June, 21 2006
Union government allots 19 coal blocks to state units
The union coal ministry on Tuesday approved the allocation of 19 coal blocks with reserves of 7,436 million tonnes. Coal minister Mr Shibu Soren, who approved the allocation, said that the current allocation will empower the state governments to promote industrialization by making coal available to prospective investors without having to approach the centre. In all 28 blocks were offered to government companies, out of which only 19 blocks have been approved for allocation.
The Mara-II-Mahan block in Madhya Pradesh with a capacity of 955 million tonnes has been jointly given to Delhi government and Haryana Power Generation Corp Ltd. Chhattisgarh Mineral Development Corp has bagged the state based Gare Palma sector-1 with a capacity of 900 million tonne for utilization in sponge iron and steel industries. The 733 million tonne Nuagaon Telisahi block in Orissa has been allotted to AP Mineral Development Corp and Orissa Mining Corporation.
AusQuest reports low Fe in initial drilling results at Pilbara
Australian junior iron ore explorer AusQuest Ltd has reported lower than expected iron grades after initial drilling at Nameless project in Western Australia's Pilbara region. The drilling confirmed the presence of channel iron mineralization but the grades were lower than at other nearby deposits including Rio Tinto's Robe River mine.
AusQuest said that the grades ranged from between 50% and 56% iron and were lower than previous exploration had indicated. It said "While both the iron grades and contaminant levels are not at the levels initially expected based on the surface sampling results, the drilling has confirmed the presence of substantial volumes of pisolitic channel iron mineralization at Nameless." High levels of contaminants in the samples meant AusQuest would not make any judgments about the commercial potential of the mineralization.
AusQuest said "A comprehensive report on the drilling results will now be prepared and submitted to Rio Tinto." Rio Tinto has an option to acquire a 60% stake in the project after reviewing AusQuest's report. If Rio Tinto decides to exercise the option it will earn its interest by funding up to $7.5 million of exploration, establishing a resource.
Essar plans 1,000 MW captive power plant in Chhattisgarh
Essar Power is planning to invest Rs 4,000 crore for setting up a 1,000 MW coal based thermal power plant in Chhattisgarh. Mr HS Sethi resident director of Essar Steel said "We have decided to build a 1,000 MW power plant in Korba district with an investment of Rs 4,000 crore. The power plant would have two units of 500 MW each, and would supply power to Essar Steel's upcoming 3.2 million tonne steel plant in Dantewada district."
Mr Sethi said the power plant would be operational within two years and before the commissioning of the steel project.
Essar Steel would require about 300 MW, and the balance would be sold to the Chhatisgarh State Electricity Board.
MSL looking to buy a round billet mill
Maharashtra Seamless Ltd is reported to be looking to acquire round billet manufacturers in a bid to ensure raw material supply after its plan to set up a round billet plant in Orissa was delayed due to land acquisition problems. Mr Anil Jain CFO told Reuters "In Orissa, we have lost some time and we are not very sure as on date how much time it would take for settling down the issues."
Mr Jain said that Maharashtra Seamless was in talks with lenders and Asset Reconstruction Company of (India) Ltd, seeking ailing mills at attractive valuations. He said "We have submitted our expression of interest for a couple of mills and we plan to for a couple more."
The company had borrowed $75 million in 2005 to fund acquisitions and capital expenditure.
Millennium & NatSteel to import low cost billets rather than scrap
TATA Steel is reported to be weighing various options before it to boost the profitability of its acquired steel plants NatSteel Asia and Millennium Steel. Dr T Mukherjee deputy MD (steel) while speaking to FE said We are finding the synergies. We are finding many opportunities among ourselves.
Dr Mukherjee said that TATA Steel wants both plants to restrict themselves to buying only local scrap to produce as much steel as possible from it and stop importing scrap and rather import billets from either TATA Steel or from any other Indian source. He said that their margin would improve substantially.
Dr Mukherjee said that as two of the three Millennium Steel plants are port-based TATA Steel is also thinking of putting up a mini blast furnace at one of the plants in order to enhance steel production.
David Brown supplies HSM gear boxes to JSW Steel
David Brown Engineering has supplied 5 large gearboxes and pinions to JSW Steel in India in the first stage of a major upgrading of the company's hot strip mill facilities, completed during April to May 2006.
JSW has 6 finishing stands with 5000 HP motors and these motors have been upgraded to 7000 HP. The installation took place in one planned 5 week shutdown with the actual installation performed by JSW Steel. VAI and Siemens were also present to oversee the installation of the motors.
This modernization will increase JSWs HSM capacity by 40% and other planned improvements are designed to progressively double throughput at the facilities.
Adhunik Metal brings coal mining in Patrapara block to halt
Statesman has reported that the mining operations to develop and extract coal in Orissas new Patrapara block in the Mahanadi Coalfields area have come to a stop.
Adhunik Metaliks with steel plant at Chandrihariharpur in Sundargarh district has challenged the coal ministrys decision in January 2006 to jointly award the mining block with Bhusan Steel & Strips Ltd as the leader company in the Orissa High Court, which granted an interim stay on the coal ministrys order and Bhusan Steel & Strips has filed a petition seeking the vacation of the stay order.
The Union coal ministry granted the 609 million tonnes coal deposits mining lease to Bhusan Steels & Strips Ltd, having right over 48% of the reserves, to be the leader company and make all investments and undertake all mining operations to develop and extract coal from the allocated block. The other 7 steel companies including Adhunik Metaliks, Visa Steel Ltd, Deepak Steel & Power Ltd, Adhunik Corporation Ltd, Orissa Sponge Iron Ltd, SMC Power Generation Ltd and Sree Metaliks Ltd were allotted 52% of the reserve.
The coal ministry specified in the order: "Production from the mines shall be shared amongst the leader and the associates through MCL. The leader company shall supply the associates share of coal to the associate companies through MCL at a price to be determined by the government." Adhunik Metaliks, however, had sought judicial intervention on the plea that BSSL was thrust upon seven companies as their leader.
Indian Railways freight revenue up by15.84% during April to May
Indian Railways have generated Rs 6687.18 crore of revenue earnings from freight traffic during April to May 2006 as compared to Rs 5772.78 crore during April to May 2005 registering an increase of 15.84%. Indian Railways carried 117.55 million tonnes of freight traffic during April to May 2006 as compared to 107.58 million tonnes carried during April to May 2005 registering an increase of 9.27%.
The earnings from freight traffic during the month of May 2006 was Rs 3359.38 crore as compared to Rs 2935.65 crore during the May2005 registering an increase of 14.43%. Railways carried 59.46 million tonnes of freight traffic during May 2006 as compared to 55.26 million tonnes during May 2006 registering an increase of 7.6%.
Out of the total earnings during the month of May 2006, Rs 1296.16 crore came from transportation of 25.95 million tonnes of coal, Rs 160.99 crore from 1.62 million tonnes of iron & steel for steel plants, Rs 160.90 crore from 4.28 million tonnes of raw material for steel plants and Rs 154.17 crore from 2.36 million tonnes iron ore for exports.
Neyveli Lignite awards McNally Bharat handling system contract
Neyveli Lignite Corporation has awarded Rs 1.77 billion turnkey contract of lignite and limestone handling system for 2x125 MW Barsingsar Thermal Power Project in Rajasthan to McNally Bharat Engineering Company.
Neyveli Lignite Corporation has also awarded Rs 383 million turnkey execution of the ash handling plant for the 2X250 MW CFBC boiler for TPS-II expansion at Barsingsar Thermal Power Project on June 5th.
McNally Bharat Engineering Company was incorporated in 1961 as a JV between Bird & Co of India and McNally Pittsburgh of USA. Presently, MBEC is jointly controlled by the CK Birla group with 24% equity stake and BM Khaitan group with 22.2% equity stake. MBEC is a turnkey project specialist, supplying bulk material handling, coal preparation, mineral beneficiation, ash handling, opencast mining, water treatment and transport infrastructure for a wide range of industries.
Lamnalco bags order for a tug to ABG Shipyard
ABG Shipyard Ltd has received another order for construction of 1 No Anchor Handling tug 80Ton Bollard Pull for Offshore applications, at a price of $ 10.55 million from Lamnalco Ltd of Cyprus for delivery by August 17, 2008
This is the 11th Ship order form Lamnalco Ltd of Cyprus to the Company. The Company has already delivered 5 vessels and other 5 vessels are under Construction for Lamnalco Ltd.
Madhucon gets NHAI highway project in Tamil Nadu
Madhucon Projects Ltd has signed a concession agreement with NHAI for a BOT Project between Trichy and Thanjavur, at a cost of Rs 3400 million with 20 years Concession Period and positive grant of Rs 784.40 million. The project involves designing, financing, construction, operation and maintenance of 80 kilometers to 135.750 kilometers of NH-67.
Madhucon Projects is engaged construction Of National Highways, State Highways, flyovers & bridges, Execution Of infrastructure projects on Turnkey basis, construction Of Irrigation projects like dams, canals & aqueducts, power Houses, material handling plants and coal beneficiation plants etc.
BHEL awards Birsinghpur power plant civil work to Era Constructions
Era Constructions India Ltd has been awarded contract by Bharat Heavy Electricals Ltd) for all civil structural and architectural work for CW Systems at 1X500MW SGTPS Birsinghpur Thermal Power Project at Madhya Pradesh Power Generating Co Ltd at Birsinghpur in Dist, Umaria of Madhya Pradesh. The value of the contract is Rs 320 million and is to be executed over a period of 10 months.
Era Constructions is already executing four major power projects at Kahalgaon in Bihar, Sipat in Chattisgarh, Vindhyachal in Madhya Pradesh and Durg in Chattisgarh.
Severstal offers revised terms for Arcelor merger proposal
It is reported that Severstal has offered to revise the terms of its merger agreement announced on May 26, 2006 with Arcelor in a bid to outflank Mittal Steel's competing bid. The proposal is in response to investor feedback provided by Arcelor's shareholders over the course of the last several weeks.
Severstal proposes the following changes to the merger agreement
1. Mr. Mordashov will now receive 210 million new Arcelor shares (previously 295 million), representing approximately 25% of the enlarged company (previously 32%).
2. The Strategic Committee will be eliminated. In return, Mr Mordashov will be free to vote his shares in line with normal shareholder practice and the standstill and lockup provisions will be eliminated
3. The cash contribution from Mr. Mordashov of Euro1.25 billion will no longer be included
4 In all other respects, the merger agreement will remain unchanged
In addition, Mr Mordashov confirms his intention not to increase, either actively or passively, his shareholding in Arcelor above 33.3% without making a mandatory tender offer to all shareholders in accordance with Luxembourg law.
Mr. Alexey A Mordashov, SeverStal's Chairman and controlling shareholder said "We have met with a large number of Arcelor shareholders over the past three weeks and discussed the transaction at great length with them. These shareholders have generally been very supportive of our value proposition and proposed merger. I have taken careful note of all the investor feedback and believe that this enhanced proposal meets their requirements. The improved terms create outstanding value to shareholders and reflect my continuing belief in the industrial logic of combining these two superb companies into the global steel champion".
China finally blinks and accepts the inevitable
The Chinese steel industry has accepted a 19% rise in price of iron ore for supplies during 2006-07 ending months of negotiations between steel mills in China, led by Baosteel and the miners Rio Tinto, BHP Billiton and CVRD. The price rise will be effective for the year that started on April 1, 2006.
BHP confirmed it had reached an agreement with a number of Chinese customers in a brief statement to the London Stock Exchange. It said "Prices increased by 19% over prices negotiated in respect of the 2005 year across the range of lump and fines iron ore products supplied by BHP Billiton."
Xinhua reported that Baosteel, the representative of Chinese steel firms, said that it had accepted a price hike of 19% for contract iron ore deliveries by BHP. Xinhua said Baosteel also reached the same price rise agreement with two other major iron ore suppliers Australia's Hamersley Iron and Brazil's CVRD. Mr Liu Yongshun chief negotiator of Baosteel said that the Chinese steelmakers will sign contracts with CVRD and Rio Tinto also in the next few days.
Mittal Steel says outcome of talks with Arcelor uncertain
Mittal Steel said on Tuesday that talks with takeover target Arcelor were continuing but the likely result was uncertain. Mr LN Mittal CEO of Mittal Steel said "Mittal Steel confirms that discussions are taking place with Arcelor. The outcome of these discussions remains uncertain at this stage."
Mr LN Mittal told the Wall Street Journal that Arcelor's decision pf cancellation of a shareholder meeting scheduled for June 21 on a planned Euro 6.5 billion share buy back plan made him increasingly confident he could convince Arcelor shareholders they should back his offer to buy their company and pressure management into dropping its resistance.
Mittal Steel has also launched a major publicity campaign in the French and European press with full page ads calling on Arcelor shareholders to vote against the Severstal merger at the AGM in Luxembourg on June 30.
NLMK named global leader in terms of profitability
Deutsche UFG has singled out the three global ferrous metallurgy leaders in terms of profitability. The Novolipetsk Iron and Steel Works whose 2005 EBITDA earnings totaled 48% of its profits, was followed by CSN and Usiminas of Brazil with 46% and 42% respectively. This situation is unlikely to change by the end of the year and NLMK may even improve its track record.
Mr Vladimir Katunin an analyst with Aton Brokerage said "Russia is at an advantage, as its steelmakers have both iron ore and coal, whereas Brazil has no coal
The Deutsche UFG survey said the Brazilian companies were offering a broader range of products than NLMK, whose top quality conversion processes accounted for only 11% of earnings, as compared with 36% for Usiminas and 53% for CSN. NLMK therefore has potential, the survey said.
Mr LN Mittal sees no future for steel futures
Mr LN Mittal CEO of Mittal Steel said that the way out of the steel industry's boom and bust cycle is through consolidation and not financial markets derivatives. Mr Mittal at a steel industry conference in Manhattan cosponsored by American Metal Market and World Steel Dynamics said "We are not working for the banks. We are working for the shareholders. If we can reduce the volatility, I don't think we need futures."
London Metal Exchange is currently in the process of developing steel market futures contracts. The steel industry has long resisted attempts at anything approaching price transparency. The concept of risk management has never been a big hit with steel producers, which have steadfastly resisted using open market mechanisms to facilitate price discovery, as in other metal markets such as copper and aluminum.
Mr Mittal elaborated that in the past, steel companies had produced volume for volume's sake, meaning that producers had simply continued their output of steel products when there was no market demand. As a result, price levels had periodically crashed, leading to the dramatic feast and famine style swings in industry fortunes. Now, however, he noted that industry participants were acting more rationally by reducing production levels but remaining firm on prices during weaker economic times.
Mr Mittal's words stand in stark contrast to those of Mr Peter Marcus, managing partner of World Steel Dynamics, also a speaker at the conference, who foresaw quantum jump in transactions as financial derivatives take off. Mr Marcus says the Chinese have a huge affinity for using financial products such as those proposed by the LME. A WSD report said "The interest in steel financial transactions matches up well with the gambling mentality that is inherent in the Chinese psyche." The report goes on to state that the Chinese Futures Exchange wants to begin trading in rebar and wire rod, another staple of the steel industry.
Corus Evraz merger back in limelight
Subsequent to the news of Mr Roman Abramovichs acquisition of 42% stake in Evraz Group SA, experts predict that the talks of a tie up or merger of Evraz with Corus Group will be reignited. Talk of a link up between the two companies was rumored earlier this year after a press report suggested they had held talks about a possible merger.
A Russian newspaper report recently said that Abramovich was preparing for a new merger in the metallurgical sector and that through the acquisition of a major stake in Evraz could try and broker a deal with Corus to form a new European low cost steel producer. Analysts have also suggested that a tie up with Evraz would be consistent with Corus's objective of building a presence in low cost, high growth economies.
Investment house Credit Suisse First Boston said that while it may be too early to call a potential Evraz-Corus deal, it did not rule out the possibility of an alliance due to operational synergies and the good connections of Abramovich in Russia and London. It said 'We believe Corus may be considering its options, given the current spate of consolidation in the sector. We have argued that Corus would be an attractive partner for an emerging market steel producer in some form of merger of strategic tie up.
US brokerage Citigroup also believes that Evrazs stake sale to Mr Abramovich could be a first step in a series of transactions aimed at Russian domestic or cross border steel consolidation. Earlier reports have suggested that Russian businessman Mr Alisher Usmanov, who owns the Lebedinsky and Mikhailovsky iron ore plants, may want to get involved in any Evraz-Corus alliance. He bought a 13.4% stake in Corus in 2003 and proposed a merger with his iron ore companies.
Mr LN Mittal calls for consolidation for sustainable growth
Mr LN Mittal CEO of Mittal Steel while speaking at the AMM WSD organized Steel Success Strategies conference in New York said that continued consolidation in the steel industry is the only way to delivery sustainable growth and returns to satisfy shareholders. Mr Mittal said that the steel industry had disappointed its shareholders over several decades but an improvement was in place, which had been helped by consolidation in Europe, the US and Japan.
Mr Mittal said that he first spoke about the need for consolidation in the steel industry in the US at a conference in 1998. He said back then, Pohang Steel Company of South Korea was the world's largest producer with annual capacity of 25 million tonnes. He said the industry was highly fragmented with a few regional players. He said that he was pleased that consolidation had moved a long way since then not because that he wanted to be proved right but because there was recognition that it was necessary.
Mr Mittal said that consolidation gave the steel industry better control over supply and demand and ultimately pricing. He said the largest players were very quick to respond to oversupply in 2005 and adjusted production and steel prices recovered very quickly in Europe and in the US.
Mr Mittal said despite the consolidation that has occurred the valuations of the steel industry were still among the lowest on stock markets. This was because the investment community doesn't believe enough has been done.
Strike halts production at Shougangs mine in Peru
Chinese owned iron miner Shougang Hierro Peru halted its production on Tuesday following a strike by workers over working conditions and pay. Hundreds of striking workers protested outside the mine to prevent the company from restarting production by using sub contracted workers.
Some 700 workers who went of strike on Monday are seeking a wage increase of 5.50 soles ($1.69) a day. The company has offered a raise of 1.90 soles a day. Workers say they deserve a higher slice of Shougang Peru's record profits generated by soaring metals and minerals prices. Mine workers at say they earn an average of $13 a day, not including benefits. That is below the average miners' salary in Peru of $33 a day, according to Peru's private National Society of Mining, Petroleum and Energy. The company said the income per worker was $40.40 a day if benefits such as free electricity and water are added.
Shougang Group bought the state run Hierro Peru iron mine for $118 million in 1992 and has increased production and efficiency at the pit, generating strong profits. Shougang, which produces 18,000 tonnes of iron ore daily on Peru's southern coast, said the strike was costing the company $400,000 a day. Mr Raul Vera GM said "Unfortunately, our operations are frozen. The work normally done by the miners has halted."
China to tighten foreign acquisitions in steel sector
China will tighten screening of deals and impose new curbs on foreign acquisitions in its heavy industry on the worry that it may be selling industrial assets to foreigners too cheap. New restrictions will be imposed on foreign purchases of controlling stakes in strategic industries including steel and the manufacturing of equipment for shipbuilding and power generation, the report quoted unnamed sources as saying.
A news report said that "Government departments and experts are concerned that the wave of large scale foreign acquisitions may endanger national security and believe restrictions and limits should be placed on purchases of domestic companies by foreign capital."
Mittal Steel calls on Arcelor Shareholders to reject Severstal deal
Mittal Steel has issued an open letter urging Arcelor SA shareholders to resist pressure from management to merge with Severstal. The letter, published across a full page of the Financial Times, said that the proposed merger would give Mr Alexei Mordashov Severstal's owner control over the combined company.
The letter said We strongly encourage Arcelor shareholders to exercise their veto right' at a meeting on June 30. Unless there is a veto by holders of 50% or more of the capital on June 30, control of the company could be transferred in a value destroying transaction.''
The letter in the FT said that after an agreement with Severstal, Arcelor's board could use a poison pill against Mittal Steel's bid by issuing new shares to Mr Mordashov even if shareholders voted to accept Mittal Steels latest offer.
Setback for SA gold miners in steel price battle
The South African Competition Tribunal rejected 2 of the 5 remedies suggested by Harmony Gold Mining and DRDGOLD. Mittal Steel SA will not have to sell its 50% stake in Macsteel International. The other remedy rejected sought to prevent Mittal Steel SA from exporting flat steel directly or indirectly through a party in which it had an interest.
The Competition Tribunal ruling on whether Mittal Steel SA is guilty of excessive pricing is expected only after August. Mittal Steel SA may also have to make transparent and public its price list, rebates, discounts and other standard terms of sale for flat steel products if the tribunal rules in favor of the gold miners.
Mr Tami Didiza Mittal Steel SA spokesman said that the three remedies that the tribunal agreed to consider were nothing more than fine tuned versions of the original remedies the gold miners had proposed. The three new remedies aimed to prevent Mittal Steel from imposing conditions on its customers use or resale of the flat steel products bought from Mittal Steel SA.
Harmony and DRDGOLD also welcomed tribunal decision. Harmony CEO Mr Bernard Swanepoel said that his group remained confident that remedies it had offered would lead to a more competitive environment for Harmony and other steel users.
Spot iron ore prices rise on Chinese summer buys
Spot prices for iron ore are rising as Chinese steel mills begin their summer purchases, even though a final 2006 term price has not yet been settled. Prices for imported Indian iron ore are reported to have risen to $73-$74 a tonne, compared with less than $70 a tonne in mid May. Domestic Chinese iron ore prices China have risen to between 640 yuan and 650 yuan a tonne in the last two weeks, up 40-50 yuan. In the northeast, where port stocks of iron ore are still ample, prices are lower at 530 yuan a tonne, up 20 yuan.
Mr Chen Xianwen deputy director at the China Iron and Steel Association said "The unsettled price talk impacts little on iron ore delivery to China. Transportation seems normal except for at one point Baosteel's carriers were held up at shipping docks in Brazil."
Term contracts in China extend to the end of June at the previous year's rate, after which buyers must revert to paying spot prices for their ore. Rather than paying spot prices, however, some Chinese buyers are believed to be loading less ore on their ships while paying for a full cargo, effectively paying a per tonne premium. It is reported that major steel mills have renewed their contracts with shipping agencies for ferrying ores from Brazil and Australia, in order to avoid any disruption in operations.
China plans $ 5 billion investment in coal mining by 2020
China, the world's biggest coal producer and consumer, plans to spend about 40 billion yuan ($5 billion) by 2020 exploring for coal reserves across the nation as the country aims to secure about 170 billion tons of coal reserves. Mr Xu Dingming head of the energy bureau under the National Development and Reform Commission said that "The budget will be used between 2003 and 2020 to boost the nation's coal resources." Mr Xu said "Companies are reluctant to invest in exploration due to its high risks, so the government should step up efforts to look for more resources."
The move reflects the nation's vigorous efforts to secure sufficient energy resources in fuelling its fast growing economy, which grew by 10.3 per cent in the first quarter.
According to Mr Zhang Yuzhuo VP of Shenhua Group China so far have commercially recoverable coal reserves of 288 billion tons with total estimated coal resources of 5.5 trillion tons. China produced 2.19 billion tons of coal in 2005 with an annual increase of 24% in coal production over the past five years.
Vietnams environment ministry clarifies scrap import rules
Vietnams minister of natural resources and the environment has clarified that the changes in the environment law do not prohibit importing steel scrap for domestic production. The minister has sent a letter to the Prime Minister Mr Phan Van Khai explaining ministrys viewpoint on this matter. This clarification has put an end to the prolonged dispute among enterprises and authorities on whether to allow scrap steel import and whether to allow end users to authorize trading companies to import scrap metal for them.
The letter said that the import of scrap metal to serve domestic production is a real demand among enterprises. The environment law, while aiming to protect the environment, must also not hinder the normal operation of enterprises and does not prohibit scrap steel imports to run domestic steel rolling mills. Article 43 of the law clearly stipulates the requirements for scrap metal importers. Strict requirements govern the flow of industrial waste into Vietnam. The article says that steel producers can authorize other businesses to import scrap metal provided that the imported metal meets environmental standards.
Arcelor expects improved bid from Mittal Steel
Mr Guy Dolle CEO of Arcelor said that he expects Mittal Steel to improve on its $27.7 billion takeover bid. But Mittal Steel's CEO Mr LN Mittal said his company has not raised its offer and believes its bid is very attractive as it stands. Fund managers meanwhile said Arcelor shareholders expect Mittal Steel to improve its Euro 22 billion offer.
Senior level executives from Mittal Steel and Arcelor have been meeting in the last 10 days in Europe discussing valuation, corporate governance and other subjects. Mr Dolle told reporters "This transaction has, and will be improved."
An insiders account of yearly iron ore price negotiations
The yearly event in mining & steel industry is the annual negotiation of iron ore prices when BHP Billiton, Rio Tinto and CVRD sit down separately with the key steel makers across the world and hammer out new prices and come up with the same price - 71.5% in 2005 and 19% in 2006. Mr Lan Kohler spoke to Mr Jose Carlos Martins ED of ferrous division of CVRD at the Melbourne Mining Club last week on this ritual.
Mr martin said that iron ore trade although with several players has a system in place which is called the benchmark system. Normally one player fixes a price with one customer and this price spreads all over the market. Mr Martin said that People discuss numbers, analyze the market. There is a lot of information around months of discussions. Normally discussions last two or three months. Different customers, different competitors. Everybody talking to find out what would be the best price for the market situation at that time and trust is very important because a customer has to understand that that price is good for him. He is paying a fair price that he will get more supply back. He will get more investment, more quality, more service.
Mr Martin said its face to face discussions. We don't hide behind the LME. We don't hide behind anything. We discuss with our customers is a face-to-face negotiation. We go to our esteemed customer and discuss the price we need. So we have no trading companies in middle of us. We don't have scalpers. We don't have speculators in middle of us like hedge funds buying in the market raising the prices artificially. So it's the best way to negotiate.
Mr Martin said that "Mining is a very complicated industry. When you increase production, for instance, price goes up. This is an industry where you don't have economies of scale. Nowdays, for instance, to increase production to supply customers, we are operating with higher costs. It's a completely different system than other industries. Miners have to cover the costs."
MMK plans for $400 million per year CAPEX till 2010
Magnitogorsk Iron and Steel Works OJSC plans to invest about $400 million per year in CAPEX till 2010 Mr Vladimir Shmakov VP during an investors' conference organized by Renaissance Capital said that these funds will be directed to the reconstruction of agglomerate, coke chemical and blast furnace processes, as well as to innovations.
Mr Shmakov also said that MMK will stop the last Martin furnace in September 2006 to be replaced by arc furnaces.
South Korean shipyards to increase ship prices by 5%
South Korea's 7 shipbuilders, who delivered 38% of the world's vessels in 2005, said they may raise the prices of new ships to take advantage of record orders and protect their profits from rising costs. Mr Kang Soo Hyun CEO of Hyundai Samho Heavy Industries Co world's biggest shipbuilder said that carriers of containers, oil and minerals may cost about 5% more this year.
The South Korean shipbuilders received a record $12 billion in new contracts in the first quarter as fleet owners rushed to order vessels before a United Nations rule came into effect in April banning single hull ships by 2010. South Korean shipyards had 38.5% of the world's back orders in the first quarter, enough to stay busy until 2009. Shipping lines putting in orders today will have to wait until 2010 for delivery as backlogs stand at a record 1,031 vessels.
AK Steel announces electrical steel surcharges for July
AK Steel announced that it has advised its customers that a $225 per ton surcharge will be added to invoices for electrical steel products shipped in July 2006.
AK Steel's surcharges are based on reported prices for raw materials and energy used to manufacture the products, with the May 2006 purchase cost used to determine the July 2006 surcharges.
Headquartered in Middletown, Ohio, AK Steel produces flat rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products, for automotive, appliance, construction and manufacturing markets.
Gazprom to expand Blue Stream pipeline
Russia's Gazprom is considering a possible expansion of the Blue Stream pipeline that stretches from Russia to Turkey across the floor of the Black Sea. The options under consideration now include a buildup of throughput capacity of the existing pipeline and laying of one or two supplementary runs of the main pipe. A technical feasibility study of these plans will be drafted by the year end.
Prime Tass economic news agency quoted Deputy CEO Mr Alexander Medvedev as saying demand for natural gas in southern Europe makes it possible to consider a general expansion of Blue Stream's throughput. Also, Gazprom may use the Blue Stream to exports of gas to Israel and other countries of the Middle East.
NLMKs waste handling technology named Best Ecological Project
Novolipetsk Steel announced that it has won the Annual Contest Best Ecological Project organized by the Federal Service for Ecological, Technological and Nuclear Supervision and Industrial Ecology magazine. Industrial companies, environment protection professionals and R&D organizations took part in the contest with 150 projects.
NLMK won the award for implementation of modern control systems and waste handling technologies. NLMK presented at the contest its waste neutralization technology developed and implemented by the Company. This technology provides successful solutions for safe disposal of power transformers containing sovtol and other overage electrical equipment that posed serious ecological problems.
Mr Francois Pinault lends hand to Mr LN Mittal in France
Mr Francois Pinault, a French businessman known to be close to President Mr Jacques Chirac, said in an interview with French daily Le Figaro that he joined Mittal Steel's board of directors in order to help the offer succeed.
He said "I did not like the welcome Mr Mittal received in France, nor the xenophobic character, not to say racist, of certain comments made about the Indian. I have also introduced him to executives of large companies and French bankers, who have shown that they have great esteem for the entrepreneur that he is."
Linde Gas to build air separation plant for SeverCorr
Linde Gas LLC announced that it will build, own and operate an on site air separation plant at the new SeverCorr steel mini mill in Lowndes County in Mississippi. Linde will supply 550 tons per day of gaseous oxygen, gaseous nitrogen, argon and compressed air via pipeline to SeverCorr's automotive quality steel operations. The scheduled start up for the Linde facility is May 2007.
Mr Gene Allen Linde Gas's VP North America for on site business said "Our relationship with SeverCorr demonstrates Linde's ongoing belief in the future growth and profitability of the steel industry in the United States. This project marks a significant extension of Linde's focus of being a world class design, engineering and construction company, to an owner and operator of the plants we build for the steel industry. We are especially pleased to be partnering with SeverCorr whose entrepreneurial spirit, management depth and steelmaking skills are sure to generate exciting opportunities for future growth."
South Africa looks for steel in Ukraine
Mr Ashraf Sentso South African Ambassador in Ukraine during a meeting with Mr Oleksandr Lukyanchenko mayor of Donetsk expressed willingness to collaborate with Ukraines Donetsk region in regard to steel purchasing. He said "In 2010 the South African Republic will host an international football tournament, in connection with it we need steel and metal for stadiums to be repaired and the infrastructure to be improved."
Mr Lukyanchenko thanked Mr. Sentso for the cooperation proposal and said "We have several serious transnational companies such as System Capital Management and Industrial Union of Donbass. These companies have metal at their disposal and can help you with it."
Koppers renews coke sales contract with Mittal Steel US
Koppers and Mittal Steel USA have agreed to a 3 year contract in which Koppers will sell 100% of its furnace coke production to Mittal Steel. The current 3 year contract with Mittal expires on December 31, 2006. The initial term of the new contract is January 1, 2007 through December 31, 2009. The contract also includes certain provisions which allow the term to be extended beyond the3 year period.
Mr Walter W Turner president and CEO of Koppers said "We are very pleased to be able to continue to partner with Mittal Steel in regard to all of our furnace coke production."
Koppers produces furnace coke at its facility in Monessen in Pennsylvania, which has an annual capacity of approximately 360,000 net tons of furnace coke. Koppers is also a producer of carbon compounds and treated wood products that increase the durability and decay resistance of rubber, steel and aluminum.
ISS recommends Arcelor shareholders not back Severstal deal
Influential US proxy advisory firm Institutional Shareholder Services on Tuesday recommended shareholders of steelmaker Arcelor to vote against a transaction with Severstal. In a report, ISS expressed concern that shareholders had not been given enough time to consider the terms of the deal, and that all facts had not been fully disclosed.
ISS recommended that shareholders back a proposal, opposed by Arcelor that would call on Arcelor to submit the proposed Severstal deal to an extraordinary shareholders meeting for approval. ISS said in the report "For a transaction that Arcelor presents as a routine contribution in kind by Mordashov, the evidence strongly suggests otherwise."
CMC reports strongest ever Q3 results
Commercial Metals Company reported net earnings of $78 million on net sales of $2 billion for the quarter ended May 31, 2006, ranking it as the strongest third quarter ever reported for the Company. This compares with net earnings of $71.7 million on net sales of $1.7 billion for the third quarter last year.
Net earnings for the nine months ended May 31, 2006 were a record $227.7 million on net sales of $5.3 billion. For the same period last year, net earnings were $202 million on net sales of $4.9 billion.
Mr Stanley A Rabin CMC chairman and CEO said "It was another remarkable quarter. We generated solid to excellent results in each of our business segments. Market conditions for steel and related products showed significant further improvement during the quarter, while nonferrous metal prices hit all time highs before undergoing some correction. Global economic growth accelerated, stimulated by strong business investment and industrial production, including some pickup in Europe. Our outlook for the fourth quarter remains very positive. As discussed in more detail later in this release, we believe demand for our products and services will remain strong, led by favorable markets in our various steel-related and other businesses."
KKR to acquire Cleanaway and Brambles Industrial Services
USs Kohlberg Kravis Roberts & Co has agreed to acquire the Australian businesses of Cleanaway and Brambles Industrial Services from Brambles Industries in a transaction valued at approximately A$1.83 billion ($1.35 billion). The existing management teams will continue in their respective positions after the transaction is completed.
Cleanaway is a waste management operator that provides a range of services including collection, materials recovery, recycling and disposal. Brambles Industrial Services is an outsourced supplier of on site and off site materials handling and logistics services to the minerals, metals, and coal mining sectors.
KKR is a private equity firm specializing in management buys outs, with offices in New York, Menlo Park, California, London, Paris, Hong Kong and Tokyo. The firm has been an active investor in the waste services and recycling industries, having acquired DSD in Germany in 2005 and AVR in the Netherlands earlier this year.
MMK seeks 2% bourse flotation
Magnitogorsk Metal and Steel Works is seeking to gradually list on the stock exchange Mr Vladimir Chmakov MMKs VP said "Today we are expecting to sell 2% of the shares on the market by auctioning them off. We want to take part in the market so that the shareholders get to know us."
Mr Chmakov added "We are not ruling out a bigger stock exchange listing within a year's time, it will all depend on the market situation."
Bayou Steel reports 38% surge in profits in 2005
Before Black Diamond Capital Management Firm purchased Bayou Steel Corp this year, its net income increased by 38% in 2005. After emerging from bankruptcy on February 18, 2004 Bayou Steel recovered with a net income of $14 million in 2004 on revenues of $240.8 million and net income grew to $19.3 million in 2005 on $272 million in revenues.
Mr Jerry Pitts CEO said that a strong upswing of demand in the steel market in the second half of 2005 and a high level of consolidation helped push Bayou Steel to prosperous earnings. He said "Consolidation took out a lot of the weakened competition, weakened capacity and its brought more discipline in the manufacturing side of our market, which has allowed us not to overproduce but to produce relative to the market."
Black Diamond is an alternative asset management firm based in Lake Forest with $8 billion under management and has had a seat on Bayou Steels board of directors since 1998.
