July, 21 2005
SAIL Chairman predicts price firming up after September
The downward turn in steel prices is likely to be arrested by September and prices may firm up gradually thereafter, according to Steel Authority of India Ltd chairman VS Jain.
Speaking to FE on Wednesday, Mr Jain said the present downturn in prices was a mere correction which would stop by September, after which prices may firm up on the back of global steel consumption.
The outlook for the sector remains buoyant with the countrys GDP expected to grow 6-7%. The push in the manufacturing sector would help generate demand in the steel sector. Moreover a 4% growth in global steel consumption will bring about price stability in the domestic market, Mr Jain said.
Domestic steel prices have come down by over Rs 4,500 per tonne (around 16%) in June and July due to sharp decline in global steel prices to around $450-480 per tonne.
Mr Jain said prices of long products like billets have already started showing signs of recovery and once global steel inventory levels falls, prices in other category would also firm up.
On increasing steel imports that has risen by about 34% during the first quarter of current fiscal, the SAIL chairman said the government should put in place a trigger mechanism to automatically revise import duty based on global prices. When global prices are very low, import duty could be revised upwards and when prices are very high, duty could be brought down.
Primary steel producers had, in fact, approached the steel ministry to revise import duty upward from 5% to 20% to curb cheap imports. The proposal was, however, rejected by the ministry.
PSU bias likely, in allocation of ore under new policy
The new iron ore pricing policy being hammered out by the steel ministry will have a clear preference for public sector steel companies in terms of allocation of iron ore. It will, however, make no distinction between PSU and private sector steel producers regarding ore pricing.
The steel ministry is likely to finalise iron ore pricing guidelines within a fortnight after consulting with the board of directors of the National Mineral Development Corporation (NMDC).
The Ganeshan Committee, constituted by the steel ministry to recommend changes required in the present ore pricing policy, has suggested a quantity preference formula for PSU steel companies, while retaining universal market determined pricing formula for the entire steel sector.
Currently, iron ore pricing follows a complex formula. While, long-term contacts are priced benchmarking against international prices, companies adopt different methods (tender process, negotiation etc) to fix prices for short-term contacts.
Steel policy almost cast in iron
The National Steel Policy, which will be unveiled in a month, has already been sent to the cabinet for approval, steel ministry joint secretary J. P. Singh said.
The government started working on the policy in 2004 and a draft was formulated. The policy envisages a 110-million-tonne steel-making capacity in the country by 2020.
The policy will be published at a time when China is coming out with its own. The world will be keenly watching the policies from India and China two key steel markets with high growth potential.
Jharkhand emerges as hub for steel companies
If the interest shown by all the companies, big and small, in Jharkhand's iron ore deposits translates into reality, the state will produce more than half the total steel in India.
Among the many companies who have either inked memorandums of understanding (MoUs) or are keen in tapping the state' 2.9 billion tonnes of iron deposits are Jindal Steel Company, Essar Steel Company and steel baron L.N. Mittal.
Jindal Steel has already signed a MoU to set up a five million tonne per annum steel plant. Essar Steel, also in the picture with a five million tonne plant, has decided to double production with an Rs.140 billion investment.
If the proposals of the three biggies -- Essar, Mittal and Jindal - materialise, the state will produce 25 million tonnes of additional steel per annum. Taken with the four million tonnes each by Tata Steel and Bokaro Steel Plant, total production will shoot up to 33 million tonnes.
At present, India produces 34 million tonnes of steel per annum and Jharkhand's share is eight million tonnes.
Besides these three biggies, there are smaller companies as well who have signed MoUs. The government has also decided to set up a steel plant in Chandil area to promote small and medium scale industries
Gujarat NRE corrals SteelRX for e-com foray
Gujarat NRE Coke Ltd on Wednesday said that the group has acquired a Delhi-based steel and metals e-commerce company SteelRX Corporation.
The group has acquired SteelRX Corporation, which owns and operates portals such as www.steelrx.com, which act as neutral platform for buying and selling of steel and metal products, Gujarat NRE informed the Bombay Stock Exchange.
With this acquisition, the Gujarat NRE group has broadened its portfolio encompassing manufacturing and information technology business, it said.
"Gujarat NRE group is proud to venture into the e-commerce domain after establishing its mark in the coke and coal business. We have acquired mines in Australia, have plants in India and with an e-commerce company now in our portfolio the globe would be our horizon," said Mr Arun Kumar Jagatramka, Vice Chairman and Managing Director, Gujarat NRE Coke
Railways face a Rs 2,000-cr scrap dilemma
The railways have lost nearly Rs 2,000 crore waiting for Laloo Prasad Yadavs much-vaunted Chhapra factory which was to use recycled scrap to manufacture wheels to come up. It is also struggling to find ways of storing thousands of tonnes of metallic waste.
In his 2004-05 budget speech the Railway Minister had said one million tonnes of scrap that are generated each year would no longer be sold but recycled instead to make wheels at the Chhapra factory. The idea was to make the railways self-sufficient in the manufacture of wheels and restrict imports scrap is the main raw material used in making wheels. However, it will be another two years before the Chhapra factory starts functioning.
This was the perfect time for the railways to sell the scrap and get additional funds, an official said. With the country facing a steel shortage and the prices going up, the scrap from the replaced rails would have been useful, both for the railways and the country.
However, the Railway Board recently instructed all stores and production units not to sell scrap from rails and wagons as well as other good quality metal waste. Controllers of stores were told to create additional infrastructure for safekeeping large amounts of scrap.
Congress party protests POSCO deal
The opposition Congress party in Orissa today took to the streets here to oppose the state governments decision to hand over captive iron ore mining rights to South Koreas POSCO Co. Ltd, the worlds fifth largest steel maker.
Congress party activists, including women, held banners and placards, and shouted slogans against the Biju Janata Dal-led state government, which has the Hindu nationalist Bharatiya Janata Party as its junior partner.
It a loss more than (what) we will gain, much more. If they want to have a steel plant, it must be done at our terms. We will appreciate this. Not on their terms, said J.B.Patnaik, the president of the Congress party in Orissa.
Re-rolling mills to face reality
The Centre has asked secondary steel producers to be self-sufficient and stop clamouring for government interventions.
In a globalised environment, the industry should not expect the government to step in and tackle issues which they must sort out themselves, steel ministry joint secretary J.P. Singh said at the annual general meeting of the Re-Rolling Mills Association of India. Singh suggested that the secondary producers should look at alternative markets for survival. Pointing out that the industry was at a cross-roads, he said re-rollers should now look at niche products that were not serviced by the integrated primary steel players.
The industry should look at alloy steel products where value realisation is higher. The export market should also be explored, he said.
UCO Bank plans to hike exposure to steel sector
Kolkata-based UCO Bank is proposing to increase its exposure in steel sector with Orissa, Jharkhand, Chattisgarh and West Bengal are lining up steel projects.
We are going to the board with a proposal to increase the exposure in steel sector, said the UCO Bank chairman and managing director, V Sridar. He said that the exposure to steel sector is now 7.5% of the total advances of the bank. The UCO Bank board is meeting on July 30, 2005.
UCO Bank has an exposure of Rs 1700-crore in steel sector. The bank has financed several steel projects mostly in Orissa and West Bengal. Orissa alone has lined up investment to the tune of Rs 70,000 crore in steel sector besides Poscos Rs 52,000 crore steel project.
DSP Rail wheels rated best quality by TTCI, US
After a performance evaluation, the Transportation Technology Centre Incorporated has certified rail wheels prepared by the Durgapur Steel Plant amongst the best.
The DSP officially has claimed the wheels produced by the plant under went through detailed mechanical and simulated running tests conducted by TTCI, the US based international agency for testing components for the railway recently.
The TTCI remarked that the microstructure of the wheels has the right mixture of pearlite and ferrite with an exceptionally fine grain. They had further certified that the wheels steel exhibits an excellent micro cleanliness as compared to other wheels steels tested by the agency during the period.
The tensile property, hardness and fracture toughness are considered better by the TTCI comparing the contender wheels reached from different wheel manufacturers across the world.
The Wheel & Axle plant of DSP recorded 33 percent growth in terms of production and dispatch in 2004-05 fiscal. The plant succeeded dispatching 60,000 wheels to the Indian Railway
WB CM to meet Jindals on steel plant issue
West Bengal Chief minister Mr Buddhadeb Bhattacharjee and industries minister Mr Nirupam Sen will meet the Jindals on 30 July to resolve the impasse over setting up of a steel plant in Midnapore.
The state government is keen on the project that is going to come up at Guptamanipur in Midnapore district at an estimated cost ranging between Rs 10,000 and Rs 12,000 crore
Mr Biswadeep Gupta had met Mr Jindal recently in Mumbai and the latter had shown keen interest in setting up the steel plant. Even Mr Jindals bankers have cleared the proposal. But the project could not be started as the Jharkhand government has decided not to supply iron ore required for the project. Mr Jindals brother is going to meet the Jharkhand chief minister, Mr Arjun Munda, soon to resolve the impasse.
Maharashtra Seamless to benefit from oil sector growth
Maharashtra Seamless has announced its first quarter results. The company's Q1 net profit is up 44% at Rs 24.75 crore from Rs 17.22 crore. The Q1 total income is up 43% at Rs 203.47 crore from Rs 142.33 crore.
DP Jindal, Chairman, Maharashtra Seamless commented on the increase in margins. Jindal said, "Our margins have increased about 10% in this quarter. This quarter our operating profit is around 18% and as the oil sector is growing, internationally also the oil sector is very hot and we will benefit from that."
He added, "We hope that oil price will remain there, and people are projecting oil price as high as $100. The demand for pipes will be there."
On the $ 75 million FCCB issue and the money raised being used for expansions, Jindal said, "It is mainly for the steel plant which is coming in Orissa. We have already taken implementation actions. It will be mainly spent there." Jindal said that the company is projecting about 18 months to complete the Orissa plant.
Emergency Coal production plan from Coal Ministry
The Coal Ministry is putting together an emergency coal production plan, which envisages increasing coal production by 60 to 70 per cent this year and would seek the government's nod for the same.
"We are putting in place an emergency coal production plan which envisages increasing production to meet the growing demand of various sectors," Coal Secretary P C Parakh said while addressing a conference on Indian coal sector here on Wednesday. He said the Ministry was making due efforts to promote exploration of coal blocks and the state-owned CMPDIL has been advised to extend a five-year contract to private entrepreneurs who were willing to venture in such exploration.
Saying that the hue and cry on shortage of coal was unjust, Parakh argued that the said shortage was less than five per cent of the total demand.
"This is the situation all over the world but nowhere there is so hue and cry. Our industry should be able to meet it through imports," he said.
BJD backs Posco deal to the hilt
BJD on Tuesday came out strongly in favour of the State Governments MoU with South Korean major Posco for establishment of a steel plant at Paradip ahead of the State-wide agitation call given by Congress on Wednesday and alliance partner BJPs meeting on the issue on July 24.
Defending the provision in the MoU to recommend Special Economic Zone status to the project area by the State Government, Secretary General of BJD Damodar Rout said the proposed plant will create employment opportunities for thousands directly and indirectly.
Criticising BJP for opposing the deal even though its ministers are part of the decision-making process, Rout maintained that this violates the norms of alliance politics. The Congress stand on the Posco project is that of anti-development and against the interest of the State, he said.
He claimed that the State Governments decision to sign the MoU with Posco has been approved by the Congress-led UPA Government at the Centre.
The BJD leader said the Government has no control over the mining companies once the lease is granted and it is up to the company to either sell or export the ore.
Global steel output in 2005 may reach 1122 mil ton - MEPS
MEPSs expects that world crude steel production to expand by 6.8 percent this year - up by 76.5 million tonnes on the outturn in 2004.
This figure represents a decline in the rate of growth in output during the second half as demand from customers in many parts of the globe continues to decrease.
The inventory building phase is complete. We are now in a stock drawdown situation. Prices for most steel products have collapsed due to over supply. Further reductions are inevitable until supply and demand move nearer into balance.
At the five month stage, steel making in the world was up 8.2 percent, year on year. A number of mills have already announced action to curtail supply. Unfortunately, significant amounts of new capacity have come on stream recently. Steel producers are always reluctant to curb output just at the time they had planned to benefit from increased tonnage.
In the European Union, several major steel makers have made announcements of further cuts in production in the second half of the year. With these stated intentions, we have downgraded our forecast for total output in this year to 187.8 million tonnes - a reduction of 3 percent on the 2004 figure. Inventory building took place in both the flat and long products segments. We predict a decline in blastfurnace iron production from almost 111 million tonnes last year to just above 108 million tonnes in 2005.
Steel making in non-EU European nations is expected to reach almost 32 million tonnes in 2005 - less than one percent up on the figure in the previous twelve months. The main driver for this improvement is the Turkish steel sector. In many other countries modest decreases are anticipated.
Our forecast for this years steel output in the countries making up the former USSR is just below 112 million tonnes. This equates to a no change situation compared to 2004. The Russian steel sector is propping up supply from this region.
North American steel manufacturing is starting to slip. Customer demand is sluggish. The mini mills have short delivery lead times due to lack of orders, resulting from the excessive inventories built up by customers over the last nine months. The second half of this year will be a difficult time for the steel makers. We forecast total output for the year falling to around 130 million tonnes - down 3 million tonnes on the year earlier figure.
Steel output in South America is likely to move up by around 0.3 million tonnes (1.5 percent) this year compared to 2004. Export sales are weakening - particularly for semi-finished products. A small decrease in production is anticipated for the second half.
African steel production is forecast to rise to almost 18 million tonnes this year - up 7.5 percent on the 2004 outturn. The second half is likely to be less buoyant than the first as those countries dependent upon exports find markets more difficult to secure. The year on year gains at the five month stage were 10.6 percent.
Steel output in the middle East should expand to 15.5 million tonnes in 2005. This equates to an increase of 8.7 percent year on year. Most of the growth is based on higher local demand.
Asian steel production is likely to reach, almost 573 million tonnes this year. This represents almost 47 percent of global output and will have grown by 77 million tonnes in 2005 (15.5 percent). This is mainly the result of higher production in China.
Krivorozhstal privatization court decision ruled illegal
The Kiev Court of Appeals ruled that the Pechersky district court's decision on the privatization of Krivorozhstal was illegal Wednesday.
Krivorozhstal is Ukraine's largest metal producer, owning 20% of the market. The enterprise's annual production capacity is over 6 million metric tons of rolled metal, over 7 million tons of steel, and more than 7.8 million tons of cast iron.
Ukrainian President Viktor Yushchenko and Prime Minister Yulia Timoshenko repeatedly said Krivorozhstal had been sold illegally and at an undervalued price.
Kiev's Pechersky district court ruled April 21 that Krivorozhstal's privatization by the Investitsionno-Metallurgichesky Soyuz consortium was legal, thus reversing its decision of February 17 on the unlawfulness of the sale of 93% of the enterprise's shares.
Kiev's economic court ruled April 22 that Ukraine's State Property Fund had illegally sold the company's shares.
The Ukrainian Cabinet and an industrial consortium sued the Property Fund.
The auction to sell 93% of Krivorozhstal shares at a starting price of about $715 million was announced May 12, 2004.
The State Property Fund sold the Krivorozhstal shares to Investitsionno-Metallurgichesky Soyuz for about $800 million.
China's Steel Output to Exceed 300 Mln Tons
China's steel output this year is expected to top 300 million tons, according to government officials.
They say that China has become the world's largest steel producer, as a result of better equipment. The growing competitiveness of steel companies has contributed to a stable and healthy economy.
The Chinese government will issue relevant laws to regulate the steel industry, in a bid for greater international competitiveness
EU approves restructuring business plan of Mittal Steel Poland
The European Commission said it has approved a business plan detailing the restructuring of metal giant Mittal Steel Company NV's operations in Poland.
After privatisation in 2004, the company revised its business plan on the basis that there would be no production capacity increase and that it would not receive further aid. It subsequently notified the commission of the changes to the plan in April this year.
The company was restructured with state aid payments worth 750 mln eur made between 1997 and 2003. Under a special protocol, the commission authorised Poland to grant state aid to eight steel companies. In exchange, Poland committed to reduce production capacity by more than 1 million tonnes.
This is the second time the commission has taken a decision accepting a modification of the ongoing steel restructuring in new member states.
The first decision concerned Czech steel producer Valcovny Plechu Frydek-Mistek.
China finalises new steel policy, global majors to gain
CHINA detailed plans on Wednesday to force consolidation among its hundreds of steel firms, nurturing a few domestic producers to compete globally while barring foreigners from controlling stakes in domestic mills.
The blueprint will grant only the largest global players access to the domestic steel industry, while calling for 10 of Chinas biggest mills to produce half of national output by 10, according to the maiden policy plan announced by the National Development & Reform Commission. That same year, the policy provides for two steel makers to control annual capacity of over 30mt each versus Germanys yearly output of about 45mt while others would each have capacity of over 10mt.
No Chinese mill now boasts that kind of capacity, though domestic Baosteel comes close, with annual capacity pegged at 25mt this year.
The restructuring blueprint comes as rapidly expanding output capacity in China has outstripped slowing domestic demand growth, contributing to a more than 30% drop in prices of some grades from their peaks.
Beijings intention is to force closures and mergers in an industry populated by more than 800 mills, of which the five biggest command a third of total output. The government will encourage some big companies to compete with international mills, Luo Bingsheng, vice chairman of the China Iron & Steel Association, said. Small mills with lower-grade technology and high pollution would either be squeezed out or merged, he added.
China will allow only the worlds largest players into its steel industry but will prevent them from controlling any mill. According to the blueprint.Only foreign mills that had produced more than 10mt of steel or 1mt of high-alloy steel in the previous year will be allowed to set up China ventures or buy stakes in domestic plants.
In principle, we will not allow foreign companies to control Chinas steel mills, the policy reads.
This blueprint may chill efforts by global giants such as Arcelor, which are trying to make inroads into the worlds top steel-producing and consuming country. All would have to vie with Baosteel, Angang Iron & Steel Group and Wuhan Iron & Steel.
Steel output shines 20% in Asia, but dulls globally
THE latest data for June 05 from International Iron & Steel Institute shows that steel production growth is getting concentrated in Asia while the rest of the world shows a decline in steel output. Most of the steel producing regions of the world have shown a reduction in steel production compared to last year while it has grown by nearly 20% in Asia.
This is mainly fuelled by Chinese growth that shows no signs of stopping or even slowing down. The figures show that China has actually accelerated over the last quarter.
World steel output grew by 5% in June 05 and 8% during the quarter. If we compare, for the Indian steel industry, the first quarter of FY06 with the corresponding quarter last year, we find that production has grown by 17% over Q1 FY05. During June 05, Indias output grew 13%.
A look at major geographical regions reveals that production is shifting to the Asian economies from the more developed regions of the world. The production cuts announced by major producers are showing in the production figures for the world.
Europe shows a drop of 4% over the year. Even CIS region shows a drop of 0.7% in production. In US, output has dropped by more than 5% compared to last year. In Brazil, which produced nearly the same amount as India, output has dropped by almost 2%.
A comparison of the major producer regions of the world, shows that only Asia has displayed strong growth over the last quarter on a YoY basis. This is on account of China. China bucks the global trends by continuing to grow at a breakneck speed over the rest of the world.
It has grown at 32% in the first quarter of FY06 over the corresponding quarter last year. This is equal to a 12% growth over the last quarter of FY05. Growth in China has accelerated over the last quarter. It has shored up the growth figures for the entire world.
This shifting of manufacturing to Asia might be attributable to the decision of large steel companies like Arcelor and Mittal Steel to reduce steel production in a bid to clear the western markets of excess inventory which is believed to have effected a weakening in steel prices.
Chinese Mills fight iron ore prices
Chinese major steel mills are still delaying iron ore cargoes from Australia and Brazil while buying more from other countries in an attempt to win price cuts from the world's top miners.
Shipping and steel officials and traders said the mills were desperate to reduce production costs as there was little hope for a strong rebound in domestic steel prices in China, because of overcapacity following explosive expansion in the sector.
From big miners, they are trying to delay and they are trying to get small cargoes,'' said a senior official at a major Chinese shipping company.
They are trying to press the shippers. Maybe they can force them to reduce prices for next year ... They are trying to get some cargoes from other places like India or the Black Sea or Mid-America.''
China, the world's top steel producer and consumer, imports huge quantities of iron ore from the world's top miners in Australia and Brazil, such as Rio Tinto, CVRD and BHP Billiton. The surging demand from China, whose economy has been growing faster than 9 percent a year, helped the miners win a price rise of 71.5 percent for 2005 term contracts in February.
In Beijing, a leading industry official said Chinese iron ore imports would slow in the second half of this year because of high stocks and slower growth of steel production.
Mittal's Bad Bets
In so many words, Peter Morici, a professor of logistics, business and public policy at the University of Maryland's Smith School of Business in College Park, says Mittal Steel is making a bad bet about the future of the steel industry.
"I don't think that further consolidation and globalization are essential to its existence," asserts Morici, a former director of the office of economics at the U.S. International Trade Commission. "It was never the case that a country had to have a steel mill or a national airline. It was just that governments behaved that way-and continue to."
For example, he says as the European Union has expanded eastward to include such countries as Romania, it's not scrapping steel production but working to make it more efficient. "They are talking about continuing steel production." At the same time, "the Chinese subsidize their steel production in a variety of ways and are expanding it at a pace that will inevitably lead to global excess capacity," he says.
"The real issue with adequate competition in the steel industry-efficiency driving competition-is going to be government intervention in terms of unfair business practices and subsidies. There is nothing fundamental to the making of steel that requires that there be very few players," says Morici.
And he also believes Mittal is wrong about China. "We are going to see changes in the composition of steel that China makes as well as the quantity," predicts Morici. "We're going to see China becoming part of the global market as an exporter. And given its sheer scale and the fact that prices don't drive decisions in China the way they do in other places, I am quite fearful that China is going to be dumping steel, selling subsidized steel abroad, and disrupting global markets." How soon? "Certainly over the next five years China poses a threat to the stability of global markets."
Rio at record ore output
Rio Tintos production of iron ore hit record levels in the past three months as it cashed in on soaring demand from China for steel.
"Demand was strong from all markets throughout the first half of the year and production was at record levels," Rio Tinto said in its June quarter report.
Rios Hamersley iron ore operation in West Australia produced and shipped record amounts to meet the demand from Asian steel makers selling into China.
Second-quarter iron ore output totalled 32.2m tonnes, up 15% from a year ago, Rio said.
China's 9.5 percent Q2 growth beats forecasts
China's economy showed unexpected strength in the second quarter as industrial output and investment remained robust despite government attempts to engineer a slowdown.
China's gross domestic product in the second quarter grew 9.5 percent from a year earlier, above market estimates for a 9.3 percent rise. It was the eighth straight quarter of annual growth over 9 percent.
Many economists, pointing to falling oil demand and weaker steel and property prices, had expected a moderate slowdown in growth for the second quarter and the rest of the year.
Severstal Invests $180M In Dearborn Steel Plant
Severstal North America says it plans to modernize the sprawling former Rouge steel plant it purchased last year.
The plan is part of a more than $500-million investment the Russian steel firm plans to make in the plant between now and the end of the decade. The company says the investments mean that the plant, first created by Henry Ford to supply his neighboring Model T factory, will be making steel for decades to come.
The company says its first step will be to invest more than $180 million to add capabilities to improve furnace productivity, efficiency and reliability and significantly reduce particulate emissions associated with the iron making process in its Dearborn-based steel making operations.
OMZ Selected to Supply Blast Furnace Casing to Severstal
Uralmash-Izhora Group OMZ has signed an agreement for the supply of a casing for steel producer Severstals blast furnace No. 5.
The casing is to be produced by Machinery Manufacturing Services (MMEQ), a division of OMZ. The value of the contract is more than US$6 million. Work will be carried out between October 2005 to February 2006.
The contract is the result of a tender held in May-June. OMZ won the tender based in part on its experience producing a casing for Severstal blast furnace No. 4. This work was completed early this year.
In March 2006 Severstal will halt blast furnace No. 5 for major repairs and reconstruction. Severstal plans to invest US$83 million into technical re-equipment of the furnace. All these activities are aimed at providing 10 years of failure-free furnace operation. The improvements will also raise capacity to around 4 million tons from the current 3.8 million tons.
Engineering for the new casing will be done by LENGIPROMEZ Research-and-Production Association and Danieli & C. Officene Mecaniche S.p.A., both of which also participated in the furnance No. 4 upgrade
Slight progress seen at Vidor mill for worker settlement
After two consecutive days of meetings, it appears that the steelworkers' union and Gerdau Ameristeel management are making some headway in discussions to resolve the lockout as each group has made small concessions, according to both parties.
Members of the United Steelworkers of America Local 8586 have been locked out of the Vidor steel mill since May 26 leaving 270 union members out of work.
The mill has ceased recycling operations since management locked out members after months of negotiations without a contract.
Gerdau Ameristeel gave its final offer to the union on May 9.
Both sides met briefly last week and made no progress but since then, both sides are negotiating better. The two sides are next scheduled to meet the first week of August
Fires go out in SAs ferrochrome furnaces
SAs major ferrochrome producers, which together account for a substantial share of world production, recently announced the closure of 14 furnaces, a move that will result in their production being cut 5%-10% this year.
The closures are partly in response to current weaker prices. But in the longer term they are planning to increase their production capacity.
Assmang will shut three furnaces at Machadodorp to reduce its production by 20000 tons. Samancor is cutting production by 60000 tons. The Xstrata-Merafe joint venture is shutting seven furnaces temporarily for maintenance work during winter, but will bring five furnaces back on stream after winter. to reduce output by 78000 tons this year
Last year, ferrochrome prices soared as a result of the strong demand, especially from China, which grew stainless steel melt by 24%
A local analyst says there are a number of reasons for the recent weakening of the ferrochrome price and he expects that it will not recover for several months. Stainless steel producers in Korea, Taiwan and Japan have announced cutbacks
Ferrochrome competes with stainless steel scrap, too, which is cheaper for producers to buy and use than ferrochrome.
Vietnams company begins producing CR products
The Phu My rolled-steel company in southern Ba RiaVung Tau province has since early this month produced cold-rolled steel products for the domestic market to gradually replace imported products.
With a total investment capital of 129 million USD, the company will initially produce and supply to the domestic market around 205,000 tonnes of cold-rolled steel each year, and will increase its output to 405,000 tonnes in 2007.
The company's rolled steel products are materials for the production and assembly of automobiles, motorbikes and household electric appliances, including air conditioners and refrigerators.
CVRD eyes venture with Aquila and AMCI
One of the world's biggest miners is considering making a Belvedere hard coking coal project in Queensland as its first venture in Australia.
Aquila and AMCI are partners in several Queensland coal projects and an iron ore venture in Western Australia. Belvedere, which is believed to contain 2.7 billion tonnes of hard coking coal, could potentially be brought into production amid continuing strong demand, particularly from China.
CVRD will bear the costs of the expected 18-month study with a view to taking a 51 per cent stake in the project for an additional fee of $A60 million.
CVRD will have an option to acquire 100 per cent of Belvedere in future.
Russia ups iron ore production 1.5% in H1
Russian commodity iron ore production grew 1.5% year-on-year to 48.44 million tonnes in the first half of 2005, Rudprom, the agency that collates statistics about ore producers, told Interfax.
Russia produced 2.94 million tonnes of sinter, up 4.7%; 46.43 million tonnes of iron ore concentrate, up 4%; and 17.93 million tonnes of pellets, an increase of 4.3%, Rudprom said.
Output grew by 4.7% at the Lebedinsky GOK mine and by 9.1% at Karelsky Okatysh, while production fell by 5.1% at Mikhailovsky GOK and by 7.3% at Stoilensky GOK.
CIS producers Russia, Ukraine and Kazakhstan raised commodity iron ore output 3.4% to 91.93 million tonnes in the half. Production grew 6.5% to 34.33 million tonnes in Ukraine and 2.3% to 9.16 million tonnes in Kazakhstan.
Hiccup for Kumba's iron ore
Mining group Kumba Resources on Wednesday announced that iron ore exports at Saldanha Bay had been halted following a breakdown of a ship loader operated by the South African Port Operations.
Investigations and repairs by SAPO and the contractor were underway and indications were that the ship loader, which was commissioned in July 2004, would resume operations by the weekend, Kumba said in a statement.
"The breakdown will delay Kumba's iron ore export programme but trains from our Sishen mine remain fully operational and will continue to feed the Saldanha Bay stockpiles until the ship loader is back in operation.
"We will endeavour to fulfill our overseas contractual commitments for the 2005/06 iron ore year," general manager of Kumba's iron ore division Matie von Wielligh said.
BHP Billiton to Formally Sign Iron Ore Agreement With JFE Steel
BHP Billiton, the world's biggest mining company, will today formally sign a long-term agreement to sell iron ore to JFE Steel Corp., Japan's second-largest steelmaker.
The agreement, which was initially announced last August, includes Tokyo-based JFE taking a stake in part of BHP Billiton's Yandi mine in Western Australia. The sales accord may be worth $6 billion at current prices, the West Australian reported today.
JFE Steel said last year it agreed to buy 16 million tons of iron ore a year from BHP Billiton over 11 years.
Privatisation of Pakistan Steel Mills moves ahead
The Privatisation Commission (PC) initiated the formal process for the privatisation of Pakistan Steel Mills Corporation (PSMC)
The meeting reviewed the transaction structure and other steps regarding the Privatisation process of PSMC and decided to ensure the timely completion of the transaction as already targeted by December 31, 2005.
The government has decided to privatise PSMC by offering 51 % to 74 % equity stake with management control to a strategic investor through a transparent and competitive process.
It is inline with the government's endeavor to promote the development and modernization of the steel sector through liberalization, deregulation and private sector participation.
PSMC is a wholly owned GoP company located 40 km south east of Karachi at Bin Qasim. PSMC commenced commercial operations in various phases from 1981 through 1985. The company has a total workforce of approximately 13200 with a production capacity of 1.1 million tones of steel per annum. With a vast total area of 18,600 acres, there is considerable room for expansion.
China's Demand for Steel Slows, but the Mills Keep Churning
Less than a year ago, the world's steel producers were scrambling to feed China's voracious demand for a metal that formed the backbone of its rapidly expanding economy. Today, the excess of the good days is catching up: The world is facing a surfeit of steel as demand from Asia's most populous nation, and in slowing economies elsewhere in the world, cools off, triggering an extended decline in prices, fears of a long-term glut and the possibility that China will move further toward becoming a net exporter of steel in coming years. That in turn could strain relations further with China's big trading partners: the United States and the European Union, which were up in arms this year already over a surge in Chinese textile exports.
China's soaring demand for steel has shaped the global market in recent years, causing prices to more than double to a peak of $700 a ton in August 2004 from $300 in January 2003.
But huge increases in steel output, especially from Chinese producers, combined with sagging growth in global demand has sent prices plunging about 40 percent from their highs. European steel makers including Arcelor, Mittal Steel and ThyssenKrupp have already cut production, while Asian producers including JFE Steel of Japan are considering production curbs. Posco, the biggest producer in South Korea, said in June that it would cut stainless steel output and reduce prices for its basic steel products. China, by far the biggest producer, is expected to announce a plan Wednesday to consolidate its vast but fragmented steel industry in a bid to curb output. "We are certainly not bullish on steel," said Robert Clifford of ABN AMRO in Melbourne. "We think steel production is going to exceed demand and prices will continue falling." Government efforts to cool the superheated real estate and construction industries have already begun to curb demand in China, the biggest steel market, where construction accounts for 67 percent of consumption, according to calculations by Baosteel, the biggest Chinese producer. Yet China is not slowing production in tandem, leading to a buildup of excess steel stocks. The Australian Bureau of Agriculture and Resource Economics, or Abare, forecasts that slower expansion in countries in the Organization for Economic Cooperation and Development will trigger a decline in world steel consumption over the next two years after growth reached 7 percent in 2004. The Chinese government forecasts a domestic steel surplus of more than 40 million tons for 2005.
China's steel output will increase by 44 million tons this year to 316 million tons before increasing further to 348 million tons in 2006, Abare forecasts, picking up an already robust pace that is likely to turn China into a net exporter in coming years. That would mark a sharp turnaround from 2004, when China was the biggest steel importer, taking delivery of more than 37 million tons. Chinese steel output for June swelled by 33 percent a year earlier to 28.5 million tons, according to recent estimates from the Brussels-based International Iron and Steel Institute, while total steel production in the country for the first six months of 2005 jumped 28.3 percent to 164.9 million tons. Outside of China, total global steel output rose in the first six months of the year by six-tenths of a percent, to 381.5 million tons. Lower steel prices are taking their toll. In May alone, the price of hot-rolled coil, a basic product of steel mills, imported to China plunged by as much as 33 percent to $482 a ton, according to a recent report posted on the Web by the China Iron and Steel Association, while benchmark steel prices in June declined in Europe by 22 percent. According to Abare, China has already become a net exporter of crude steel, with shipments reaching about 1.8 million tons over the first four months of 2005. This is a sharp turnaround from 2004, when China was the biggest steel importer, taking delivery of more than 37 million tons. If China continues to export its surplus output, industry analysts fear a further downward pressure on prices. "The question is, how much surplus capacity will the government allow to be exported?" asked Mike Komesaroff, managing director of Urandaline Investments, a consultancy based in Queensland, Australia, specializing in Chinese minerals and metals industries. There has been no official statement indicating that the Chinese authorities will attempt to curb exports. Trade analysts say, though, that Beijing's decision in June to restore a 17 percent tax on steel exports was an attempt to head off further international trade tensions with the United States and Europe. Industry analysts also say that one of the government's objectives in the pending industry consolidation will be to bring steel output back in line with demand and to reduce pressure on steel makers to find foreign markets. Under the consolidation plan, Beijing is expected to force some of the more than 800 steel mills in China to close or to merge with bigger, more efficient plants. Senior Chinese steel industry executives say the government will also ban foreigners from holding controlling stakes in Chinese mills.
Iron mining project gets Vietnams Govt approval
The Government has approved a pre-feasibility project to exploit the countrys largest iron ore deposit in the central province of Ha Tinh, the Ministry of Industry has said.
The Thach Khe iron ore deposit, also considered one of the largest reserves in Southeast Asia, is estimated to hold about 544 million tonnes of ore with a 60 per cent iron content, the ministry said.
The ministry, also the major investor in the project, will use the open-pit method in order to ensure safety of workers involved in the mining process, due to the 500-ha site being located close to the seashore.
The ministry said it will assign the Viet Nam Steel Corporation (VSC), one of its affiliates, to be responsible for attracting local and foreign investment, which is estimated to reach US$350 million.
Meanwhile, VSC, the countrys largest steel maker, will be required to hold a controlling stake of at least 51 per cent once it teams up with foreign partners.
In a separate development, South Korea steel maker Sun Steel is considering investing $80 million in the Thach Khe project, the Viet Nam Steel Association said earlier this month.
Penn Virginia acquires Illinois Basin Coal
Penn Virginia Resource Partners, L. P. today announced the acquisition of approximately 95 million tons of coal reserves from a private seller, for $62.3 million of cash.
The coal reserve acquisition is PVR's first in the Illinois Basin and was funded using the Partnership's recently expanded credit facility.
The acquisition is located on 56,000 acres along the Green River in Henderson County, Kentucky. Current operations on the property consist of approximately 45 million tons of coal reserves leased to affiliates of Peabody Energy.
