July, 05 2005
Essar to set up 3.2MT steel plant in Bastar
Essar Steel in on an expansion spree. Within weeks of announcing a 4 million tonne steel plant in Orissa, the group has drawn up plans to set up a 3.5 million tonne (MT) plant in Chhattisgarh at an investment of up to Rs 4,000 crore.
Essar Global, an arm of Ruia's Essar Group, will sign the memorandum of understanding with the chhattisgarh government tomorrow, company sources said.
The plant would be set up in Bastar district in two phases of 1.6 million tonne each and the final project proposal would be submitted to the Raman Singh government within three months of the signing of the MoU, sources said.
The company has been assured of full quantity of iron ore from the Bastar region known for its quality iron ore, they said.
According to sources, the project would be put on the fast-track and the state government has assured that it would be dealt on a priority basis.
It may be recalled that tata steel had already clinched a deal with the Chhattisgarh government for setting up a 5 MT integrated greenfield steel plant in the state.
Essar has a 3.3 million tonne steel plant in Hazira, where the capacity would be expanded to 4.5 million tonnes by next year
Gujarat NRE buys third Aussie mine
Gujarat NRE Coke Ltd, the largest non-captive metallurgical coke manufacturer in the country, has bought a coal mine in Australia, its third acquisition there in the last six months.
The company has taken on lease the entire old Avondale Colliery and part of Huntley Colliery in the Southern Coalfields of New South Wales, Australia.
Gujarat NRE Coke (GNCL) will spend Australian dollar 80 million for the acquisition and development of mines, which have recoverable reserves to the tune of 96 million tonnes (mt).
Arun Jagatramka, vice-chairman and managing director of GNCL, said the strategic investment would strengthen the companys position in the Southern Coalfields.
The coalfield is known for producing high quality hard coking coal. The investment makes sense as the colliery is close to the NRE No. 1 Colliery and the company can exploit the benefits of owning two collieries nearby, he added.
GNCL will produce 1.5 mt of coal from these mines, named NRE No. 2 Colliery.
The NRE 1 Colliery, acquired in December, will start production this month at 1 mt per annum, which will be later scaled up to 2 mt.
By early 2007, GNCL will have access to total 3.5 mt coal from Australia. Of this, 2 mt will be hard coking coal.
The entire volume will be shipped to India to produce 1.4 mt metallurgical coke at the companys two plants in Gujarat and Karnataka.
The Australian buy will make GNCL self-sufficient in raw material supply.
The acquisition was done through GNCLs Australian joint venture company, Gujarat NRE FCGL Pty Ltd. It is, however, subject to ministerial approval.
The company will fund the project through the foreign currency convertible bond issue that has raised $50 million.
Last month, GNCL had bought a 30 per cent stake in an Australian mining company with licence in exploring iron ore and other base metals.
GNCL is the first Indian company to acquire any iron ore mines abroad, ahead of integrated steel makers like Tata Steel or the Steel Authority of India Ltd.
Ernst & Youngs mergers and acquisitions division has acted as lead corporate finance advisors and Corrs Chambers Westgarth as legal advisors to the company.
GNCLs stock rose 0.98 per cent or Rs 1.20 to close at Rs 124.10 on the National Stock Exchange today with 161,85,82 shares being traded.
JSPL proposes to increase production capacity
The Jindal Steel & Power Limited today submitted a revised proposal to raise the production capacity of its proposed steel plant from 2 million tonnes to 6 million tonnes and shift its location to Angul district from Keonjhar district.
A proposal to this effect was given to the state government during the meeting between chief minister, Mr Naveen Patnaik and executive vice chairman of Jindal Steel & Power, Mr Naveen Jindal at the state secretariat here today.
During the course of the day, he had also discussed the matter with steel & mines minister, Mr Padmanav Behera and chief secretary, Dr Subas Pani. Steel & mines minister, Mr Behera confirmed that a proposal had been made to the state government by Mr Jindal. However, no final decision had been taken at the government end, he said.
It may be noted that the company had earlier signed a MoU with the state government on 18 October, 2004 for setting up a 2 million steel plant at Deojhar in Keonjhar district at an estimated cost of around Rs 4,000 crore. Talking to reporters here today, Mr Jindal said the plant would be set up with state-of - art and indigenous technology at revised project cost of around Rs 15,000 crore.
The 6 million tonnes plant would be set up in two phases.
The first phase (3 million tonnes) would be completed by 2008 and the second phase by 2011. Stating that the civil construction work for the phase-I will start after monsoon, he said already orders had been placed for plant and machinery worth over Rs 2,000 crore. On the location of site, Mr Jindal said that the blast furnace and main production unit would be set up in Angul district while the ore handling plant would be located in Keonjhar district.
Admitting that they were facing some problem in land acquisition, he said they had sought the intervention of chief minister, who had assured to sort out the problem
Mercator Lines buys 9 dry bulk vessels
Mercator Lines Limited (MLL), the second largest private sector shipping company in India, has acquired nine dry bulk geared panama vessels for Rs 2,69.97 crore. These new vessels will have a total capacity of about 6.5 lakh tonne (dwt).
The Rs 563 crore Mercater Lines will be aloowed to charter these vessels for different periods and the company would also have the option to purchase some of these vessels in the future.
The company had also recently acquired two bulk carriers, a move seen as a step forward for starting dry bulker business. At present, Mercator Lines is only engaged in liquid transportation business.
With this acquisition, the company has total 10 vessels in its fleet, which is around 22 per cent of the total world fleet of these type of vessels. MLLS tonnage will increase to about 1.85 million DWT once the vessels are delivered in August 2005.
Recently, the company had bagged a Rs 50 crore contract from Steel Authority of India Ltd for transportation of around 5 lakh tonne of coal over a period of 15 months, starting August 2005
Shri Ramrupai Balaji IPO between Rs20 to Rs22
Shri Ramrupai Balaji Steels Ltd, part of Rs. 500 crore Kolkata based Jai Balaji Group, is entering the Capital Market on July 8, 2005 with an IPO of 2,00,00,000 Equity shares of Rs. 10 each through the 100% Book Building Route to part-finance its Rs. 285 crore project for a vertically integrated steel plant in Durgapur, West Bengal. The Price Band for the issue has been fixed at Rs. 20 to Rs. 22 per Equity share, which is 2 times the face value at the minimum of the price band and 2.2 times the face value at the maximum price band. The issue closes on July 14, 2005 and the shares are proposed to be listed on the BSE and the NSE. The Company has reserved 10,00,000 equity shares for allocation to permanent employees, leaving Net Offer to the public at 1,90,00,000 equity shares of Rs. 10 each. The issue would constitute 30.31% of the post issue paid up capital of the Company.
The total funds to be raised through this issue would work out to Rs. 40 crores at lower end of the Price Band and Rs. 44 crore at higher end of the Price Band. The Book Running Lead Managers to the issue are Microsec India Limited and Anand Rathi Securities Private Limited and Registrar to the issue is Intime Spectrum Registry Ltd. The Company is a part of Jai Balaji Group, which has the largest sponge iron capacity in West Bengal. The group has an installed capacity of 3,45,000 tonnes of sponge iron and about 3,63,000 tonnes of semis and rolled products making it a large player in the steel industry in Eastern India.
The business operation of the Jai Balaji Group has increased significantly over the years by setting up different projects in the steel sector in West Bengal and Orissa. The group has a total chain of value added products including Sponge iron, Pig Iron, TMT Bars, Mild Steel & Alloy Rounds & Flats. The group has an experience of more than two decades in the steel manufacturing and has earned its name in the market for quality production of various steel products.
Shri Ramrupai Balaji Steels has already commissioned facilities to manufacture 1.20 lac tonne per annum of sponge iron, 80,500 tonne of pig iron and a rolling mill with a capacity of 80,000 tonne per annum. And the commercial production for all these units has already commenced successfully. The company's final product i.e TMT bars are extensively used in the housing and the infrastructure sector, which it sells under the brand name Balaji Shakti, which is well accepted in the market.
The steel melting shop, with a capacity to manufacture 1,76,418 TPA of MS billets and a coal washery, with the capacity of 2,16,000 TPA is expected to be commissioned by August 2005. The Company is also in the process of setting up a 40 MW captive power plant. Post expansion the Company would be amongst the top integrated plants of similar size or bigger in eastern India . The Company is eligible for various fiscal incentives including sales tax reimbursement for the next 15 years up to 100% of the capital cost. It will also benefit from the 5 year reimbursement of 50% of PF and ESI and exemption from electricity duty.
The company has recorded a Sales turnover of Rs 239.86 crores during 2004-05 against Rs. 43.69 crores in 2003-04 and earned a Net Profit after Tax of Rs. 12.39 crores against Rs. 3.26 crores respectively. The Financial Institutions / Banks have already sanctioned term loans amounting to Rs. 187 crores and regular working capital facilities of Rs. 34.20 crores to the company to part finance the proposed project
JSW Steel may go in for IPO
JSW Steel has signed a Memorandum of Understanding, MoU, with the Andhra Pradesh government to set up a Rs 9,000 crore (Rs 90 billion) aluminum project in the state.
The company is to fund the project via internal accruals. It may go in for an IPO after the project is set up
Steel: Will fortunes remain cast in iron?
While the steel industry is no doubt passing through good times right now, there is fear that with many players rushing in to create new capacities, there may be overcapacity by 2010. However, Indian companies are in a much better position to weather the temporary mismatch in demand and supply and price declines today because their debt-equity ratios and interest rates are much lower. Yet, steel producers need to guard against the likely bottlenecks and prepare themselves for new challenges, says S. D. Naik.
THE steel industry is now having a dream run, thanks to the booming global demand, propelled by China, and a significant pick-up in domestic demand. In fact, the surge in domestic and global demand for the metal has continued uninterrupted for three consecutive years since 2002 and the outlook remains positive for the medium term.
The steel scenario has undergone a dramatic transformation over the last three years with rising prices the world over, following a strong revival in demand. Not long ago, this industry was virtually in the dumps because of severe demand recession lasting five long years till 2001 and rock-bottom prices. Consequently, most producers in India and abroad incurred heavy losses and quite a few downed shutters.
The new generation steel companies in India, which had borrowed heavily to fund their new projects in the wake of high consumption growth in the boom years (1994-96), found it extremely difficult to service their debt as they incurred heavy cash losses. Many had to pledge over 50 per cent of their equity to financial institutions in lieu of the loans or for further rescheduling of loan repayments.
That was also the period when steel producers were forced to make concerted efforts at restructuring, technology upgradation and downsizing of workforce to reducing their production and operational costs. Consequently, when the global and domestic demand for steel started picking up since 2002 and the international prices of the commodity staged a smart recovery, the industry reaped well-deserved benefits.
Until two years ago, financial institutions in India were a worried lot because of their huge exposure to the steel industry, which had turned sick, and the RBI had had to create a Corporate Debt Restructuring (CDR) Cell to bail out the ailing industry.
But thanks to a significant improvement in profit margins on the back of rising steel prices, companies such as Essar Steel and Jindal Vijaynagar Steel have improved their debt-equity ratios by repaying the loans to the financial institutions. SAIL, which was not a CDR company, is virtually debt-free now, as is Tata Steel.
Thanks to the strong demand in international markets, exports of finished steel from India rose from 2.7 million tonnes in 2001-02 to 4.5 million tonnes in 2002-03 and further to 5.3 million tonnes in 2003-04. According to estimates, exports in 2004-05 were over five million tonnes. There was also a surge in domestic demand for steel because of the rising off-take from sectors such as automobiles, consumer durables, infrastructure and engineering.
The domestic consumption of finished steel rose to 30.4 million tonnes in 2003-04, more than double the 14.84 million tonnes achieved in 1991-92. With GDP expected to grow at a higher rate of 7-8 per cent per annum in the coming years and the increased emphasis on infrastructure development, domestic steel consumption is slated to grow at over 8 per cent per annum.
According to experts, the potential for growth in domestic demand for steel is enormous as the per capita consumption of the metal in India is only around 30 kg, far lower than the world average of 140 kg and the developed world's figure of over 400 kg.
According to Steel Ministry estimates, India's per capita consumption of steel is expected to increase to 55-60 kg by 2010 and over 100 kg by 2020.
Not surprisingly, therefore, a number of steel producers have already lined up ambitious expansion plans in the short and medium term. A few companies have also planned green field investments.
The companies that have announced their investment plans are: SAIL (8 million tonnes), Tata Steel (9.5 mt), RINL (7 mt), Essar (1.5 mt), JVSL/JISCO (3.0 mt), JSPL (1 mt), Ispat (1.7 mt), Nilachal Ispat (1 mt), Uttam (0.5 mt), and Bhushan (0.3 mt). This adds up to 33.5 mt, nearly equal to the existing capacity of about 36 million tonnes.
In addition, the Orissa Government and the South Korean Steel major Posco signed a Memorandum of Understanding (MoU) on June 22 committing $12 billion to set up a 12-million-tonne steel plant at Paradeep. The project, to be completed in two phases, comprises two modules of three million tonnes capacity per annum. The first module is scheduled for completion by June 2010 and the second by 2016. This is the biggest single FDI in India so far.
Buoyed by their improved financial strength and competitive edge, some of the domestic steel majors are also looking for overseas acquisitions. Last year, Tata Steel acquired the Singapore-based NatSteel for $486.4 million (Rs 1,313 crore). NatSteel has a capacity to produce about two million tonnes per annum of rebars, wire rods, pre-stressed concrete wires and strands.
This acquisition not only gives Tata Steel a manufacturing foothold in countries such as Singapore, Malaysia, Thailand, Vietnam and the Philippines, but geographical access to the Asian region.
This year, Essar Steel bought out Stemcor of the UK from two companies Hy-Grade Pellets Ltd (HGPL) and Steel Corporation of Gujarat Ltd (SCGL) for $450 million (around Rs 1,950 crore).
The acquisition will make Essar Steel a fully integrated steel producer with end-to-end control over raw materials, processes, technology and finished products.
Recently, Tata Steel decided to invest $700 million in Iran over the next five years to set up two joint ventures with the Iranian Mines and Mining Industries Development and Renovation Organization (Immidro). The first will be for a 1.5 million tonne per annum steel plant to make slabs and a unit of similar capacity for making billets. The second venture will be for a three million tonne per annum capacity export-oriented unit that will come up in two phases of 1.5 million tonnes per annum each.
Since Iran has abundant supplies of gas, a cheap fuel for making steel, Tata Steel will reap substantial cost advantage. Moreover, it proposes to use billets from Iran at its NatSteel facilities and replace electric arc furnaces that use much expensive scrap. The company has also signed a pact with Immidro to explore iron ore mines in Iran.
Even as the steel industry is passing through good times, some analysts have expressed apprehension that with so many players rushing in to create new capacities, there may be overcapacity by 2010 and if the commodity cycle takes an unfavourable turn, producers may find themselves in a difficult situation, as happened five-six years back.
China is already augmenting its production capacities and could become a net exporter of steel by next year from being a major importer. Russia and Ukraine are also raising their output.
Already, benchmark prices of the commodity in the international markets have declined by over 20 per cent this year from their all-time high last year, according to Metal Bulletin data. However, there is no need for panic.
According to market operators, hardening prices last year had led to somewhat nervous inventory building by major consumers, particularly the automobile and white goods manufacturers. However, profit warnings by major groups in Europe and the US have led to rapid liquidation of inventories at consumer end.
Mr Lakshmi Mittal, the owner of world's largest steel group, is among those who believe that steel's long-term prospects remain bright, notwithstanding recent glitches. In any case, the Indian companies are in a much better position to weather the temporary mismatch in demand and supply and price declines today because their debt-equity ratios and interest rates in the market are much lower now.
Moreover, companies have learnt from their mistakes and are planning their new projects in two or three phases so that they have the flexibility to alter their investment plans.
At the same time, Indian steel producers need to guard against likely bottlenecks and prepare themselves for new challenges. For instance, with the Steel Ministry targeting an output of 100 million tonnes by 2020, there is an urgent need to develop assured raw material sources such as iron ore and coal. Also, adequate infrastructure such as power, ports, road and rail transport is a pre-requisite for the Indian industry to remain competitive in a fast globalising economy.
For the past year, domestic steel producers have had to contend with the rapidly escalating costs of raw materials such as coke, iron ore and scrap. But for the equally buoyant steel prices, the industry would have found itself in a difficult situation. It is, therefore, time steel producers got their raw material linkages in place. Wherever possible, they should also try to acquire coalfields abroad for their captive use.
Tata Steel, which has its own iron ore and coal mines, is acquiring a coal block in Australia by the year-end since it is going for a massive expansion of capacity over the next decade. Others would do well to emulate its example since backward integration will give it greater control over costs in the supply chain apart from reducing uncertainty relating to raw material supplies.
Another problem in India is the prevalence of too many small players in this industry with uneconomic scales of operation and little scope for backward integration. Such units should seriously explore the possibilities of going in for mergers and consolidation. Otherwise they will find it difficult to survive in times of price decline.
Higher steel production projected in China
China would produce far more steel this year than previously forecast, generating an unexpected surplus almost as big as Germanys national capacity estimates from a top agency showed last Wednesday.
China, the worlds largest steelmaker and consumer, would produce 348 million tons of steel products this year, 17.7 percent more than last year, it said in a report carried in the China Securities Journal. Demand would grow 10.2 percent to 305 million tons. The surplus, 43 million tons, compares with Germanys 2003 crude steel output of 45 million tons.
Slowing growth in domestic steel demand, mainly from the property sector, was responsible, said the State Council Development Research Center, a government think tank, spelling bad news for global steelmakers dreading a tide of Chinese exports. But the surplus was not going abroad just yet. Exports and imports would be about balanced, the think tank said.
JFE May Cut Steel Production on Slowing Demand
JFE Steel Corp., Japan's second- largest steelmaker, may join rivals such as Mittal Steel Co. and Arcelor SA in cutting production to boost prices as demand slows in China, the world's biggest consumer of the alloy.
We may reduce output over the next few months to deal with the supply-demand imbalance,'' Hajime Bada, president of Tokyo- based JFE, said yesterday in an interview in Beijing
AK Steel Announces Price Increases for Oriented Electrical Steels
AK Steel announced that it will increase spot market transaction prices for its Regular Grain Oriented and TRAN-COR(R) H electrical steel products, effective with shipments on and after August 1, 2005.
European steel makers cut output amid slowing demand from China
European steel manufacturers have reduced their production levels in 2005 in response to a global slowdown in demand and an increase of production capacity in China, the main export market during the record year of 2004.
One by one last week, Europe's largest manufacturers announced cuts in production for the third quarter of 2005, following on from reductions in the second quarter.
The world's largest producer Mittal Steel said on Wednesday that it would reduce production by a million tonnes in the third quarter in order to "re-establish a balance between global offer and demand" and "help reduce stocks"
A day later, German group ThyssenKrupp announced a cut of 120,000 tonnes of stainless steel production in the third quarter, the equivalent of 20 percent of its European capacity, following a 500,000-tonne cut in the second quarter.
Finally, the world's second-largest producer Arcelor followed suit and unveiled its own production cutbacks. Stainless steel production has been reduced by 15-20 percent since April, the company said on Friday.
Ukraine Sets Up Tender Commission to Privatize Controversial Steel Mill
The head of the State Property Fund, Valentyna Semenyuk, has said that a tender commission for a repeat privatization of [Ukraine's biggest steelworks] Kryvorizhstal has been set up.
She said that the order to set up the tender commission was signed by Svitlana Ledomska, who was acting State Property Fund chief when Semenyuk was on sick leave.
The repeat privatization tender will be held on 24 October, according to the Cabinet of Ministers' decision to sell just over 93 per cent of Kryvorizhstal's shares
Shougang starts constructing environmental friendly plant
Shougang Group, the largest polluter in the Chinese capital city, started to build an environment-friendly steel plant in the city's northern suburb on Saturday, marking a substantive move to help alleviate the city's long-standing pollution problem.
The plant is located in Beijing's Shunyi District and will produce 1.5 million tons of cold-rolled steel plates when put into operation, reports Beijing News Daily on Monday.
The Shunyi-based operation will be developed and managed to save water, land and energy, according to the press office of the Group.
NTMK Produces 300-Millionth Ton of Steel
Nizhniy Tagil Iron and Steel Works (NTMK), part of the EvrazHolding group, today produced its 300-millionth metric ton of steel. The milestone was reached in the converter department of the plants oxygen-converter shops.
The plant produced its first steel on September 23rd, 1940 when the first open-hearth furnace was built
Arcelor to invest 7.5 mln eur in Polish steel mill
Arcelor plans to invest at least 7.5 mln eur in a new rolling mill at the Lucchini Group steel plant in Warsaw which it is close to acquiring, Puls Biznesu news agency reported.
Arcelor chief executive Guy Dolle has concluded negotiations over the acquisition and is now finalising administrative details, it said.
The new rolling mill could start operations at the beginning of 2007 and will mainly produce steel bars for the construction sector, the agency said.
'Arcelor's strategy is based on the development in countries with a potential of increasing steel consumption,' said Dolle
Severstal increased the rolled product production by 2.9 percent for January-June 2005
JSC Severstal increased the rolled product production by 2.9 percent for January-June 2005.
For an accounting period of 2004 Severstal produced 4.5 million tones of rolled product. Therefore, the production volume in January-June this year made up 4.63 million tones.
Nowadays Severstal is among the three leaders of Russian ferrous metallurgy and among twenty world major steel companies.
Severstal as an integrated Iron & Steel works manufactures a wide range of products: hot and cold rolled steel, roll-formed shapes and pipes, rolled sections, a large group of coke products and by-products.
JSC "Severstal" is the largest exporter in Russia.
Romania: Mittal Steel - Iasi Plans 950,000 EUR Investment
Mittal Steel - Iasi has announced plans to invest 950,000 EUR in two industrial installations that will soon be procured from a Korean manufacturer, reports "Bursa".
Mittal Steel - Iasi union leader Constantin Rotaru said this was going to be the first major investment made since the plant was acquired by Mittal Steel two years before.
Severstal Makes the Second Step to Arcelor TA Cord
Russian steel giant Severstal Group and one of the world steel leaders Arcelor (Luxembourg) sealed an agreement Friday, July 1, 2005, to set up TA Cord, a joint venture for steel wire cord production.
Founded by Severstal Metiz and Arcelors subsidiary Trefil Arbed, TA Cord will operate on production facilities of Orlov Steel Rolling Works and Volgograd
Mexican NorMexSteel Inc. Extends the Letter of Intent with Global Steel Holdings Ltd
NorMexSteel Inc. announced today that it has extended a Letter of Intent with Global Steel Holdings Ltd. to enter into a Joint Venture. Global Steel Holdings Ltd. will provide Financing and the Management for operations of the world-class NKS steel mill foundry located at Lazaro Cardenas, Michoacan, Mexico. The mutual extension will allow sufficient time to conclude due diligence and finalized contractual documents.
Further details will be announced once Global Steel Holdings Ltd. has completed their due diligence on or before August 1, 2005
Iron Ore Imports Set to Rebound
RIO Tinto Group, the world's second-largest iron ore exporter, said Chinese commodity imports were set to rebound because of buoyant demand from steelmakers and declining inventories.
Iron ore imports to China fell in May to the lowest in three months after the government imposed an 8 percent duty on iron ore. China has also been seeking to limit the number of companies importing the commodity.
Surging demand from China led to a record 71.5 percent jump in iron ore prices in April. London-based Rio Tinto and rivals Cia. Vale do Rio Doce and BHP Billiton are spending a combined US$8.5 billion expanding their mines, railroads and ports to meet demand.
China has doubled steel output in the last four years as it makes more cars, household appliances and buildings. Production would probably rise almost 20 percent to 322 million metric tons this year, according to the China Iron and Steel Association.
The nation's iron ore imports fell to 21.8 million metric tons in May, from a record 24.3 million in April and 24.2 million in March, as steelmakers used inventories because of the new tax.
China's iron ore imports might rise 15 percent this year to 240 million tons, the China Iron and Steel Association said April 11. That might help prices rise a further 5 percent from April 2006, said analysts
Arcelor Group acquiresWarsaw's Lucchini Steel Mill
Arcelor Group, the world's second largest steel concern, announced that it will acquire Warsaw's Lucchini Steel Mill once it gets final permission from regulatory authorities.
The value of the transaction was not revealed. It also plans to construct a rolling mill in Warsaw, worth at least EUR 30 (zł.121) million. "We plan that the first products will roll out of the mill in the beginning of 2007," said president Guy Dolle
