October, 24 2005
Congress against closure of KIOCL
Kudremukh Iron Ore Company Ltd KIOCL, set to close down its operations by December end, has received a shot in the arm with the Congress coming out in its support. Congress general secretary Ms Margaret Alva, during a session of Indian National Trade Union Congress INTUC said that KIOCL has become the target of pseudo environmental groups and efforts should be made to avoid its closure. Taking a strong view, she said: if environment is the issue, then no industry can function in the country.
The Supreme Court has ordered KIOCLs closure on a petition filed by a Bangalore based NGO, which contended that the companys mining operations in Karnataka posed a threat to the environment.
Stemcor likely to pick up stake in Mesco Steel
Stemcor appears to be on an equity acquisition drive in India through its local arm, Stemcor India Pvt Ltd. It is reported that the company is already in talks with the Mesco group and has decided to pick up equity stake in the Orissa based Mideast Integrated Steel Ltd Mesco Steel.Mr WJ Attenborough, MD Middle, East & South Asia Stemcor said that neither the price nor the size of the equity had been finalized.
He also ruled out any greenfield steel project of Stemcor and further clarified that nowhere in the world had the company, which celebrated its 50th year in 2001, promoted such a steel venture. "We are only interested in picking up minority stake. We will not hold the majority stake."
He added that his company would also be picking up equity stake in a tinplate container manufacturing company. However, he refused to give details, only stating that a formal announcement is likely to be made within the next three months.
POSCO India identifies two iron ore mines
Having identified two mines in Keonjhar and Sundergarh districts with nearly 600 million tonnes of proven reserves, POSCO India has approached the Orissa government for early notification for land acquisition. "We have already completed the formalities on our part and are awaiting the state government's notification on the same. We expect the notification to be issued by Late November of early December," POSCO Indias project Chief Mr Ho Chan Ryu said to press. "We expect Orissa government would soon start bureaucratic process such as land acquisition and sending proposal to Union governments for mining license," he added
It is reported that POSCO India is more than half way through its feasibility study and would take any decision on signing the Memorandum of Agreement MoA with government after the results were found conducive.
The reserves of 600 million tonnes of iron ore, which is expected to last 30 years, is sufficient to feed POSCOs proposed 12 million tonnes steel plant near port town of Paradip to be built at an estimated Rs 52,000 crore.
Draft gas pipeline policy put on hold
It is reported that the Petroleum Ministry has put on hold the draft pipeline policy till the Petroleum and Natural Gas Regulatory Board PNGRB Bill gets the Cabinet approval. This, in effect, would mean that companies laying pipelines for transportation of gas would have to wait a little longer for a policy that would provide a proper linkage between gas sources and market centers, along with inter-connectivity for regions, consumers and producers.
As per the draft policy, gas has to be transported through a network of pipelines laid with the authorization granted by the regulator through a transparent mechanism.
The policy envisages the appointment of a regulator under the PNGRB Bill for regulating the transmission, distribution, supply, and storage system for natural gas & liquefied natural gas and for promoting the development of the sector. The regulator would ensure access to gas pipelines, based on a non-discriminatory common carrier principle for all users. It would also approve the pipeline tariff for the common carrier pipelines.
Aditya Birla Group rules out foray into steel making
The Aditya Birla Group has ruled out plans to get into steel making. The conglomerate will focus on remaining a "cost-effective, raw materials supplier" to the steel industry, Mr Ravi Kastia, Group Executive President and Business Head of the Aditya Birla Group, said while addressing the Steel Metallics India 2005 seminar
Mr Kastia said the Aditya Birla Group's strategy for the metallics business pertains to beneficiation, pelletization, and business diversification into coal, manganese and beach minerals and infrastructure development. "That is the policy of the group," he said.
He said that the production and demand for iron ore, pig iron and sponge iron would go up substantially in the years ahead. India has already emerged as the largest producer of sponge iron in the world. Abundant availability of coal and sponge iron-grade iron ore; increase in the domestic demand for steel; and less availability of melting scrap in India and metallurgical coke are among the factors that would fuel the growth of India's sponge iron sector.
Mr Kastia said the domestic demand for iron ore is expected to grow by nine per cent a year till 2012 and thereafter, by five per cent till 2020. Export demand is expected to grow by five per cent a year till 2012 and thereafter, by two per cent till 2020.
New railway track to ease ore movement
In an attempt to facilitate smooth movement of freights and raw materials, the South Eastern Railway has decided to set up a freight corridor between two railway stations, Tatanagar and Raj Kharsawan. The proposed freight corridor entails construction of a separate railway track, which will be exclusively meant for movement of goods trains.
The stretch covering a distance of about 80 km, has been chosen for establishing the corridor since this stretch undertakes a large share of freight movement. Dongaposi, a hub of loading of iron ore, which serves as a raw material for steel manufacturing units as Tata Steel and other sponge iron plants is located in Raj Kharswan. It has a capacity of loading 60 million tonnes of iron ore annually. Iron ore, for export purposes, is also loaded from here.
A railway manager told press that no passenger trains will be allowed on the new railway tracks that will be laid parallel to the two existing tracks to enable smooth movement of goods trains and increase the loading capacity at Dongaposi up to 70 million tonnes.
Merrill Lynchs outlook for steel remains mixed
Steel producers have not enjoyed ideal market conditions this year as the supply demand balance has shifted in favor of the consumer, which has kept prices lower.
Merrill Lynch notes conditions may again be turning in favor of steel producers, as the last period of higher prices saw prices in the US above those in Europe, which in turn were higher than prices in Asia a situation that is happening again now. In the brokers view this should see a much different market next year with production growth improving to around 5% globally from 3% this year, the difference being this years growth was accompanied by a major manufacturing de stocking that depressed demand. In contrast, the coming year should see any spare capacity growth absorbed, which in turn should see pricing power return to the producers.
As the broker notes, conditions remain different in the three main regions, with greatest strength currently in the North American market where steel inventories remain tight, pushing prices higher across the entire range of products. In comparison European market conditions are mixed, as while the majority of producers are pushing for price rises their success has been limited as a small number of producers continue to undermine prices.
On the positive side import prices have moved above European prices, so stockiest are buying European supply rather than paying more for imported steel. Conditions in Asia remain mixed as well with the strength of demand weaker than in other regions, resulting in a confusing pricing outlook where some producers lift prices and others push prices lower.
As the broker notes, recent months have seen China again become a net importer of steel, a trend likely to last until the Chinese New Year.
The big question, as always, is Chinese production, as the country continues to add significant capacity that increasingly raises the possibility of supply growth exceeding demand growth. Merrill Lynch points out that if China were to lift production by 70mt in 2006 world steel demand would need to grow by about 7% to absorb the higher output, an outcome that would be challenging at best. The good news is government initiatives to slow the expansion in production appear to be having some impact, potentially slowing the rate of growth to a more manageable 5%.
Elsewhere in Asia producer discipline is mixed, the Japanese continuing to refuse to cut prices and proposing production cuts, while at the same time some Korean and Chinese producers have happily sacrificed price for volume.
Overall Merrill Lynch is forecasting steel price strength to continue in the US, European prices to settle at slightly lower prices than currently but with pockets of strength and Asian prices to trend down over the course of 2006. The rise in prices in the US and parts of Europe is also a positive for the scrap metal market, as Macquarie notes higher steel prices could see production cuts wound back, so increasing the demand for scrap. As the broker notes, the production likely to come back on stream is swing production where volumes can be more easily adjusted to suit market conditions.
Merrill Lynch agrees, noting mini mills using electric arc furnaces can easily wind production up or down given their low fixed costs and high variable costs. These furnaces use scrap, pig iron and electricity to produce steel, so scrap usage is likely to increase.
As Merrill Lynch notes Turkish buyers are currently maintaining low stock levels as they wait for demand to pick up, which has been reflected in prices of US$215/t being about US$30/t below the prices seen in mid-September.
This is despite the market currently entering its seasonally stronger period for scrap metal prices, though as Merrill Lynch points out Hurricane Katrina-related scrap moving from the US to China is likely to dampen export prices this quarter.
Race for Kryvorizhstal Auction today
For the first time in Ukraine's history, a major industrial enterprise is slated to go under the hammer live on television. President Viktor Yushchenko has staked his reputation on the auction to privatize the Kryvorizhstal steel mill, Ukraine's biggest. His opponents are determined to block it.
Parliamentary critics twice last week mustered enough votes to press the government to halt Monday's sale of the 93.02 percent stake in the mill, but Mr Yushchenko shrugged off their nonbinding appeal, just as he has the legal challenges waged by the mill's former owners. "There won't even be talk of reconsidering the decision," Mr Yushchenko said Friday, adding that a repeat auction was necessary "first of all, morally and politically." "We want the repeat sale to show one thing: breaches in the law ... will be corrected," Yushchenko said.
Kryvorizhstal, which produces 20 percent of Ukraine's entire metal output, was sold in June 2004 by the state for $800 million in a privatization widely condemned as rigged. The buyers: Former President Leonid Kuchma's son-in-law, Viktor Pinchuk; and coal and steel magnate Rynat Akhmetov.
During last year's Orange Revolution, Yushchenko called the sale a "theft" and pledged it would be reversed.
In the running are the Mittal Steel and two Ukrainian firms LLC Smart Group, with Russian links, and Industrial Group, controlled by France's Arcelor.
Nippon steel to cut 1 million tonne in October March
Nippon Steel Corp has increased their production cut for the period from October to March. The company initially announced a 500,000 ton cut in production, but they will not reduce steel production by one million tons for the period.
The rising domestic steel sheets inventories and dropping Asian steel prices prompted the increase in output reduction and inventories reached four year highs recently, increasing to 4.66 million tons. The company has an annual production output of about 32 million tons
Thermal coal witnessing lower prices before talks
Commodity analysts at Smith Barney Citigroup believe that declining thermal coal spot prices in both Asia and Europe are casting a shadow over the upcoming annual contract price negotiations scheduled for early 2006 as price weakness is believed to reflect demand weakness. The broker reports spot deals of 30000 to 70000MT are being made for Richard's Bay (Europe) and Newcastle (Asia) coal for around US$40 PMT FOB. This is 20% lower from prices in June.
In addition, the broker reports that key traders and utilities in Japan, Taiwan and South Korea have reported that their respective positions are sufficiently covered for the remainder of 2005. Apparently, some have already started delaying purchases in anticipation of lower prices, the analysts believe.
Europe is facing problems of a complete different nature with Citigroup pointing out that weak demand in the region is more a reflection of how the region's new carbon market has undermined the cost competitiveness of coal. As a result, gas fired power remains viable, even at record highs of $6 MBtu, representing a 40% jump on last years price, simply because it produces less CO2 than coal.
Meanwhile, supply remains stable with the broker pointing out Australia & South Africa exports are flat compared to twelve months ago, while reported stocks are rising, another potential negative indicator. Elsewhere expanding Indonesian exports are currently being offset by a 5% fall in Chinese exports, and thats a positive
BHP gets RGP3 approval
BHP Billiton yesterday announced approval for its Rapid Growth Project 3. This will increase capacity at BHPs Area C iron ore mine in Western Australia by 20 million tonnes per annum to 42Mtpa. BHP will commence work on the project immediately, with initial production forecast to begin in the fourth quarter of calendar year 2007.
BHP has approved capital expenditure of US$1.3 billion for its 85 per cent share of the project. The RGP3 scope includes the development of a new pit at the Area C E Deposit and the construction of new crushing and screening facilities at the mine C Deposit. BHP will expand port and rail facilities to assist this capacity increase and position the business for further staged growth. The expansion will include a new stockyard, upgraded car dumper and ship loading facilities, as well as additional rolling stock and rail sidings.
President BHP Billiton Iron Ore Mr Graeme Hunt said RGP3 is part of the companys broad investment program to meet growing demand for all steel making raw materials. The project builds on our outstanding track record of bringing new production capacity on line over the past few years and lays the foundation for further expansions that will drive the future success of our business, he said. He added We are currently in the feasibility stage for Rapid Growth Project 4, which is focused on expanding the Newman operations, and are studying further growth options to ensure we continue meeting customer needs over coming decades.
Chinas nickel import to drop in Q4
After a surge in Nickel imports in September, the fourth quarter is expected to be quiet as many domestic stainless steel producers reducing their purchase quantity as well as the fact that Chinas largest nickel producer, the Jinchuan Group Ltd will be doing maintenance work in this quarter. Jinchuans nickel output occupies 75 percent of the total output in the domestic market.
China's Baosteel and Tisco will delay their usual monthly import of nickel for October for two months. Baosteel will accept new nickel offers at the end of 2005 or early next year as they have sufficient stock and are therefore able to delay their new nickel purchase plan.
The base price of nickel has dropped by 8% this year so far and was down 7% in August. China imported a total of 42,849 tons of nickel in the first seven months of the year.
Malaysia Kedah may revive iron mining industry
With soaring iron prices fuelled by increasing worldwide demand, Kedah is mulling over plans to allow revive the mining industry. Acting Menteri Besar Datuk Mahdzir Khalid said several local companies had expressed interests to mine iron ores in the State.
"Our mining industry was not as big as other States like Perak and Pahang but it did help bring in the investors. We want to revive the industry as it will boost the States coffers and diversify our sources of income," he said
The State's mining industry that is largely located in the southern part came to a halt back in the late 90s after iron ore prices fell.
Australia keen on steel ties with Iran
Australia and Australian companies are keen to brace stronger trade relations with the Islamic Republic of Iran, Australias Ambassador to Iran Mr Greg Moriarty said in a visit to Esfahan Steel Company ESC.
Mr Moriarty during his meeting with ESCs GD pointed to the industrial progresses of the country and steel mill industry in the city of Esfahan. The ambassador said that these have opened up new prospects for Australian companies to cooperate with their Iranian counterparts in commodity exchange and service sectors.
Malaysian Power Company threatens to cut power to steel plants
Power supply to a steel plant in the country may be cut because it is said to have failed to settle the outstanding electricity bills in the past five years. Tenaga Nasional Bhd deputy president Mr Datuk Abdul Hadi Mohamad Derus said the move to cut power supply would be the last resort. However, he refused to disclose the name of the company and the amount of the debt incurred.
Abdul Hadi said Tenaga Nasional had spoken to the company several times before in an attempt to make it pay up. He added We do not want to cut power supply because this will affect their operation and will create more problems. But even patience has its limit,
