker, only ranked No 6 in the world. The company now has an annual steel production capacity of more than 20 million tons, compared with Mittal's 58 million tons and Arcelor's 46 million tons.
Luo Bingsheng, another top official from the steel association, last month suggested that Chinese steel companies should form four to five bigger groups with an annual steel output of more than 30 million tons through M&As within the next two to three years.
Anshan Iron and Steel Corp and Benxi Iron and Steel Corp, another two Chinese steel heavyweights in Liaoning Province, are expected to merge to form a new group this month or later, said sources from the two companies. It should have a production capacity of more than 20 million tons.
China imported 13.2 million tons of steel products in the first half of this year, up 26.8 per cent from a year ago, according to Qi.
Meanwhile, the nation's steel exports surged by 154 per cent to 11.6 million tons.
China imported 133 million tons of iron ore in the period, up 34.3 per cent.
Evraz beats Mittal to Vitkovice Steel
The Czech government yesterday spurned a late counter-bid by Mittal Steel and confirmed Evraz Holding of Russia as the winner of the privatisation tender for Vitkovice Steel, the last big steel mill still in Czech state hands.
Evraz's winning bid of Kc7.05bn ($280m) for 99 per cent of Vitkovice is a success for the government, which was forced to renationalise the plant for Kc3.3bn three years ago. The sale marks the largest Russian investment in the former Soviet satellite.
Japanese stainless steel producers to cut output further
Major Japanese stainless steel producers plan to further cut production in the July-September quarter in a bid to keep prices from collapsing, the Nihon Keizai Shimbun reported without citing sources.
The companies will reduce production of thin sheet used in construction materials due to lower-than-expected demand from China and an influx of cheap products from other countries such as South Korea, the business daily said.
Nippon Steel & Sumikin Stainless Steel Corp, the largest stainless steel producer, plans to cut crude steel output by 20 pct by idling the blast furnace at its Hikari mill for 18 days during the September quarter, the Nikkei said.
Nisshin Steel Co, the second largest, will reduce output by 15 pct by halting the blast furnace at its Shunan mill for at least 10 days during the three months.
Similarly, Nippon Metal Industry Co will cut crude steel production by 30 pct, and Nippon Yakin Kogyo Co is also scaling back production.
Indian steel billionaire gives 2m to Labour Party
Lakshmi Mittal, the multi-billionaire steel magnate, has donated 2 million to the Labour Party.
The Indian-born tycoon, who is worth an estimated 14.8 billion, said he was impressed by Tony Blair's plans to improve education, health, employment, skills and technology.
Mr Mittal was at the centre of a political row in 2002 when it emerged that Mr Blair had, the previous year, sent a letter to the Romanian prime minister supporting Mr Mittal's takeover of the country's nationalised steel company.
The Prime Minister's letter was written two months after Mr Mittal had given a gift of 125,000 to Labour.
Mr Mittal always maintained that there was no connection between the donation and Mr Blair's letter, which was sent after the takeover deal had been agreed. Mr Mittal also insisted that it was a personal donation made after his company had entered negotiations with the Romanians.
Mr Blair said he had merely been preforming the normal duty of acting on behalf of a British business overseas.
Mr Mittal's latest donation is the biggest single contribution by an individual to Labour's coffers after Lord Sainsbury's gift of 2.5 million in March 2003.
Yanion plans US$600m steel plant
Yanion International, a Hong Kong-listed drug manufacturer turned steelmaker, plans to invest US$500 million (HK$3.9 billion) to US$600 million producing thick steel plates despite potential government measures to further curb growth in the industry.
The estimated annual production of the new plant will be 2.3 million tonnes and the company may sell bonds to fund it. The expansion plan is subject to government approval.
``We expect to start building the plant in mid-2006 and it will be finished by the end of 2007,'' said executive director Nathan Zhang after the company's special general meeting Wednesday.
Beijing enforced curbs to suppress growth in the steel sector last year to avoid oversupply and energy wastage and analysts expect further moves soon.
The National Development and Reform Commission said the unit fuel cost of steel production in China, which became a net importer of the metal last year, is 21 percent higher than the international standard.
China Metallurgical Industrial Planning and Research Institute vice president Li Xinchuang earlier said the government will release policy as early as next week aimed at consolidating the sector.
Citigroup expects ``Asian steel prices to remain weak in the second half due to China oversupply'' before becoming stable in 2006 as China slows production and exports.
Prices of contracted imported iron ore rose 71.5 percent, effective March, which has increased steelmakers' costs. Raw materials as a percentage of steel prices could rise from 40.5 percent to 58.9 percent in 2007, Citigroup said.
Yanion, which obtained shareholder approval to rename itself Yingkou Steel Rolling, also got the go-ahead to buy Guohua International Investment for HK$50 million in cash and 600 million new shares.
After the acquisition, the company will indirectly hold a 40.7 percent stake in Minmetals Yingkou Middle Plate Company which is 28.7 percent owned by state-backed Minmetals Development and China Minmetals.
The factory has an annual output capacity of 1.2 million tonnes of middle steel plates and one million tonnes of steel billets. Production of steel billets will double to two million tonnes by the end of this year, Zhang said.
The gross margin of these products, which averages 20-25 percent, will increase to 25-30 percent after the expansion, he said.
Demand of steel increases as GDP rate rises: Chairman EDB
Demand for steel has been increased due to rise in GDP rate and government has provided a conducive environment for the local as well foreign in this sector.
"Government has set a target of 15 million steel production by 2015 and private sector should come forward to avail the opportunities of investment in this steel sector" this was stated by chairman Engineering Development Board (EDB) Razak Dawoud , chairman CBR Abdullah Yousuf and other speakers in the 'workshop' held here on Tuesday.
Addressing a workshop, chairman EDP Razak Dawoud said that government had chalked out a comprehensive strategy to promote steel sector and opportunities for the investment in this regard.
He further said that Ministries of petroleum and Natural Resources and Industries and production were working in collaboration to carry out these policies." Private sector should come up to invest in this sector"he added.
He maintained that government had taken certain initiatives to safeguard the interests of local as well foreign investors and private sector could avail opportunities in the exploration of iron.
CBR chairman Abdullah Yousuf said that government had made amendments in tax system and fiscal regime to facilitate the investors and this would result in the restoration of confidence of investors.
He said that CBR would continue helping the investors and it could be contacted any time to seek the resolution of the problems.
Chief Executive Engineering Development Board Mumtaz Rastgar said that government had made a framework to batter the infrastructure and measures would be suggested to reach the market access.
He said that public-private partnership would result in enhancement of steel production to meet the set target and EDB had made a task force to explore the reserves of iron.
