July, 08 2005
Posco headed for stormy waters
It appears that the deal is headed for further opposition, this time in the form of the former chief minister of Orissa JB Patnaik as well as environmental activist Prafulla Samantara.
Mr Patnaik has expressed concern about the motives behind the agreement and has even asked that the MOU be scrapped. 'The hastily signed MOU seems mysterious. It may not serve the country or state's interests, but that of some individuals. Therefore, the government should be careful and cancel this one-sided deal.''
He said: ''Posco has come to Orissa after Brazil and China rejected its conditions. The two countries wanted Posco to buy ore at prevailing market rates, but Orissa has agreed to Posco's demand for captive mines.''
''Currently, the difference in prices between raising ore from mines and the market rate is Rs1,500 per tonne, hence the state would lose Rs90,000 crore by giving 600 million tonnes of ore to Posco.''
Mr Patnaik cast aspersions on Posco's reasons for exporting ore to Korea, saying: ''There is no doubt Orissa's ore is of high quality; it contains 62%-65% iron. Domestic companies have been taking out alumina in the ore and producing best quality steel. Why does the Korean company want to import better ore from outside? Does it not know the technology used by Indian companies? The intention is clear: Posco wants to export Orissa ore to its own country.''
He also believed that there had been a misrepresentation of figures on investment in the state, saying: ''Posco's claim that it will invest Rs51,000 crore is not true. It is a well-planned conspiracy to mislead the government. Tisco's six MTPA project at Duburi, including development of Dhamra port and rail linkage, envisages an investment of Rs15,000 crore. Going by this, the Posco project would entail an investment of Rs25,000 crore.'' He added: ''The state is yet to give details of how it expects to get Rs22,000 crore revenue from the project.''
In conjunction with this intense criticism, Mr Samantara's insistence that the leases are illegal as they have not properly assessed the potential environmental damage to the area seems like the final nail in the coffin of the project. Mr Samantara insists that the mining activities in the two areas are likely to damage the ecosystems, potentially causing water resources to dry up in the Khandahar region. The agreement would result in thousands of government protected tribals being homeless and was thus unconstitutional. He has asked for a ban on mining in the area.
Orissa to announce model resettlement policy
In order to keep pace with rapid industrialisation in the State, the Government has decided to revise the Rehabilitation and Resettlement (R&R) policy of 1998 and announce a model one in August as it has several drawbacks
Proper settlement of displaced persons has become a key issue before the Government as it has signed 37 memoranda of understanding (MoU) for setting up steel plants in the State.
The Chief Minister said colonies with good houses and other facilities should be constructed for the displaced. He also underscored the need for protection of environment and creation of green belts around the colonies.
The meeting discussed Kalinga Nagar issue in which two officials were injured in an attack by locals in May during the Bhoomi Puja ceremony of a steel project.
Uniform pricing likely for all iron ore futures contracts
Iron ore companies will have to soon adopt a uniform pricing formula to sell their products through short and long term contracts. The government is planning to come out with iron ore pricing guidelines that would curb the freedom available to companies to price ore, especially on short-term contacts.
The Ganeshan Committee, constituted by the steel ministry to recommend changes required in the present ore pricing policy, is understood to have come to the view that a uniform pricing formula would ensure more transparency in the process. Steel ministry sources said that the committee has come out with specific norms for iron ore sales under long-term, short term contacts as well as exports.
According to ministry sources, the committees report is currently being studied by the ministry which will finalise the guidelines after consultation with companies by month-end. The ministry will give its consent to the report by next week.
Presently, iron ore pricing follow a complex formula. While long-term contacts are priced benchmarking against international prices, companies adopt different methods (tender process, negotiation etc) to fix price for short-term contacts. There were allegations that this pricing methodology has invited corrupt practices with companies often making allotment to their preferred customers at much lower prices.
Ministry sources said that under the new dispensation, the differential pricing formula would also be scrapped. This would mean that both private sector as well as public sector would now get iron ore at similar price levels.
The new ore pricing guidelines would also focus on export pricing, another area where there is tremendous potential for companies to increase revenues through proper pricing.
Steel ministry sources said that migration to a new pricing regime would not put companies at any disadvantage but would actually help them to double the profitability.
The new guidelines are also expected to put responsibility on iron ore companies to fix the quantity of ore to be sold under long and short term contracts.
It is, however, not clear whether the new guidelines would also apply to private sector companies. At present ore is sold by five public sector companiesIISCO, MMTC, KIOCL, NMDC and OMDC and over 40 private sector companies.
No breakthrough in Tata, Bangladesh talks
The second round of talks on the $2.5 billion investment plan by India's Tata Group concluded here Thursday with both sides claiming progress though no breakthrough was made on contentious issues, an official said.
Tata and the government of Bangladesh could not come to any conclusive decisions after six days of negotiations on issues such as site selection, gas pricing and power purchase.
"Although it's a big and complex project, both sides negotiated showing professional approach to deal with the issues," Alan Rosling, executive director of Tata Sons, said after a meeting with Bangladesh Finance Secretary Zakir Ahmed Khan here.
"This time, we have made good progress in different areas relating to the planned investment," Alan told reporters.
The two sides also agreed to resume negotiations at the end of this month.
The Tata Group have offered to invest $2.5 billion to set up steel, fertiliser and power plants in Bangladesh.
The negotiations began in May and are supposed to be completed by August 31.
Tata has sought 2,000 acres for its steel plant in Bheramara, 600 acres in Barapukuria for a power project and 400 acres in Chittagong for the fertiliser plant.
"The two sides have agreed to appoint consultants to deal with complicated issues," an official said
KIOCL pleads for review of mining stoppage
Despite over 300 million tonnes of iron ore reserves, Kudremukh Iron Ore Company Ltd (KIOCL) is unable to exploit the resources as it has fallen victim to NGO over-activism and has petitioned Supreme Court to review its order that brings an end to mining activity there in December.
We are waiting for (the court decision to go ahead with our plan to invest Rs 200 crore for the 1,00,000 tonne plant, KIOCL chairman and managing director P Ganesan told reporters here. On a petition filed by a Bangalore-based NGO alleging that the mining activity was damaging the ecology, the apex court had on October 30, 2002 restrained the company from mining the primary ore lying beneath the surface, but allowed it to tap ore from the broken area and the weathered ore.
The company, a mini ratna, contends that this order will render infrastructure worth Rs 4,000 crore redundant, besides a loss of $400 million of export earnings and Rs 200 crore revenue to the government, Ganesan said.
The National Institute of Rock Mechanics and an independent Canadian agency had suggested building a natural slope in the mines for safety and land purposes.
If granted by the Supreme Court, this will last another 2-3 years. However, if we are allowed to mine the primary ore region, we would be able to provide iron ore to both domestic industry and overseas customers for 10-12 years, the chairman said.
There will be a loss of around Rs 560 crore to the national exchequer by means of dividend, excise duty, income tax besides affecting the new Mangalore port which could incur loss of about 35 per cent of its revenue after KIOCLs mining operations are brought to a standstill, Ganesan said.
Asserting that KIOCL had been making profit for the last 14 years and was without any loan against its accounts, he said the PSUs performance even preceded the boom due to high Chinese demand that had resulted in turning around several companies.
On whether NGOs were harming development activities in the country in the name of ecological concerns, he said, We want all the issues to be examined objectively by both the court and the NGOs. Ecology and economics have to co-exist. They cannot serve cross purposes, he added
Ganesan said KIOCL was also looking at alternatives, including a Rs 1,200 crore 50:50 joint venture with Steel Authority of India to develop Kalta, Taldih and Barsua mines in Orissa where mining and steel sectors look poised for a great take off.
To keep our pellet plant running at Mangalore, KIOCL is looking for an iron ore deposit of about 200 million tonne at Ramanadurg at Bellary Hospet area in Karnataka, the KIOCL chief said. However, the matter is sub-judice, he added.
To a question about the fate of its nearly 2,000 employees, Ganesan said, The merging areas offer scope for their redeployment. We are also awaiting supreme court decision on the issue to settle it finally
Alang units deny tax evasion charge
Shipbreakers in Alang have denied allegations of any malpractices, claiming their deals are clean.
The intelligence wing of the defence ministry has recently initiated a probe into non transparent deals involving cash purchases of junk ships in the Rs 5000-crore ship demolition market. Such deals help the ship breakers evade taxes. A top level ministry-level meeting was held in New Delhi last week to discuss the issue.
The defence ministry has also asked the steel and finance ministries to probe into the matter. The steel ministry, in turn, has sought details from Gujarat Maritime Board (GMB), under whose jurisdiction Alang operates.
We do not indulge in cash deals. We pay for the ships bought through the letter of credit of nationalised banks. When funds are easily available through proper banking channels, why should we go for illegal means? These allegations are just to malign the ship breaking industry, Dilip Bobra, director, Aapee Ship Breakers, a leading ship breaker at Alang said.
It is the international ship buyers who indulge in cash deals. These buy ships in cash from across the world and sell them to us. We don not pay them in cash, he added.
I have also heard such allegations against the industry. But, not a single ship is brought in Alang for cash. How these ships are sold in international markets, we cannot say, but as far Alang is concerned, these allegations are baseless, said Raj Bansal, president, Ship Recycling Industries Association (India).
According to sources in the ship breaking industry, there are at least a dozen active cash buyers in the international market, and most of these are Indians. Over the past few years, they have emerged as an important link in the sale of old ships, with International Maritime Organisation (IMO) getting stricter with the breakers.
With the recent International Maritime Boards (IMB) decision to scrap 100 ships built before 1977, these cash buyers are doing good business.
Ship owners are increasingly striking deals with cash buyers, when they want to get rid of the ships. This helps them avoid the responsibility for environmental problems during the demolition process. However, we at Alang buy ships from them through the letter of credit of nationalised banks only, said a shipbreaker at Alang on the condition of anonymity.
C M Parmar, port officer, GMB, Alang Ship Recycling Yard, refused to comment on the issue
Foreign steel Punjab`s only hope
In the absence of government action on the increasing steel prices and unpredictable the raw material market, imported steel, which is the most used raw material, seems to be a lifeline for the industries in the region.
Scrap and steel, imported from Russia and the African and Arabian countries, are not only cheap but are also superior.
The reason for the increased demand in the region, especially in Punjab, is the cost factor, because it is almost Rs 2,000-3,000 per tonne cheaper than the steel available in the domestic market.
S K Dhir, owner of Dhir Steels in Mandi Gabindgarh, said, Seventy per cent of the market is dominated by the scrap imported from the other countries primarily because they are cheaper and the other reason is its non-availability in the country due to lack of technical advancement.
No doubt the demand was always there for the imported raw material but for the last few months an increasing trend has been observed with total rise of 15-20 per cent in the demand by the industry, he said.
The problem being faced by the industry is that in the absence of any incentives and freight concessions, the price almost touches the same level as in the domestic market, which includes loading and unloading charges, complained Ashwani Kohli, Senior Vice-president, Chamber for Small Exporters of Phagwara
The government should therefore take necessary measures to encourage the import providing the platform to the international companies. This would not only open more choices for the industry at the competitive prices but would also finish the monopoly of major domestic players and traders.
Kohli said it would further reduce the input cost to Rs 1000 per tonne to the industry. Elaborating further on the issue, Opinder singh, Assistant Director, Engineering Export Promotion Council, Jalandhar, said that there would be open competition for the domestic players making the ultimate source of raw material for the industry with the relaxed norms for the import.
But, the main problem is lack of incentive and the industry demands that the government should immediately announce the freight concessions and zero import duty to encourage the import of the steel he added.
It is also believed that the presence of explosives in the imported scrap had made the authorities alert and many restrictions have been imposed on the import of steel, said V K Vaid, export advisor, Victor Forgings.
The government should set up the corporations that would buy the steel in bulk facilitating the small industries as it is observed that the small-scale industries are financially incapable to meet the price of the imported raw material, he suggested.
KWA to purchase pipelines from SAIL
The Kerala Water Authority is waiting for a clearance from the state governments finance department to go ahead with its plan to purchase pipelines worth Rs 11 crore from the Steel Authority of India Ltd to complete the work on the last phase of the Hudco-assisted drinking water project for supply of water in the city.
KWA decided to purchase directly from SAIL rather than going for tenders to complete the work on a faster note. With tender being invited, we expect to finish the work in seven months, KWA (central) chief engineer M.A.Salahuddin told
ATI Allegheny Ludlum Announces GRGO Price Increase
Allegheny Technologies Incorporated (NYSE:ATI) announced that ATI Allegheny Ludlum, an Allegheny Technologies company, is increasing prices by approximately 26% for grain-oriented silicon electrical steel products. The price increase is effective with shipments beginning on August 1, 2005. All surcharges for grain-oriented silicon electrical steel remain in effect. This price increase is necessary for capital investment and growth.
Grain-oriented silicon electrical steel is used in the manufacture of power distribution and power generation transformers for the electrical energy market
GSII needs $20 M more to fully operate steel plant
The Indian-owned Global Steelworks International Inc. (GSII) still need to infuse $20 million, approximately P1.1 billion, to really put the Iligan-based plant in commercial operation. But downstream steel industries represented by the Filipino Galvanizers Institute (FGI) said this is on the assumption that GSII had already poured in the $30 million as it earlier claimed as part of the $50 million full rehabilitation cost of the facility.
Perez cited the obsolete technology level of the equipment facilities being used in the Iligan plant after being idled for four years, the financial capability of GSII as well as the insufficient quantity and quality of the steel products being produced by GSII.
The FGI suspected that the companys claim of having gone into full commercial operation since last month was just meant to make the company eligible for the promised preferential import duty once the plant is into full commercial operation. Since GSII took over the operations of the former National Steel Corp. in February 2004, FGI said that only 45,000 MT of HRC and 30,000 metric tons of slabs have been imported by GSII for re-rolling. "The combined volume of 75,000 MT is not even enough to sustain one-month of continuous operations of the plant," Perez said.
Perez further related his members disappointing experiences with GSII.Galvanizers, which have ordered and tried CRC from GSII suffered several order cancellations despite domestic letters of credit being opened by the galvanizers in favor of GSII.
EIB grants 125 million EUR loan for UGINE & ALZ steel plants
The European Investment Bank (EIB) granted the Arcelor Group 125 million EUR financing for the construction of Carinox, the UGINE & ALZ steelplant in Charleroi (Belgium). The loan agreements were signed on July 6th in Luxembourg by Guy Dolland Michel Wurth, CEO and CFO of Arcelor, and by Philippe Maystadt, President of EIB.
This new facility, which will have a 1 million tonne production capacity, is currently under construction on the site of the existing hot strip mill of the UGINE & ALZ company.
This project solves three major handicaps of the flat stainless steel sector of the Arcelor Group: the number of production sites, their geographic dispersion and the unit size of its steel plants. The new facility, directly connected to the hot strip mill, will provide an optimised industrial configuration, reduced transport costs and an outstanding competitive position at international level for the Charleroi site.
The participation of the EIB in the financial operation enables the Arcelor Group to diversify its funding sources, both in terms of duration and of interest rates, adapting them to the characteristics and the requirements of the project.
Tymoshenko embroiled in dispute between tycoons
A shadow has been cast on the integrity of Ukrainian Prime Minister Yulia Tymoshenko, as two "oligarchs" vie for control over a lucrative steel business.
For the past several weeks the Ukrainian media has been rife with a rumor saying that the Dnipropetrovsk-based Privat group was buying Ukraine's second-most popular TV channel, 1+1, for Tymoshenko, in exchange for the government taking the Nikopol Ferroalloys Plant (NFZ) from "oligarch" Viktor Pinchuk and passing it to Privat.
Tymoshenko has been too slow to deny this allegation, which may damage her reputation ahead of next year's parliamentary elections. Ukrainians do not like their oligarchs, and the allegations against Tymoshenko of conniving with one tycoon against the other are sure to damage her popularity.
Thai Steel firm denies land rumour
Sahaviriya Group denies it bought for its new steel plant the controversial plots of land once planned for construction of a coal-fired power plant in Prachuap Khiri Khan province.
A company executive, who asked that his name be withheld, said the company had already prepared plots of land near its existing steel plant in Bang Saphan district in the upper southern province to build its new plant.
The company's existing plant produced secondary and tertiary products such as hot rolled coil and bars, while the new one would produce prime materials, and that was why they had to be close to each other.
He declined to reveal the location of the new plant or the developments that would be undertaken in the other phases, simply saying they would be in Bang Saphan and further south in Chumphon province.
Ban Krut villagers earlier had voiced their opposition to the planned purchase after they heard from local land agents about it. Villagers from Ban Krut and Bo Nok had for years opposed the two proposed coal-fired power plants until the government scrapped them in late 2003.
Brascan bid for Stelco gets tentative support from Ontario government
The Ontario government has waded into the lengthy restructuring of Stelco Inc., issuing a letter in support of a refinancing offer from Brascan Corp.-controlled Tricap Management Ltd.
The union, which represents the majority of the Hamilton-based steelmaker's workforce, has been working with Tricap on a $1.35-billion offer that would see $500 million used to reduce Stelco's pension deficit.
The steelmaker previously rebuffed the offer along with others from steel companies and financial firms, and decided to attempt to exit bankruptcy protection on its own by raising money on the capital markets.
Japan and China steel mills upset over Rio Tinto's Hope Downs deal
Japanese and Chinese steel mills are worried over Rio Tinto's 11th-hour deal to snatch control of the Hope Downs iron ore project in Western Australia's Pilbara region, fearing it will further strengthen the Pilbara's two dominant iron ore suppliers, The West Australian newspaper reported, citing unidentified sources in Japan.
It said Japan's steel mills, already reeling from a 71.2 pct price increase won by the miners earlier this year, believe Rio's deal to take management control and a 50 pct stake in the Hope Downs development further tightens its grip on the crucial supply side.
The newspaper said the massive Hope Downs project, in which Rio has become a 50 pct partner with privately held Hancock Prospecting, had received strong support from the Japanese and Chinese iron ore buyers because it was seen as a potential alternative supplier and a way to break the BHP Billiton-Rio Tinto duopoly in the Pilbara.
No Sign Of Slowing Demand In Iron Ore And Coal from Australia
UBS reports iron ore exports were 20.6Mt in May, just below the record in March of 20.8Mt.
Recent press suggests Chinese steel mills have been deferring shipments of iron ore, however Australias largest exporters, BHP Billiton (BHP) and Rio Tinto (RIO) have said they see no signs of demand slowing
Coking coal exports were 7.9Mt in May, UBS reports - a new monthly record. The analysts do not expect much variation on exports in the next 12 months given the major ports have capacity restrictions and are now operating under allocation systems. BHP remarked at a UBS conference that demand was still extremely strong and would be driven in the future by India.
Thermal coal bucked the trend, with exports down 10% in May. Despite robust markets for iron ore and coal, UBS retains a forecast 20% price decline for iron ore and a US$15/t decline for coking coal. The anticipated price declineis due to the steel market, where prices and production continue to fall
