May, 20 2006
Higher iron ore prices to trigger steel price hikes - Dr Irani
Dr JJ Irani director of TATA Sons and chairman of the Indian Steel Alliance believe that high iron ore prices will trigger steel price hikes amid tight iron ore supply during this year and in early 2007 benefiting steel makers with captive iron ore resources. During an interview with CNBC-TV18 Dr Irani said that I cannot remember anytime when it has reached that level and that will certainly encourage steel producers to increase prices because there is no way that they can make steel without the use of this high cost raw material and therefore it will certainly trigger a series of price escalations in the international market.
Hr also said that China cannot have much differential pricing from Korea and Japan.
RINL to secure additional 3 million tonnes of iron ore post expansion
Rashtriya Ispat Nigam Ltds Visakhapatnam Steel Plant is looking to pick up equity upwards of Rs 400 crore in foreign iron mining blocks in the next few months. RINL CMD Mr Y Shiv Sagar Rao said that the company has identified mining blocks in Canada, Australia and the US to meet its post expansion additional demand o 3 million tonnes of iron ore.
RINL, which has already applied for captive mining blocks in Orissa and Chattisgarh, is currently doling out an additional Rs 900 per tonne of iron ore that it carts from the Bailadilla mines. Mr Rao said that in order to have a level playing field, the government should seriously consider the allocation of captive mines to VSP.
In a bid to reduce raw material linkage costs, VSP has signed a memorandum of understanding with the National Mineral Development Corporation to set up a pit-head iron ore pelletization plant at Bailadilla. The proposed project will need an investment of Rs 400 crore and proposals for appointing a project consultant have been called for.
Steel ministry opposes higher iron ore exports
It is reported that steel ministry has not agreed on the proposal from the commerce ministry for maintaining status quo on the quantity of ore exports saying that ore exports cannot be at the cost of domestic steel utilities.
A senior official is quoted to have said "We are certainly not against export of iron ore to meet our overseas commitments, but that certainly cannot happen at the cost of our domestic steel utilities. The commerce ministry wants us to sanction the export of ore to the tune of six-and-half million tonne, which is absurd as it virtually, amounts to neglecting the perennial needs of the domestic steel majors."
It is reported that commerce ministry wants to export a minimum of six and half million tonnes of ore, where as steel ministry is in favor of capping it at 1.7 million tonnes. Moreover, steel ministry has sought cabinet approval for 5 year agreement with Japan, which is coming to an end, as against earlier recommendations of 10 years.
Indecently RK Dang committee, appointed by the steel ministry to address iron ore issue, has given its recommendations suggesting that domestic steel utilities be given priority along with those who intend to set up greenfield projects.
Indias iron ore production currently stands at 142 million tonne, out of which 78 million tonne is exported every year. The estimates for current year are at Rs 1,393 crore against last years Rs 827 crore following the firming up of price and quantity by a consortium of Indian iron ore exporters.
CIL enhances its coal production target
Coal India Limited has enhanced its coal production target of 2011-12 to a level of 504.1 million tonne which is about 141 million tonne more than the projection of 2006-07, to meet the rising coal demand.
CIL under Emergency Coal Production Plan has identified 16 opencast projects where production from the existing mines will be enhanced to a higher level yielding additional 71.3 million tonne.
The estimated investment for the increased production is Rs.5319.94 crore, out of which Rs. 2629.14 crore have already been sanctioned.
Coal prices deregulated since 2000
Minister of State for Coal Dr. Dasari Narayana Rao in a written reply in the Lok Sabha said that the prices of coal have been fully deregulated with effect from January 2000. The Colliery Control Order, 2000 empowers coal companies to fix the coal prices taking into account the market forces, average cost of production and other relevant factors.
Tariff Commission will be involved in pricing of coal for the power sector and to suggest modalities for pricing of coal for other sector.
CCEA approves Rs 141 crore support for 15 ailing units
Indias Cabinet Committee on Economic Affairs approved providing non Plan budgetary support of Rs 140.31 crore towards liquidating outstanding statutory dues of the employees in 15 public sector units, the Minister for Information and Broadcasting.
These PSUs include Andrew Yule & Co, Bharat Heavy Plates & Vessels, Bharat Opthalmic Glass, Burn Standard, Bharat Wagon Engineering, Heavy Engineering Corporation, Hindustan Cables, HMT, Hindustan Photofilms, Instrumentation Ltd, NEPA Ltd, National Instruments Ltd, Triveni Structurals and Tungabhadra Steel Products.
Mittal Steel unveils improved offer for Arcelor
Mittal Steel announced its decision to improve its offer made to the security holders of Arcelor SA. Based on the Mittal Steel share closing price, on the NYSE, on 18th May 2006, the revised offer values each Arcelor share at 37.74, which represents a 33.8% premium over the consideration offered in the offer announced by Mittal Steel on January 27, 2006 (i.e., 28.21 per Arcelor share), a 17.9% premium over the closing price on Euronext Paris of Arcelor shares on 18 May 2006, and a 69.8% premium over the closing price on Euronext Paris of Arcelor shares on 26 January 2006. Based on the average closing price, on the NYSE, of Mittal Steel shares over the 30 calendar days prior to 19th May 2006, the revised offer values each Arcelor share at 41.5.
This offer values Arcelor at an equity value of 25.8 billion on a fully diluted basis.
Under the terms of the revised offer, Arcelor shareholders will receive one Mittal Steel share and 11.10 cash for each Arcelor share, to be adjusted as provided in the terms and conditions of the current offer (including all distributions in excess of 0.8 per share). In addition, they may opt for a cash or stock mix in any proportion they elect, provided that overall 29.4% of the aggregate consideration paid to Arcelor shareholders is paid in cash and 70.6% in stock. The maximum amount of cash to be paid by Mittal Steel will be approximately 7.6 billion and the maximum number of Mittal Steel shares to be issued will be approximately 684.46 million.
Mittal Steel also announces significant changes to its corporate governance, as set forth below, including the adoption of a one-share one-vote structure.
Classes of shares and voting rights : Mittal Steel will amend its articles of association so as to eliminate all differences between class A common shares and class B common shares. All shareholders will hold ordinary shares carrying the same voting and economic rights. Each share will have one vote, irrespective of the length of time it has been held. The current right of holders of Mittal Steel class B common shares to make binding nominations for appointments to Mittal Steels Board of Directors will be removed. Directors will be elected by the general meeting of the shareholders, by a simple majority of the votes cast.
Board Composition: Mittal Steel will propose to enlarge the Board of Directors of Mittal Steel to 14 members. The Board of Directors will have a majority of independent directors.
Terms of office of Directors: Both Mittal Steel and Arcelor directors are currently elected for a term of office that varies from one year to five years. Mittal Steel will simplify this and have all directors elected by the general meeting of shareholders for a term of office of three years.
Management Board: Mittal Steel plans to have a management team reflecting the best talent for each position. The new organizational structure will be developed with senior management of both companies.
Headquarters: Mittal Steel intends to relocate the companys global headquarters and domicile to Luxembourg.
Shareholding Structure: After completion of the revised offer, assuming that all Arcelor shares have been tendered, the Mittal family stake in the combined entity will be around 45% in share capital and voting rights.
Mittal Steel expects to formally file the documentation relating to its revised offer, with the AFM, the CSSF, the CBFA, the AMF, the CNMV and the SEC shortly.
Mr LN Mittal chairman and CEO said We have today announced a materially improved offer, providing an exceptionally attractive premium to Arcelor shareholders. Not only are we offering a very significant increase in the cash component, but also a greater participation in the combined company. The revision reflects our long-term confidence in the health and prospects of the steel industry, in which the Arcelor - Mittal combination would be the undisputed sector leader.
Arcelor spokesman Mr Jean Lasar said the companys board of directors would meet to evaluate the details of Mittal Steels offer, including the new terms and conditions announced on Friday. Mr LN Mittal said he spoke with Arcelor chairman Mr Joseph Kinsch on Friday, and Mr Kinsch said Arcelor management would discuss the revised offer at a board meeting on Sunday.
CVRD settles 2006 iron ore prices with Mittal Steel
Companhia Vale do Rio Doce, the world's largest iron ore producer, announced that it has concluded the iron ore price negotiations for 2006 with Mittal Steel. As an outcome of these negotiations, iron ore prices for Carajas (SFCJ) and Southern System (SSF) fines increased by 19.0% relatively to 2005.
CVRD is investing a significant amount in the production and logistics of iron ore despite of rising investment costs. CVRD CAPEX budget allocated for 2006 is $2.1 billion for investments in ferrous minerals. Currently, CVRD is developing seven projects for iron ore and pellet production capacity expansion, which will come on stream between 2006 and 2008.
Chinese mills seek to exert clout in ore talks
The China Iron and Steel Association said that Chinese steelmakers will continue to talk with miners over an annual contract iron ore price adding the Asian benchmark price has not been set yet. CIISA said "The negotiation is still going on and Chinese mills won't accept a price hike without taking China's market conditions into account. So far, no Chinese and Japanese mills have given their approval to the 19% increase, therefore no Asian benchmark has been settled yet."
CISA made the remark after it convened executives of 16 major domestic mills to an emergency meeting in Beijing yesterday, following announcements reportedly by key global miners that some European and Japanese steelmakers had accepted a 19% jump in the contract iron ore prices.
CVRD announced on Tuesday that ThyssenKrupp has agreed to the 19% price rise. Than on Wednesday and Thursday CVRD announced settlement with Italy's Ilva, several Japanese mill, POSCO and on Friday announced agreement with Mittal Steel. Rio Tinto Group has also reportedly agreed with Japanese mills on the 19% rise.
In the past, Chinese steelmakers agreed to prices set by Japanese and European counterparts and ore miners. But this year, they vowed to exert more say over the annual talks given China's clout in the industry.
Arcelor calls a meeting on June 21 for share buy back offer
Arcelor will call a second extraordinary general meeting of shareholders in Luxemburg, for Wednesday, 21 June, 2006 after a first meeting held on May 19th did not gather the required quorum of 50% of the issued capital. The absence of quorum at the first convened extraordinary general meeting is frequent and usual in many large listed companies. No quorum will be required for the second meeting at which resolutions may be adopted with a majority of at least two thirds of the votes of the shares present or represented.
The agenda for the upcoming meeting remains unchanged and contains a draft resolution providing for a share capital reduction by a public offer to buy back shares of the company, which will then be cancelled. This offer will be open to all shareholders and will concern a maximum of 150 million shares, at a price to be set by the Board of Directors, but not exceeding 50 euros per share.
The proposed share buy-back is one of the possible options announced by the Board of Directors on April 4, 2006 in connection with the distribution of a total amount of 5 billion euros to the shareholders.
Another proposed resolution on the extraordinary general meeting agenda seeks to reinforce the groups already high corporate governance standards. It proposes the insertion of a paragraph into Article 13 of Arcelors Articles of Association allowing shareholders holding at least 1% of issued shares to request that draft resolutions be put on the agenda of a shareholders meeting.
Price increase for iron ore lumps to be lower
Iron ore suppliers are likely to win a price increase for lump ore below the 19% rise. Credit Suisse analyst Mr Peter O'Connor said "We expect that the lump iron ore price will come in at a price gain of about 14.9% versus the fine price gain of 19%."
For the past contract year, which ended on March 31 2006, lump ore attracted a record premium of about $0.17 per dry metric ton unit. However Mr O'Connor noted that following a drop in the premium for pellet ore in Europe from an all time high, there is likelihood that the premium for lump ore may also be trimmed.
He said it is likely that lump ore prices will be settled with the Japanese steel mills within a few days.
POSCO confirms 19% iron ore contract price hike with CVRD
POSCO said that it has agreed to an iron ore contract price hike of 19% for the year to March 2007 with Brazil's Companhia Vale do Rio Doce, in line with deals reached by other major steelmakers and ore suppliers. It said We agreed on a price hike of 19 pct.
MoneyToday reported that CVRD will supply about 12 million tons of iron ore this year to the South Korean firm, with the price increase in force from April.
Falconbridge CEO says that its worth more than Xstrata offer
Mr Derek Pannell CEO of Falconbridge said that Xstrata's hostile C$16.1 billion bid for Falconbridge Ltd undervalues' the Canadian miner whose profit is soaring on higher metal prices. Mr Pannel said
I think it is worth a lot more than C$52.5. It's frustrating that people haven't seen the full value of the company.''
Mr Pannell said that Falconbridge's earnings justify a higher bid. Falconbridge announced that net income for April almost tripled to $238 million. Profit for the year, based on the $700 million earned in the first four months, could reach $2.1 billion. Mr Pannell said I think a company that's actually earning $2.1 billion is worth more than the offer that we've had, particularly given our growth projects and particularly given that those earnings were achieved at prices below what they are today.
Xstrata offered C$52.5 a share for the 80% of Falconbridge it doesn't own, trying to thwart a friendly offer for Falconbridge from Canadian rival Inco Ltd. Xstrata's May 17 offer followed a revised cash and stock bid from Inco on May 13 that is worth C$18.9 billion, based on yesterday's closing share price. Xstrata's bid values Falconbridge at C$20 billion.
Lion Group to start DRI plant in Malaysia by the year end
The Lion Group, owner of Mega steel, is building Malaysia's biggest 1.54 million tonnes capacity natural gas based Midrex direct reduction iron plant at its steel complex at the investment of RM1billion. The plant is slated for operation either by year end or early 2007.
Perwaja Steel Sdn Bhd is the only steel player with a DRI plant in Malaysia.
Mr Tan Sri William Cheng chairman of Lion group said that higher production of DRI in Malaysia would help reduce dependence on scrap as raw material for steel making. This would enable the production of high quality and special grade steel to support the downstream manufacturing and processing industries of automotive parts, steel furniture and electrical and electronic appliances adding that Lion Group would continue to focus on becoming a low cost producer while improving productivity and yields.
Mr Cheng said Our production helps to substitute imports worth about RM5bil annually and promote exports directly and indirectly through the downstream industries". He added that We will be talking to Petronas to source a sustainable supply of natural gas, estimated at 18 million British thermal units per year, for this project.
Lion Groups steel-making capacity is about 4.8 million tonnes per year with Megasteel, Amsteel Mills Sdn Bhd and Antara Steel Mills Sdn Bhd as main companies. Megasteel is the only integrated flat steel mill in Malaysia manufacturing hot rolled and cold rolled coils.
5 people trapped in coal mine collapse near Beijing
Rescuers are searching for five miners who are trapped after a coal mine collapsed Thursday in southwestern Beijing. The accident took place around 3AM on Thursday when the No 6 coal mine in Lianhua'an Village of Fangshan District collapsed, burying all the five workers who were repairing a section of the shaft.
The management group of the mine did not report the accident to the administration until 12 hours after it happened. Rescuers managed to pump oxygen into the shaft at around 8PM. Thursday but no contact with the trapped miners has been established yet.
The mine is located in a mountainous region in Fangshan, which is about 120 km from downtown Beijing. An investigation into the cause of the accident is underway.
Mittal Steel says new Arcelor bid fully financed
Mittal Steel said on Friday its increased offer for rival steelmaker Arcelor was fully financed and should not affect its credit ratings. Mr Aditya Mittal CFO said "The transaction is fully financed, was financed last night. We have 14 banks that are participating in this financing."
He added that "We also believe that the additional cash that we are offering Arcelor shareholders does not impact our ratings."
Ukraines steel export up by 1.5% in January-April
Ukraine increased steel exports tentatively 1.5% YOY in January to April to 10.2 million tons, Deputy Industrial Policy Minister Mr Volodymyr Hranovsky said at a meeting with mining and steel sector executives.
However, steel exports in value fell by 11.5% to $3.7 billion, reflecting a steep plunge of steel prices on world market Mr Hranovsky said.
Mittal Steel & Arcelor shares suspended on Amsterdam exchange
According to latest reports by CNBC-TV18, shares of Mittal Steel and Arcelor have been suspended on the Amsterdam Stock Exchange. This happened after news broke that Mittal Steel is likely to raise its bid for Arcelor by 3 billion euros. As per reports, trade has been halted because there was a dip in the share prices of both the companies, given the offer and the uncertainty following it.
The offer period is valid for 30 working days and shares cannot be suspended for that long. Therefore resumptions are likely soon. They have been halted on the speculation on what exactly the offer would be and what the terms will be. Once that is declared and announced and shareholders have a very definite offer to look at and respond to, then the trading is likely to resume.
Metals USA completes 2 acquisitions
Metals USA Inc announced the completion of two acquisitions.
On May 17, the Company acquired the assets and business operations of Port City Metal Services Inc located in Tulsa Oklahoma. Port City is a value added processor of steel plate, using laser cutting, plasma and oxyfuel burning, braking and rolling, drilling and machining, and welding to service its customers. This single site business will become part of the Company's Plates and Shapes Group.
On May 12 the Company acquired the assets and business operations of Dura-Loc Roofing Systems Limited. With its manufacturing facility located near Toronto Ontario the Dura-Loc acquisition provides our Building Products Group with the ability to manufacture and distribute stone coated metal roofing products to the eastern half of North America.
Metals USA provides a wide range of products and services in the heavy carbon steel, flat rolled steel, specialty metals, and building products markets.
AK Steel board approves pre payment to pension fund
AK Steel announced that its board of directors has authorized the company to make an $84 million contribution to its pension trust fund months ahead of schedule. The company said it would make its full required 2006 pension contribution next week, more than five months before the final due date. AK Steel's previous pension contribution was a voluntary $150 million contribution made in January of 2005.
AK Steel provides pension benefits to approximately 32,000 retirees or their beneficiaries. The company said that while it has continued to fund its retiree health care and pension legacy costs, most of its competitors have reduced or eliminated their legacy obligations through the bankruptcy process.
Mr James L Wainscott chairman, president and CEO said "AK Steel is proud to continue honoring a retiree tradition unique in the steel industry. In more than half a century, this company has not missed a pension fund contribution, nor a payment to any of its 32,000 pensioners."
Isfahan exports surge by 106% in last Iranian year
Isfahan Steel Complex produced 2.574 million tons of iron rods, beams and sheets in the past Iranian year. The 106% growth in exports has been unprecedented in the history of Isfahan Steel Complex.
ISC mainly exported to the regional countries such as Afghanistan, Pakistan, Iraq, the UAE, Saudi Arabia as well as the European markets in particular, Germany, Italy, Spain, Greece and Poland.
Isfahan Steel Complex is the largest producer of steel beams in the Middle East region.
AK Steel CEO urges AEIF to get serious
Mr James L Wainscott AK Steels chairman, president and CEO, at the annual shareholders meeting in Chicago, said that "although AK Steel wants an agreement with its locked out union as soon as possible but the union has been unrealistic. Mr Wainscott said Middletown cannot be an island. Middletown Works is out of step and the Armco Employees Independent Federation is out of touch with reality.
AK Steel says that it must have what it calls new era labor agreements to make its labor costs competitive. Mr Wainscott said "That means we need fewer employees, fewer job classes, defined contribution pensions and active and retiree health care cost sharing. If we have any hope of improving our competitiveness and sustaining profitability, we must have these things."
He said the company has negotiated such agreements at other plants, including its Zanesville Ohio plant this month and said a settlement in Middletown can happen quickly when the AEIF gets serious.
Union leaders have challenged that claim, and also have urged management to pick up the pace of negotiations and have daily sessions.
The lockout of nearly 2,700 workers began on March 1 at the AK Steel's Middletown Works.
Material Sciences improves earnings in last financial year
Material Sciences Corp., which makes steel products and engineered materials, announced that its fourth quarter net loss narrowed as sales edged up slightly and costs declined. For the quarter ended February 28, the company posted a net loss of $0.665 million as compared with a loss of $1.9 million during the same period a year ago. Sales rose by less than 1% percent to $64.4 million from last year's $63.9 million. The company said its gross profit declined by 21.7% to $9.5 million from last year's $12.2 million, as higher sales of body panel acoustical products were offset by weak sales of coated products and brakes.
For the full year, the company earned $5.2 million as compared with a loss of $0.32 million a year ago. Sales rose by 9% to $286.6 million from last year's $263.3 million.
The company said it has launched programs to improve production issues that have hurt its results. Mr Clifford D Nastas CEO said "These programs have already begun to reduce inventory and customer warranty costs and have helped to mitigate the impact of rising energy and raw material prices."
EU to pass a restrictive take over law
It is reported that EU is set to enact a less restrictive law that would leave in place poison pills and other defenses against hostile corporate takeovers. The law makes it optional rather than mandatory to bar takeover defenses.
Luxembourg's Parliament passed its version of the law on May 4, giving the steel maker Arcelor, which is registered in that country, the option to use defenses against Mittal Steel. German lawmakers approved their measure Friday.
Coal mine collapses in NW China region
A coal mine caved in Friday afternoon, killing at least one worker underground in northwest China's Xinjiang Uygur Autonomous Region, local government said Friday night. The accident took place at 2PM at the Ke'erke coal mine in Nilka County, about 600 km west of the regional capital Urumqi.
However, it is not known how many miners were working underground when the accident happened and officials have not provided any further details.
The miner was not taking precautions while removing the roof bracket, which led to the collapse of the roof and cave-in of the coal mine, local government sources said.
