New mining policy keeps space for existing steel makers

The Hoda Committee report, a synopsis of which was released to media on Friday, includes that it is in the best interest of the country to provide space in the mining regime for both stand alone as well as captive mines however the Committee has not accepted the argument of steel plants for exclusive allocation of mines to them on ground of limitation of resources. The new policy seeks to safeguard this conclusion by including important riders in section 11(iii) of the Mines & Minerals (Development & Regulation) Act.

As per reports experience in mining, financial resources and technical staff now have to be satisfied in the mining concession rules. In other words steel makers cannot apply for mining permits without partnering with a mining major as all the clauses receive equal weight age. So while the policy recommends, on the one hand, that steel units in existence as of July 1, 2006, be given preferential allocation of iron ore mines fully prospected by public agencies, without the need for going through the auction procedures, as a one time measure to create a level playing field between them and steel plants that have captive mines, in reality, they are not eligible without mining experience.

In what could benefit stand alone domestic steel producers like Essar Steel and the Jindals but could be bad news for new entrants including Mittal Steel & POSCO and also steel mills with captive mines like SAIL & TATA Steel as the policy has suggested that existing steel capacities, which do not have captive mines, should be given preferential allocation or iron ore mines which have established reserves. This would be one time measure to create a level playing field between them and the steel plants that have captive mines.

Government may review NALCO disinvestment decision

The Indian government on hinted at reviewing the decision to divest 10% stake in NALCO and admitted that a discussion was likely on over the issue due to mounting protests from left political parties resulting in unrest in Orissa.

Mr Jairam Ramesh union minister of state for commerce said there was a proposal that the Rs 1,400 crore, likely to be raised through the 10% disinvestment in NALCO, could be got from the companys reserve fund or NALCO could be asked to raise its dividend payoff to the government.

NMDC & Chattisgarh form JV for opening new deposit in Bailadila

National Mineral Development Corporation signed an agreement with the Chhattisgarh government for excavation of 350 million tonne one of the world's best quality iron ore from the state's Bailadila area in Bastar region. Mr Kumar said that NMDC will soon open up the fourth mine called deposit 13 in a51:49 JV with Chattisgarh Mineral Development Corporation.

Mr B Ramesh Kumar chairman of NMDC also promised that The NMDC will cut short its export of iron ore produced from Chhattisgarh by 40% to cater to the demands of the Chhattisgarh units.

NMDC stated iron ore mining in Bailadila area 1968 and currently holds mining ownership rights in Bailadila's three major deposits. Although Bailadila is divided into 14 deposits and excavation is currently possible only in three deposits.

Mr LN Mittal admits interest in buying SAIL

Mr LN Mittal during an interview said that he would like to partner in state owned SAIL whenever the Government would decide to privatize the major PSU.

Mr Mittal said "I have always said openly that whenever the Indian Government would like to privatize SAIL, we would like to partner that."

Essar to set up 3 steel facilities in Qatar, Sharjah & Iran

As per reports in media in Gulf Essar Group has revealed that it plans to establish three steel plants in the Middle East at a cost of about $1.5 billion.

Essar has inked a 50:50 JV with state owned Qatar Steel Company to establish a 1.5 million tonne a year steel plant in Qatar. Essar has currently taken possession of the land in Qatar, has tied up debt for the project and is in the process of signing gas contracts with the government. It will set up a HBI plant in the 1st phase at a cost of $325 million and a 1.5 million ton a year steel rolling mill for long products in the 2nd phase at a cost of another $300 to $400 million. Essar expects commissioning in 30 months after construction begins in November.

Essar will also set up a 1 million tonne steel rolling mill at the Hamriyah Free Zone on the outskirts of Sharjah at a cost of about $200 million. The rolling mill will use imported steel billets from Essar's India plant,

ESSAR has formed a 60:40 JV with pension funds to set up a 1.5 million tonne a year steel plant in Iran which will be identical to the project in Qatar.

Mr Anshuman Ruia director of Essar said that "The Middle East is a very important part of what we are doing because most of our businesses are very energy centric, steel, power, refining. So we believe we need to have a much bigger presence here. Our philosophy has always been to have steel production capacity in markets which are growing and which have a captive need."

Union minister terms POSCO MoU as a total rip off

Mr Jayram Ramesh union minister of state for commerce said that the MoU signed by Orissa government with POSCO was a complete rip off and that export of iron ore was neither in the interest of the country nor the state. Mr Ramesh told media "I am not against POSCO setting up a steel plant in the country but it should not be allowed to take away iron ore."

He was however guarded on two other contentious issues related to the POSCO MoU, the special economic zone status and dedicated port proposal.

High grade iron ore export to be made free but with export duty

With a view to resolving the contentious issue of iron ore exports, the Anwarul Hoda Committee has recommended that an export duty be levied on exports of ore in lump form with iron content above 65%. The Committee on Mineral Policy also recommended that the existing regime of canalisation and export licensing should be discontinued.

At present, export of higher grade iron ore of above iron content of 64% is canalised through the Minerals and Metals Trading Corporation. The department of commerce also issues licenses separately.

India to reform environmental clearance guidelines for mining

Mr Prodipto Ghosh secretary of ministry of environment and forests said that the ministry would shortly come out with a notification for re engineering, reforming and rationalizing old guidelines to quickly give environmental and forest clearances for those who wish to explore the domestic mining sector. He said that the new guidelines formulated by the ministry in consultation with the ministry of mines had been sent to the Prime Ministers Office for necessary approval, which is likely in next three weeks, after which the government would come out with the relevant notifications

He however made it clear that the new and modified environment and forest guidelines would have no relaxation for degradation of environment and forests to ensure that exploration of mining potential does not compromise on it.

Severstal reported to be planning London listing

The Business has reported that Severstal plans a Euro 12 billion London share listing. The paper quoted a banker close to Severstal as saying that Mr Alexei Mordashov began talking about a London listing as soon as Arcelor board had decided to ditch its merger talks with the Russian firm last weekend in favor of Mittal Steel.

The banker suggested that Mordashov could list up to 25% of his shares, worth as much as 3 billion euros.

Nickel price spikes as warehouse supplies plummet

Nickel jumped to a three week high on last Thursday, spearheading a rally in metals, on expectations that global demand from manufacturers would outpace supplies from the world's smelters and mines. Nickel for delivery in three months rose $650 to $21,050 a ton in London. It later closed to $20,750, a rise of $360.

Inventories of nickel in warehouses monitored by the London Metal Exchange have plunged 70% this year to 10,548 tons which is equal to less than three days of global use.

Credit Suisse said this month that demand in 2006 would exceed output by 15,000 tons. Mr Tony Warwick-Ching an analyst with CRU said "There's no question that fundamentals are looking pretty attractive for nickel. The markets are still saluting that."

Algoma CEO sees more shakeups in Canada's steel sector

Algoma Steel expects some of Canada's remaining steelmakers to be snapped up by bigger global players looking to boost their presence in a new market. Mr Denis Turcotte CEO of Algoma while speaking to reporters after Algoma's annual meeting in Toronto said that deals will not be limited to ones between Canadian steelmakers given their lack of size on the global stage.

Mr Turcotte said "Buyers are all over the planet, and in our type of business there are companies with lots of cash and there are a lot of private equity pools out there with a lot of cash as well that have a bullish attitude on this sector. This industry is going through a period of transition and frankly we have no illusion that there is anything we can do to change it or even influence it in a material way."

Mr Turcotte said it is hard to predict what the Canadian steel industry will look like down the road but did say he thinks the company can survive on its own and that it does not need to be part of something bigger.

Japanese steel demand to rise 5.2% YOY in July to September

Japanese ministry of trade, economy and industry said that demand for steel made by Japanese steel mills is expected to rise 5.2% YOY 27 million tonnes in the period from July to September 2006, out of which 20 million tonnes is for domestic shipment and 7 million tonnes for exports. Demand for ordinary steel is expected to rise by 4.9% YOY to 22 million tonnes out of which domestic demand is 16 million tonnes and export is 5 million tonnes. Crude steel production in the July to September period is forecast at 29 million tonnes up by 3.4% YOY.

Demand for specialty steel such as high tensile and stainless steel products is forecast to rise by 6.5% to 0.5 million tonnes with domestic demand accounting for 3.7 million tonnes and exports 0.5 million tonnes.

Mr Hisayoshi Ando iron and steel division manager of the ministry during a news conference in Tokyo said Ordinary steel consumption by the Japanese construction sector is expected to slow from last year due to reduced public works spending, but demand in the manufacturing sector, particularly shipbuilding, is robust.

Chinese steel demand influencing metallurgical coal market

Mr Jim Popowich president of Fording Canadian Coal Trust during last week at the McCloskey's Coal USA conference in New York said that phenomenal growth in the metallurgical coal world market is likely for the next several years, driven by the growing demands for steel in China as China will continue to increase its steel production as its economy grows. He said that this strong demand will help support higher prices for met coal, although prices have dropped off somewhat from last year.

He said that for 2006 metallurgical coal is selling for $112 per tonne, while for the coal year, the price is about $107 per tonne. Growth in demand for seaborne metallurgical coal is expected to increase at 3% per year through 2015.

Elk Valley expects to sell 22 million tonnes to 25 million tonnes this year with about 45% going to Asian markets.

Shanghai Baosteel-NSC-Arcelor Automotive JV captures 50% market share

Nippon Steel, BaoSteel & Arcrlors Shanghai based JV Shanghai Baosteel-NSC-Arcelor Automotive Steel Sheets Co is reported to have captured almost 50% of China's market share for high end steel products.

The JV was set up in July 2004 and started production of high quality steel for auto bodies in November 2005, supplying them mainly to European and US automakers. Mr Katsuhiko Kotani head of Nippon Steel's Chinese office said that the JV will increase its supply to Japanese automakers in the future.

Demand for high quality steel is growing in China, where automobile sales are expected to top 6 million units in the current year, ranking the country above Japan as the world's second biggest auto market.

Lundin buys 49% stake in Ozernoye Zinc deposits in Russia

Lundin Mining Corp has agreed to pay $125 million for a 49% stake in the Ozernoye zinc lead deposit in eastern Russia as Lundins wholly owned subsidiary, Lundin Mining AB signed a LoI with Russian financial company IFC Metropols subsidiary, East Siberian Metals. Upon completion of the deal, a new joint-venture company will be formed in which Lundin will hold 49% and Metropol 51%.

The deposit is located in the Republic of Buryatia and is expected to be developed as a conventional open pit mine. Indicated resources are estimated at 157 million tonnes of ore at 5.2% zinc and 1% lead.

Mr Karl-Axel Waplan president and CEO of Lundin said "The Ozernoye project has the capability of easily doubling our zinc production. The deposit is of a major size and we are convinced that we can turn the deposit into a commercial, highly profitable mining operation."

Mr Oleg Mikhailenko CEO of East Siberian Metals said "Developing Ozernoye into a profitable and technologically advanced mining operation will be one of the largest Greenfield projects in mining in the post Soviet Russia.

Impact of Chinas export on SEA mixed SEAISI

South East Asian Iron & Steel Institute said that although analysts say that China will not become a major steel exporter in short run steel producers in South East Asia have a different opinion as the SEA region has been flooded by cheap semi finished and finished products from China. As per SEAISI China's export in 2005 to Indonesia increased by 374% to almost 1.7 million tons and by 80% to Philippines and Thailand.

In 000 tonnes

As per SEAISI several producer in the region are facing a sever challenge due to increased imports at cheaper prices. Malaysian long product producers had to compete with cheap billets and bars from China and to survive they tried to increase exports with little success. Indonesia submitting AD petition against China's HRC after Krakatau Steel could not bear to compete domestically when China dumped 123,000 tons of HRC, an increase from 55 thousand tons in 2004 and also received cheap narrow width HRC. Thailand also suffered with the surging imports from China as the protection of AD duty does not cover China's HRC product resulting in big jumps in import of HR, CR, and galvanized sheet from China. NatSteel of Singapore has been moving away from selling rebars and wire rods and focuses on producing more value added products.

Therefore, China's product is a big threat for integrated producers having steelmaking facility in the region but it is an opportunity for stand alone steel processors with China being a source of semi finished products. South East Asian steel producers have very limited choices to cope with Chinese products as there is no way that they can compete.

China unveils projects worth $20 billion into west

Chinas National Development and Reform Commission made an announcement that China plans to start construction of 12 new key projects with a total investment of 165.4 billion yuan ($20.68 billion) in its undeveloped west. The NDRC said all the 12 projects are related to the infrastructure construction in the west, especially focusing on the poor rural areas.

The 12 projects include railway project between Taiyuan and Zhongwei city, a series of highways, small airports, several coal mine projects including the Shengli No 1 coal mine in Inner Mongolia and Meihuajing coal mine in Ningxia, 3 new hydropower stations and a reservoir, 800,000 ton ethane project in Sichuan, a 1.2 million ton kainite project in Xinjiang and a 400,000 ton alumina project in Inner Mongolia.

NDRC said that though Chinese government has tighten control over investment this year so as to cool the heating economy, the financial support to the western development has not been changed. Every year the central government will open a number of new projects in the west to help boost local economy. From the year 2000 to the end of 2005, a total of 70 key projects have been launched in the west, with a total investment nearly 1,000 billion yuan.

Laigang becomes Chinas largest exporter of H beams

Laigang exported s 439,000 tons of steel during January to May 2006 recording an increase of 262% over the same period of last year, which resulted in 220.45% increase in foreign exchange of $159.6 million. Laigang exported steel products of 150,000 tons in May, breaking the monthly record in history

Laigang exported 162,000 tons up by 322% to more than 20 countries and regions to become Chinas largest export base of H section.

Ice conditions at Tecks Red Dog zinc mine to delay shipments

Mr Don Lindsay CEO of Teck Cominco during a webcast in New York last week said that ice conditions at Teck Cominco's shipping facilities at its Red Dog zinc mine in Alaska are the worst in 25 years and could delay the mine's annual shipping season for 2 weeks to 4 weeks. He explained that this could ease if the wind direction changed adding that the delay would have no effect on the company's profitability but might be hard on consumers with an immediate need for zinc.

Red Dog is the world's biggest zinc mine with annual production capacity of 600,000 mt of zinc concentrate. Its shipping facilities are ice bound about nine months of the year.

Mine inspectors close Blue Diamond Coal mine

The Kentuckys Office of Mine Safety and Licensing shut down a Perry County based Blue Diamond Coal No 74 mine last week because seals inside the mine were constructed improperly. OMSL inspectors found seals were dry stacked with no mortar holding the lightweight, synthetic blocks together. OSML has asked Blue Diamond to build six seals to replace existing seals. It was the second such closure order by OMSL in nine days. The Sapphire Coal Advantage No. 1 mine in Letcher County was ordered closed June 20 after inspectors found that it also had dry stacked seals. The state closure order was lifted after the company rebuilt 20 seals.

Non conventional mine seals, those made of materials other than concrete block, have been under scrutiny since a methane explosion killed five miners at Kentucky Darby in Harlan County on May 20. Two days later, Governor Mr Ernie Fletcher ordered daily checks of oxygen and methane levels at all non conventional seals.

Previously, seal construction had been regulated by the Mine Safety and Health Administration. But new state legislation that takes effect July 12 will require state approval as well before a seal is built.

According to MSHA records, Blue Diamond produced 189,123 short tons in 2005 and 59,088 short tons so far in 2006.

Total Coal & BHPB exploring mining in Delmas in SA

Total Coal SA and BHP Billiton are exploring for coal in the Eloff region near Delmas in Suth Africa and there could be long term potential for a large coal mine there.

Mr Jean-Marc Otero del Val MD of Total Coal during last week said that it was too early to say what the size of the reserves or the quality of the coal might be but because of the distance from Delmas to the Richards Bay coal railway line, a potential mine might be better suited to power generation or coal to liquid projects than to exports.

Total Coal SA is a wholly owned subsidiary of French oil giant Total, the worlds fourth largest oil group. Total has four coal mines in Mpumalanga. These are Forzando, Dorstfontein, and a JV with Xstrata at the underground Arthur

Spoornet unveils CAPEX

South African state owned rail utility Spoornet is to spend R7.2 billion in current financial year out of planned R31 billion CAPEX in next 5 years. Mr Siyabonga Gama CEO of Spoornet told the AfricaRail conference last week that the company would spend the capital on infrastructure upgrades and fleet modernization and that the utility was also planning to bring on board new capacity.

Mr Gama admitted that Spoornets past strategy of downsizing had been inappropriate and had been shown up as the South African economy began growing strongly. He said the emphasis had again shifted towards growth and modernization. This investment formed part of Spoornets drive to tackle inefficiencies in South Africas railway systems, in an effort to increase rails market share in the Southern African transport sector. Although rail transport is estimated to be 28% cheaper than road transport, Spoornets market share was still less than 10% of the overall freight transport in South Africa.

The South African government is also tackling the issue of rail freight losing market share to road. Mr Mpumi Mpofu SAs transport director general said that competition in the rail sector would be introduced soon. South Africas primary rail network, which included all railway lines connecting major cities and production centers to ports or international borders, would continue to be owned and managed by Spoornet for the foreseeable future, but that the secondary network would be owned and managed by a public rail infrastructure utility. Private rail entities would also soon be allowed to own and manage infrastructure, and run operations thereon. He said that rail service operators, both public and private would be allowed non discriminatory access to the primary network with an expansion regime defined from time to time by government. This would ensure competition in rail services on the primary network.

Trimaran acquires Standard Steel

Trimaran Capital Partners announced that it has completed the acquisition of Standard Steel LLC from Citicorp Mezzanine Partners LP and certain members of management. Terms were not disclosed. Standard Steel's senior management team, headed by CEO and President Mr Michael Farrell and COO Mr Tom Reinecke will continue in their current positions.

Mr Jay Bloom a co founder of Trimaran Capital Partners said "Standard Steel is uniquely positioned within the railcar wheel and axle industry to capitalize on the continuing strength in the demand for railcars and railcar components. We are experienced investors in the railcar industry, having recently exited our successful investment in FreightCar America, and Standard Steel represents an exciting opportunity to enhance that track record."

Standard Steel produces steel wheels and axles for sale to Class I railroads, freight railcar builders, railcar and locomotive maintenance shops, Amtrak, locomotive builders and regional transit authorities, among others. The company, together with its predecessors, has been operating since 1795 and has its manufacturing facility in Burnham, PA. With approximately 590 employees, Standard Steel generated over $147 million in revenue in 2005.

Fitch confirms Severstals ratings

Fitch rating agency has confirmed ratings of the Russian Severstal company: Long Term Issuer Default Rating BB-, senior unsecured rating BB-, Short Term Rating B and National Long Term Rating A+, the agency report said.

Cooksons H1 profit up by 23%

Cookson Group Plc, the world's biggest maker of molds for the steel industry, said that the first half earnings rose at least by 23% due to orders from China and India and cost savings from job cuts. Operating profit from continuing businesses was at least 70 million pounds as compared with 57 million pounds a year earlier.

Orders for ceramics from steelmakers, particularly in China and India, boosted sales as production grew by as much as 19%.

Job cuts last year also helped earnings and improving retail markets bolstered demand at the precious metals unit in the US.

Natural Resource closes 2 coal acquisitions

Natural Resource Partners LP has closed two acquisitions of coal reserves in Indiana and Maryland.

The first acquisition of reserves leased to Triad Mining, a subsidiary of James River Coal Co, for $10.85 million consists of 16.3 million tons of coal reserves in Pike, Warrick and Gibson Counties in Indiana and an overriding royalty interest on an additional 2.4 million tons. Production on both the owned and override property is anticipated to begin in mid 2007.

The company has also closed a $5.5 million acquisition of 3.3 million tons of coal reserves in Allegany County in Maryland. The property currently produces more than 500,000 tons per year and should generate royalty income to of nearly $1.4 million per year for the company.

Xstrata shareholders approve Falconbridge takeover plan

At an extraordinary general meeting on Friday, Xstrata shareholders approved the plan to acquire Falconbridge, which fulfilled one of the only remaining outstanding conditions of its offer. Xstrata is Falconbridge's largest single shareholder with 20% and has made a hostile C$16-billion bid for the outstanding Falconbridge shares.

In October last year, Inco reached agreement to acquire Falconbridge and this week US miner Phelps Dodge announced a $40-billion offer for both Inco and Falconbridge, in a deal that would create the worlds largest nickel miner and largest publicly-listed copper producer. Despite the Phelps Dodge transaction, Xstrata had no intention of abandoning its takeover bid.

Peabodys subsidiary asks for permit for School Creek mine in Wyoming.

Western Roundup Resources submitted its permit application to the Wyoming Department of Environmental Quality for School Creek coal mine located between Peabody's North Antelope Rochelle mine and Arch Coal's Black Thunder mine in Campbell County in Wyoming. The mine will also need to obtain water quality, air quality and solid waste permits.

If approved, Peabody officials have said they plan to add 30 million to 40 million short tons per year of ultra low sulfur coal from the Powder River Basin mine. The targeted online date is early in the last quarter of 2008.

Ms Beth Sutton Peabody spokeswoman said "We're achieving a major milestone today in the development of School Creek."

Coal shortage shuts down 3 power stations in Zimbabwe

3 small thermal power stations Bulawayo, Munyati and Harare belonging to Zimbabwe Power Company have suspended operations owing to coal shortages and Hwange Thermal Station is operating below capacity.

ZPC acting managing director Mr Norbert Matarutse confirmed that operations at the stations had been affected by coal shortages but said the reasons were explained in a joint statement by his company and Hwange Colliery Company published early this month. In the joint statement published in most newspapers, Hwange and ZPC said they were working together to address the shortage of coal to improve electricity generation.

The Bulawayo station, which has a capacity to produce 90 megawatts of electricity, has not been operating for the past two weeks.

UMWA holds rally to unionize Peabody new Black Stallion mine

Mr Phil Smith communications director of United Mine Workers of America informed that almost 1,500 members of UMWA and their supporters in West Virginia rallied on June 22 to press for unionization of Black Stallion mine being opened in the area by Peabody Energy.

Mr Cecil Roberts UMWA president told the rally Peabody made the decision for these nonunion workers. They did not give them the option when they hired them.

Peabody is opening the non unionized Black Stallion mine near another Peabody mine represented by the UMWA here in Boone County in southern West Virginias coalfields where the union has a strong presence. With the opening of Black Stallion, the number of nonunion operations in the United States run by Peabody now stands at 20.

Elk Valley Coal Mines win Reclamation Awards

Elk Valley Coal Partnership announced that its Fording River and Elkview mining operations located in southeastern British Columbia, were award recipients at the 30th Annual British Columbia Mine Reclamation Symposium held in Smithers, British Columbia on June 21st.

Fording River operations was awarded the 2005 British Columbia Jake McDonald Mine Reclamation Award for outstanding reclamation achievements. This marks the third time in its operating history that Fording River mine has received this award. The mine was previously recognized in 1979 and 1992. The 2005 Citation for outstanding achievement for reclamation at a Coal Mine was awarded to the Elkview operations.

Mr Jim Popowich president of Elk Valley Coal and Fording Canadian Coal Trust said We are very proud of the awards these two mines have received. We believe these awards are a reflection of Elk Valley Coal's ongoing commitment to being a responsible member of the communities in which we operate."

Elk Valley Coal, comprised of Canada's senior metallurgical coal mining properties, is the world's second largest exporter of metallurgical coal, Elk Valley Coal is owned by a partnership between Fording Canadian Coal Trust and Teck Cominco Limited.

Steel & iron firms dominate list of top companies in Ukraine

InvestGazeta last week presented list of Top 100 of the best Ukrainian companies. According to the list the most profitable companies of Ukraine are Ukrnafta, Kyivstar GSM and UMC but several large metallurgical enterprises featured in the top portion of the list

The metallurgical enterprises include Mittal Steel Kryvyi Rih JSC, Severnyi GOK JSC Kryviy Rih, Illich Metallurgical Industrial Complex in Mariupol, Azovstal in Mariupol, SCM in Donetsk, IUD and Zaporizhstal Integrated Iron & Steel Works JSC.

Pakistans SCA calls for investments in mining & power

The Sindh Coal Authority plans to hold roadshows in Dubai, Germany and other countries in November and December to attract foreign investors to the development of coal and other minerals in the province. Mr Agha Zia said that SCA had signed several MoUs with local and foreign mining companies for coal exploration and setting up of coal-fired power houses in the province.

He said that China National Machinery Import and Export Corporation after getting an exploration license would carry out exploration in Sonda-Jherruk coal mine area and prepare detailed feasibility for 1 million ton capacity coal mine and 250MW power house. Cathay Oil and Gas of Canada would start exploration and development of coal and methane at Thar Coal Field. Associated Group of Lahore and Fateh Group of Hyderabad would prepare a feasibility study for the development of coal mines and integrated coal field power project in district Tharparkar and establishment of coal mining and coal washeries plants leading to power generation of up to 200MW at Lakhra in Sindh.