June, 26 2006
Arcelor-Mittal merger Jubilations from India
Some of the Indian politicians started airing views while the Arcelor board was meeting. Indias commerce and industry minister Mr Kamal Nath said Mittal's bid demonstrated the intellectual ability of Indians and people of Indian origin. There is a new economic architecture and India and countries, which had a different mindset now have to face it that in the new global architecture, India has to be a major player."
Mr P Chidambaram Indias finance minister said that We are happy and proud that an India born entrepreneur is the biggest steel maker in the world. We wish him well.
Dr BN Singh joint MD & CEO of JSW Steel said that the deal is very good news because of two reasons. One is Indian has proved his mettle in the giant steel industry. Second is that consolidation in the steel industry is very critically required. Industry was fragmented and if the consolidation takes place, it gives strength to the industry to give the price line in at reasonable level and supply steel at a reasonable price to the customers. That means the steel industry will be in a stronger position to run the business.
Mr Anil K Agarwal president of Assocham president said that Mr Mittal made the country proud by his takeover bid. Though the takeover was subjected to many controversies in the past, it had finally reached its logical conclusion.
Many more such messages are expected in coming days.
Finance ministry favors SPV over Coal Videsh Limited
It is reported that the finance ministry has suggested that Coal India acquire coal blocks overseas by setting up special purpose vehicles rather than form Coal Videsh Limited as Coal India Limiteds subsidiary expressing reservations on the viability of creating an overseas arm. It is now being proposed that Coal India identify properties abroad and invest through SPVs involving joint venture partners. Besides government companies, private sector companies may also be allowed to partner CIL in these SPVs.
A Cabinet note has been prepared by the coal ministry for the formation of a subsidiary, which will have a specific foreign investment focus to make it distinct from its holding company CIL. The proposed capital structure of the subsidiary includes a paid up equity capital of Rs 100,000 and authorized equity share capital of Rs 500 crore. The steel ministry has already proposed to the coal ministry to involve Steel Authority of India Ltd and Rashtriya Ispat Nigam Ltd as partners in the CVL projects.
As per reports setback to the new subsidiary formation may affect the CIL's plans in the Zimbabwean coal block in the Whangi province and in Bangladeshs Dinajpur district.
Trade unions to paralyze all central units on June 30 on NALCO matter
Seven trade unions have threatened to paralyze functioning of central sector establishments including rail and air services on June 30 in Orissa against Centers decision of divesting 10% stake in the NALCO. The decision t was taken at a joint meeting while NALCO Employees Unions continued to put up token protests.
Mr Souribandhu Kar general secretary of AITUC said that "All central trade unions and political parties including the CPI, CPI (M), SUCI and BJD have agreed to halt functioning of establishments on June 30. We will be picketing in front of every central offices and industrial units including Rourkela Steel Plant on June 30. We wanted immediate paralyzing of all central sector units. Since Rath Yatra of Puri falls on June 27 and devotees could face problems, the protest had been deferred by three days.
He added "We will wait and observe the Union Government's response to our strike. If encouraging assurances did not come subsequently, we will lead an all party and all trade unions delegation to Prime Minister Manmohan Singh to seek his intervention. The final resort would be Orissa bandh and paralyzing of NALCO operation for an indefinite period."
Sical to offer total logistic solutions to industry
Sical Logistics Ltd, formerly South India Corporation (Agencies) Ltd, has re drawn its focus to scale up its operations a pure integrated logistics services provider and will providing product solutions and move away from the project and service centric approach.
Stating this at a press conference here on Friday, A
Mr Ashwin Muthiah VC said that Sical Logistics had considerable knowledge in commodities like coal, iron ore, fertilizer and cement. It would now focus its efforts on spotting clients, understanding their logistics requirements and supporting them by providing end to end product solutions.
Arcelor recommends improved Mittal Steel offer
The Board of Directors of Arcelor, chaired by Mr. Joseph Kinsch, met on Sunday to evaluate and compare proposed revisions to the strategic alliance with SeverStal and proposed improvements to Mittal Steels offer. The Board has concluded that Mittal Steels improved offer consists of a merger proposal effected by way of a mixed share and cash offer that will be followed by the merger of Mittal Steel into Arcelor. The new group, which will be called Arcelor-Mittal, will be listed in New York, Paris, Madrid, Amsterdam, Brussels and Luxembourg.
The Board believes that Mittal Steels new offer represents a substantial improvement compared to Mittal Steels preceding offer announced on 19 May. In particular, the Board notes that all of the key conditions established by the Board and presented by the Management Board as well as the observations made by the European works council in terms of valuation, industrial plan and corporate governance, have been met.
The proposed merger agreed by Arcelor and Mittal Steel provides that
1. The value proposed to shareholders will be once again significantly increased (10%)
2. A mixed offer at a price equal to 13 Mittal Steel shares and 150.6 in cash per 12 Arcelor shares, or 12.55 in cash and 1.084 Mittal Steel shares per Arcelor share
3. A cash offer at a price equal to 40.4 per Arcelor share
4. An exchange offer at an exchange ratio of 11 Mittal Steel shares per 7 Arcelor shares
5. A mixed offer for Arcelor convertible bonds (OCEANEs) at a price equal to 13 Mittal Steel shares and 188.42 in cash per 12 Arcelor
Tenders to the offers above will be subject to a pro-ration and allocation procedure that will ensure that in the aggregate the portion of the consideration paid consisting of Mittal Steel shares and the portion of the consideration consisting of cash will be 69% and 31%, respectively.
This improvement represents
1. An improvement of 49% to Mittal Steels initial offer
2. A premium of approximately 100% excluding dividend on the closing price of Arcelor shares on the day preceding the announcement of Mittal Steels starting offer
3. A 108% increase of the cash offer
4. A 32% increase of the exchange offer
The negotiated exchange offer ratio implies relative valuations of 60% for Arcelor shareholders and 40% for Mittal Steel shareholders. Therefore, taking into account the cash portion of Mittal Steels offer, the shareholders of Arcelor and Mittal Steel will hold 50.5% and 49.5% of Arcelor-Mittal, respectively.
Consistent with the Arcelor model, the combined group will be based on the following principles
1. An integrated model based on leadership in high value added steel, on the one hand, and capturing growth in low cost developing markets, on the other,
2. Industrial excellence through state of the art assets sustained by sound capital expenditure levels
3. Upstream vertical integration for cost leadership
4. Focusing on research and development
5. Commercial leadership based on Arcelors strong distribution channels
6. Best standards in terms of health and safety and protection of the environment
7. Best standards in terms of ethics standards and sustainable development
8. Best practices in terms of social dialogue and social responsibility
9. Commitment to comply with industrial plans and social commitments of both companies
10. No restructuring plans nor employee reduction plans within Arcelor in Europe resulting from the merger
11. High profitability targets, including a 30% dividend payout target, as part of a broader effort to maximize shareholder returns
12. A sound capital structure
The corporate governance model will be based on best practices which corresponds to Arcelors current practices
1. There will be only one class of shares, and each share will have one vote
2. The board of directors and the management board will be separate bodies and the board of directors will be constituted by a majority of independent directors
3. The board of directors of the combined group will have 18 members, 12 members currently in place at Arcelor, including Arcelors 3 employee representatives, and 6 members nominated by Mittal Steel, of which 3 will be independent directors. Every director will have one vote.
4. The Mittal family will own 43% of the combined group
5. The Mittal family will agree to a lock-up for 5 years and a standstill at 45% of the combined groups share capital
6. The combined group will be domiciled in Luxembourg
7. The Management Board of the combined group will be constituted by 7 members, the 4 current Arcelor members, including the chief executive officer, and the 3 members nominated by the Mittal Steel board of directors
Mr Joseph Kinsch chairman of the board of directors said "Intense discussions with Mittal Steel in the past weeks have resulted in a significantly improved offer by Mittal Steel that the Board of Directors is unanimously recommending. The merger will give rise to the leading steel company in the world. The managers and employees of Arcelor have made extraordinary efforts and produced exceptional results in the course of the last five months, which were difficult and full of uncertainties. I congratulate them and thank them on behalf of the Board of Directors. They should be proud and confident in the future."
A joint press conference of Arcelor-Mittal will be held today at 14h00 at Arcelors headquarters in Luxembourg.
OneSteel launches friendly $1.6 billion takeover for Smorgon
Australian OneSteel Ltd has launched a $1.6 billion friendly takeover of Smorgon Steel Group Ltd to create Australia's biggest steel manufacturer and distributor. The takeover deal is subject to approval by the Australian Competition and Consumer Commission and also be approved by Smorgon shareholders. If all approvals are received the takeover, via a scheme of arrangement, could be implemented by late October.
OneSteel has offered Smorgon shareholders a combination of cash and OneSteel shares valuing Smorgon shares at $1.76, a 31.8% premium over the last month's average value of Smorgon shares. Smorgon shareholders will receive nine shares in OneSteel for every 22 Smorgon shares that they hold. They will also receive between 6.2 cents and 22.6 cents per share. The Smorgon board has recommended the offer.
Mr Peter Smedley chairman of OneSteel said that the merger was a logical step in the restructuring of the Australian steel industry. He said "It will further consolidate the sector, leading to a lower cost and more efficient steel industry from which to effectively compete in the world steel market for years to come. The combination will allow OneSteel to provide a more comprehensive and competitive product and service offering to customers of both companies, greater security of raw material supply and material cost savings, thereby providing significant benefits for our shareholders."
Mr Graham Smorgon chairman of Smorgon Steel said "Although I will be sad to see the end of Smorgon Steel's existence as a separate company, I am delighted that the offer from OneSteel reflects the inherent value of the company."
OneSteel currently produces 1.7 million tonnes of steel a year and sells a total of 2.2 million tonnes a year of steel and metal products. In 2004-05 Smorgon collected and processed over 1.4 million tonnes of scrap metal, produced 923,000 tonnes of new steel from recycled scrap and distributed over 1.8 million tonnes of metal products.
Severstal did not get opportunity
Severstal has vide a release said that since Severstal signed merger agreement with Arcelor on May 26th, Severstal have proceeded in good faith with partners to provide a compelling value proposition to shareholders. In response to feedback from investors, Severstal has also substantially improved the merger terms.
The release said that Severstal has a legal, binding merger agreement that the board of Arcelor entered into. Arcelor has unanimously supported it to date, consistently affirming the industrial logic, the better business sense and the higher value creation behind our agreement on several occasions. In light of this Severstal is very surprised that the board did not invite Severstal to discuss Severstals revised proposal nor offer Severstal an opportunity to respond as Severstal had requested.
As per the release Severstal is now reviewing all of our options.
China plays up difference in iron ore shipping costs
China Iron & Steel Association on Friday noted there was an obvious differential in pricing between Australian iron ore and Brazilian iron ore as shipping costs have averaged $S9.70 a tonne this year to move ore from Western Australia to China as compared with an average of $23.13 a tonne to ship ore from Brazil to China.
BHP Billiton had tried to put forth this argument during last years price negotiations for getting a premium for Australian iron ore and the Chinese seem to have bought its argument in their favor now.
The statement could also be taken as encouraging Chinese steel mills to purchase cheaper Australian ore rather than its Brazilian competition.
ABN Amro analyst Mr Rob Clifford said "The only difference is the shipping cost, so the Chinese could be saying they want to pay a lower ore price to Brazil to offset the higher shipping cost. This sound like a direct comment to Brazil's Companhia Vale do Rio Doce."
Belgian Walloon region government welcomes Arcelor-Mittal deal
Belgium's Walloon region, which holds a 2.3% stake in Arcelor, on Sunday, welcomed an amicable merger agreement between Arcelor and Mittal Steel.
The regional government said in a statement "For the future of the steel workers of Wallonia, the Walloon government expresses its satisfaction about the friendly solution reached by Mittal Steel and Arcelor."
China's economy likely to expand 10.3% in H1 of 2006
Chinas People's Bank of Chinas research bureau said that Chinese economy will expand faster this year than in 2005 as investment and exports continue to grow. Gross domestic product will probably rise by 10.3%t in the first six months before slowing in the second half for full year growth of 10%.
Premier Wen Jiabao said in April he wants to curb an expansion by factories, which has caused an oversupply of goods in China and pushed global prices of commodities to records. The government is seeking to avoid a sudden economic slowdown in the world's biggest market for steel and second-largest oil user by shifting its focus to raising incomes and consumer spending.
The forecast of slower GDP growth in the second half of the year reflects the central bank's expectations that macroeconomic measures taken in late April will take effect and help slow economic growth
China's economy grew 9.9% in 2005, overtaking the UK as the world's fourth largest.
PSMC Privatization Government to implement courts decision
Pakistans Prime Minister Mr Shaukat Aziz said that the government respected the judgment of the apex court and would implement it in letter and spirit. He said that the Supreme Court had also upheld the privatization process and the Privatization Ordinance, under which public units were privatized. He added that "We will go ahead with the privatization process under existing law."
Mr Aziz said that the government had sent the summary of formation of the Council of Common Interest to President General Pervez Musharraf for approval. The federal government had nominated 4 federal ministers as its representatives in the summary. The CCI would be notified once approved by the president and would be summoned soon after the notification.
He said "privatization process would continue in a transparent manner so as to restore investors confidence and increase investment."
China to launch of steel futures
China is planning to launch trading in steel and oil products futures as part of efforts to increase its role in determining prices in the international market. Mr Yang Maijun director of the futures supervision department with China Securities Regulatory Commission said. "Conditions are mature for launching futures of steel wire and screw-thread steel" Mr Yang did not give a timetable for the launch of the futures markets
Mr Yang said China is improving the regulatory environment for development of its futures markets. He said "The State Council is working on a revision of futures supervision regulations under which financial institutions will be able to deal in futures with capital from banks. Futures companies will be allowed to have more business lines."
Mr Yang added that China expects to open a market for financial derivatives as well. Mr Yang said that China is preparing to launch stock index futures as the first instrument to be introduced at the proposed financial futures exchange.
ISSF predicts 8.6% rise in SS production in 2006
According to forecasts by the International Stainless Steel Forum global stainless steel production in 2006 will rise by 8.6%. The ISSF estimates that total stainless steel production will reach 26.4 million tons this year up by 1.83 million tons compared to production in 2005.
Asia will be the major contributor to the rise in production with China in particular seeing a big growth in production. Asian production is expected to increase to 13.75 million tons up by about 10%. Production from Western Europe and Africa will increase by around 7.4% to 9.5 million tons.
Toll Holdings, POSCO & Mitsubishi to develop infrastructure in WA
Australian logistics firm Toll Holdings Ltd, POSCO and Mitsubishi Corp have formed a consortium to develop port and rail infrastructure in the mid west region of Western Australia. The consortium with iron ore miner Murchison Metals Ltd will conduct a feasibility study to investigate building export infrastructure for that region's iron ore resources.
The study will look at building a deep water port 23 kilometers north of the port town of Geraldton, providing sea access to rail links from key iron ore projects already underway and expected to be completed by the June quarter of 2007. The new port is likely to berth Cape Class bulk ore carrying vessels while the new rail link will be designed as heavy haulage Pilbara specification rail lines.
ABARE revises 2007 commodity sales forecast to 6.6%
The Australian Bureau of Agricultural & Resource Economics increased its forecast for commodity export earnings by 6.6% to a record as supply disruptions and surging demand from China boosts prices. Sales of commodities will reach A$143 billion ($105 billion) in the year ending June 30, 2007 as compared to its February forecast of A$134.2 billion.
ABARE said in its June report that prices of iron ore, oil, copper and zinc reached all time highs in the past three months, helped by demand from China and disruptions to mines and oil fields. Global economic growth of 4.6% this year and 4.3% in 2007 will help underpin demand for commodities.
Australia's exports of minerals and energy, such as copper and oil, are expected to be A$110 billion in 2006-07, up from a previous forecast of A$101 billion in February. That compares with an estimated A$91.8 billion in 2005-06, the bureau said.
NLMK posts $298 million profit in Q1
Novolipetsk Steel posted USGAAP consolidated net profit of $298 million for the first quarter of 2006 while consolidated revenue fell by 12% to $1.123 billion as against 1.271 billion year ago. The gross profit reduced to 444 million as against 654 million year ago.
NLMK increased crude steel output by 4.4% YOY in the first quarter of 2006 to 2.29 million tonnes. Pig iron production rose by 4% to 2.2 million tonnes. The production of slabs increased by 8.9% to 980,000 tonnes, CR production by 7.8% to 590,000 tonnes and HDG production by 55.7% to 90,000 tonnes. The production of HR reduced by 14.6% YOY to 430,000 tonnes.
NLMKs DanSteel reduced steel plate production by 27.7% YOY in the quarter to 114,000 tonnes.
SUEK to invest $25-30 million in a coal terminal at Muchka Bay
Russia's biggest coal producer Siberian Coal and Energy Company plans to invest $25 million to $30 million this year in the construction of a coal terminal on Muchka Bay in the Khabarovsk territory in Far East Russia.
Mr Vladimir Rashevsky GD of SUEK said Overall investment in the terminal in Russia's Far East will total about $150 million. The amount of investment that will be spent this year on construction and assembly work will amount to $25 million-$30 million."
There are plans to export up to 12 million tonnes of coal annually through the terminal which is scheduled for completion in the first quarter of 2008.
Tanzania to call for tenders for Liganga iron ore mining
The Tanzanian government has directed the National Development Corporation to start floating tenders for the mining of Liganga iron ore as more research to determine the actual potential of reserve continues. Dr Ibrahim Msabaha said two weeks ago that there was no point of holding mining activities for the sake of additional research.
NDC is in the process of establishing the potential that iron ore deposits and other valuable minerals like vanadium and titanium that have higher value than iron ore.
Liganga-Iron Mountain in Ludewa district in Iringa region is believed to have iron ore deposit of size between 200 million tonnes and 1bllion tonnes.
BNSF warns coal miners on proposed Congressional regulation
Mr Steve Bobb VP of BNSF's coal business unit while speaking at the Wyoming Mining Association's annual convention last week asked the Wyoming mining industry to pressure Congress not to further regulate the rail industry saying anything that might impede railroad profits would reduce the carriers' ability to expand their lines in Wyoming.
He said that the industry is working to expand lines into coal country, even though returns from hauling coal aren't that great. Mr Bobb said "If they cap our ability to raise our revenue, then we will pull capital out of this business, very quickly."
Mr Bobb said the industry is working hard to expand capacity so it can better handle producers' shipping needs. He said railroads expect that by 2009 they'll be able to ship 425 million tons of coal per year from Wyoming on the southern line alone.
Earlier this week, members of a US Senate subcommittee criticized the chairman of the Surface Transportation Board saying more needed to be done to strengthen railroad competition and lower fuel surcharges. Shippers in some states have complained that a lack of competition leaves them captive to higher prices and equipment shortages, and argue that they are forced to pay inflated fuel surcharges.
BHP increases stake in Skye Resources
BHP Billiton Ltd increased its stake in Canadian nickel producer Skye Resources through the purchase of two million common shares by its subsidiary Billiton Development BV. The purchase lifts BHP Billiton's holding in Skye Resources to 16.5% from 9.7% of the issued common shares. The acquisition is being funded using cash and existing facilities.
BHP Billiton said in a statement that it acquired the shares on the TSX for investment purposes and to further BHP Billitons ongoing interest in mining opportunities in Guatemala. It said "BHP Billiton is continuing to review its investment alternatives and may acquire additional common shares or may sell the shares it now holds in the open market or in privately negotiated transactions to one or more persons."
NOK drops plans to process tin concentrate abroad
Russia's biggest tin producer Novosibirsk Tin Combine has dropped a project to partially move primary processing of tin concentrate outside Russia. Mr Alexander Dugelny GD of NOK said at a press conference "We had a project last year, but the price situation changed and we had to change our plans in the fourth quarter."
It was reported earlier that NOK had drafted a strategic program that called for moving some primary processing of tin concentrate outside of Russia, possibly in China or Malaysia. Based on the specifics of the labor market and the new technologies these countries already had, NOK had hoped to substantially reduce processing costs.
Yieh Phui plans to start up new melt shop by 2008
Taiwanese Yieh Phui Enterprise announced that they have reached an agreement with Danieli for the equipment for their new 800,000 tonnes per year melt shop. It plans to commission their new melt shop by 2008.
Danieli will provide the electric arc furnace based plant that will be centered on a 100 ton FastArc EAF.
Assmang orders for equipments for new Khumani mine
Diversified miner Assmang has placed an order worth R250 million for the supply of nine materials handling machines with Sandvik Materials Handling Africa for its Greenfield development at its Khumani Iron Ore mine near Sishen. Assmang has ordered four rail mounted bucket wheel reclaimers and five rail mounted stackers.
The stackers and reclaimers for the project will be designed and manufactured by Voest-Alpine Materials Handling, which is also a Sandvik company Work on the project will begin later this year and when completed, the iron ore will be mined from a series of open pits for hauling to the primary and secondary crushers.
Formerly known as the BKM development, the R3.2 billion Khumani Iron Ore mine is scheduled to begin production during the early part of 2008. Initially, the mine will produce 8.4 million tons of iron ore a year, but this will be doubled when the second phase is completed at an additional cost of about R1.8 billion, which is subject to board approval.
Mr Jan Detlof-Wismer SMHA's manager for business development said that the order is the biggest placed with Sandvik for a materials handling project in southern Africa and follows a major development late last year when ETS, one of South Africa's leading materials handling specialists, was integrated into the company's operations.
Consolidated Mineral controls 53.54% of Titan Resources
Consolidated Minerals has increased its relevant interest in nickel company Titan Resources to 53.54% following a strong flow of recent acceptances during last week. The offer is scheduled to close at 5PM on June 28.
Consolidated intends to proceed to compulsorily acquire the remaining Titan shares on issue once it passes the 90% threshold.
Daewoo Mangalia secures $280 million ship contracts
Romania based Daewoo Mangalia Heavy Industries has bagged contracts for the construction of four container carriers for the German companies Gebab Holding and Conti Holding valued at $280 million.
Daewoo Mangalia is already building four container carriers for German ship owner Gebab to be delivered between September 2007 and March 2008.
Daewoo Mangalia Heavy Industries was created in 1997 as a JV between the South Korean Daewoo who owns 51% of the nominal capital and the company 2 Mai Mangalia who has a 49% stake.
