RINL’s April to May sales up by 21% YoY

Rashtriya Ispat Nigam Limited has achieved record sales of INR 1294 crore during the April to May 2007 period up by 21% YoY as against INR 1068 crores in April to May 2006.

RINL has also recorded sale of 0.187 million tons of value added steel in April to May 2007 period up by 62% YoY as compared to April to May 2006. The sale of value added steel out of total steel sales in terms of volume is 46% which is up by 9% with respect to plan set by RINL. RINL is the largest supplier of special steel for manufacturing of elastic railway clips used for fastening the Railway track to the railway sleepers by the Indian Railways.

Its project sales volumes of 92, 000 tons during April to May 2007 has also recorded a growth of 8% YoY over the same period last year.

RINL has posted an export sale of INR 75 crores during April to May 2007 period up by 20% YoY over April to May 2006.

SAIL moving ahead with SS SEZ at SSP

The Hindu recently reported that the preliminary initiative to establish a special economic zone for stainless steel on the premises of the Salem Steel Plant has begun and Steel Authority of India Limited has almost finalised a financial and leasing firm for the purpose.

The report cites Mr PM Balasubramanian executive director of Salem Steel Plant as saying that "SAIL has already set the ball rolling towards this. A few leading players both from the country and abroad have expressed their willingness to pitch their tents. Clearance from the union ministry of industry and commerce is awaited."

Mr Balasubramanian said that the formation of SEZ on the surplus land will not hurt the INR 1,553 crore expansion project of SSP.

As SSP owns more than 3,500 acres of land for its future industrial needs, the Salem SEZ spread over 375 acres will be insulated totally from any social and political tensions, which many other SEZs are facing.

JSW Steel’s WB plant to start production in 2011

Mr Sajjan Jindal vice chairman and MD of the JSW Steel last week announced that production at its proposed Greenfield plant in West Bengal is slated to begin from April 2011.

JSW Group had inked a memorandum of agreement with the Bengal government for setting up the proposed plant at an estimated cumulative investment of INR 35,000 crore in January 2007. The project would be set up under the banner of JSW Bengal Steel Ltd in which the JSW hold 89% equity stake and the remaining 11% by West Bengal Industrial Development Corporation Ltd.

Mr Bhattacharjee chief minister of West Bengal said that about 5,000 acres of land would be required for implementation of the project out of this the state government has allocated 3,798 acres held by it. Mr Bhattacharjee further added that water for the steel project would be sourced from the nearby Rupnarayan River and the proposed plant's iron ore requirements would, however, have to be met from the JSW' own sources.

The first phase, with a capacity of 3 million tonnes per annum and an investment of INR 10,000 crore is scheduled to be ready in the next 4 years.

Indian economy grows by 9.4% in 2006-07

As per the latest numbers released by the India’s Central Statistical Organization last week Indian economy has grow by 9.4% in 2006-07, the fastest rate in 18 years. The growth exceeded the earlier projection of 9.2% and is next only to the 10.5% GDP expansion achieved in 1988-89. It is impressive also from the point of view that it is on the high base of 9% growth in 2005-06.

For the whole year, growth in manufacturing and some services sector more than made up for a slowdown in agriculture and construction sector.

Mr Venugopal Dhoot president of ASSOCHAM in a statement said that "Sectors particularly manufacturing and services have done vary well in 2006-07 as a result of which the economy grew 9.4%. If the momentum persists, the fiscal 2007-08 would record a similar growth.”

However, many analysts project that Indian economy would slow down in 2007-08 because of tight monetary policies adopted by the RBI to contain high inflation. According to RBI's own projection, the economy is expected to grow at 8.5% in 2007-08.

World Bank, in its Global Development Finance Report for 2007, has projected the Indian economy to grow at 7.8% and 7.5% in 2008 and 2009 respectively. It said that "Its restrictive policy conditions are expected to lead to deceleration in investment growth and weaker private consumption and government spending, contributing to a slowdown in GDP growth.”

TL Shankar committee recommends CIL restructuring

The Hindu reported that the TL Shankar committee after completing its report on the Indian coal sector reforms has recommended that the present structure of Coal India Limited needs to be recast. It has also recommended the setting up of an office of Coal Governance and Regulatory Authority.

The committee has also forecast pronounced coal shortages over the next 4 years and felt that the current structure of CIL and its role as the corporate company and the subsidiaries should be changed. The CIL chairman should be made chairman of all subsidiary companies with the current CMDs being designated as vice CMD. The committee wants the union coal ministry to quickly examine the Articles of Association of CIL and its subsidiaries to include these changes as this restructuring do not entail changing the legal status.

The committee has also favored separating Central Mine Planning and Design Institute Ltd from CIL or at least distancing the 2 organizations.

The committee while recommending CIL restructuring however said that the issue should be considered only during the 11th Plan period since any major change might disrupt the production plans CIL when it is required to increase output from about 400 million tonnes to 1,000 million in 10 years.

Coal and iron ore movement by East Coast Railway hit

BL reported that that transportation of coal and iron ore in large parts of Orissa, Andhra Pradesh and Chhattisgarh has been thrown out of gear last week. As per report, East Coast Railway’s daily average loading of four wheelers wagons nearly halved from the normal 10,000 per day.

As per report, the loading of coal in Talcher mines under Mahanadi Coalfields Ltd and the road transportation of it to the nearest railheads have been badly hit by agitation by the local people demanding immediate rehabilitation and jobs. The report cites a spokesman of East Coast Railway as saying that "We targeted to load 26 to 27 rakes of Talcher coal a day but the daily average loading in the month of May 2007 was 23 rakes and today we could load barely 5 rakes due to the agitation. There is hardly any ground stock available at the railheads."

The iron ore movement on the Kottavalasa Kirandul line in Andhra Pradesh has remained suspended because of the power failure. The high voltage transmission line in Jagdalpur area in Chhattisgarh has been reportedly damaged by the Maoists. East Coast Railway normally moves 15 rakes of iron ore a day on the Kottavalasa Kirandul line. It had dropped to 11 rakes recently due to repair of the conveyor belts and other work undertaken in some of the National Mineral Development Corporation's mines.

Power shortage may derails Indian economy growth - PM

Dr Manmohan Singh prime minister of India has bracketed likely power shortages as a key concern for Indian economy to grow at annual rates of 9% to 10%. Dr Singh has stressed the need for a wide range of power sector reforms including open access and competition.

Dr Singh during a power conference held recently said that an energy shortage of up to 13% in peak season does not look very promising and that India needed a crash programme to raise capacity if shortages were to be eliminated by 2012. He said “If we expect the economy to keep growing at 9% to 10% per annum, we need a commensurate growth in the power supply.”

Dr Singh said that "We have not been able to make a decisive breakthrough in ensuring high and sustainable rates of growth of this sector and improving its financial health. The current level of losses in transmission and distribution, ranging 30% to 45% in many states threatens the financial health of the sector. A large proportion of these losses are due to theft. Theft is the cancer of the power sector."

Dr Singh added that “The centre will support the initiative through a revised Accelerated Power Development and Reforms Programme scheme through which we will reward performing states by converting loans to grants in an appropriate manner on achieving certain benchmark results.”

Under the National Electricity Policy, India plans to add 78,577 MW of power generation capacity by 2012, mainly from coal fired units, to tide it over an acute shortage.

Reliance Energy to acquire thermal coal mines overseas - Report

Times News Network last week reported that Reliance Energy is scouting for coal mines in Indonesia and Australia to feed its proposed projects in Uttar Pradesh and Maharashtra.

The report cites a source close to the company as saying that “Reliance Energy has short listed three coal mines that are valued around USD 500 million. The deal is likely to be finalized before the Krishnapatnam ultra mega power project bid.”

Reliance Energy needs coal for its 2 upcoming plants namely the 1,200 MW Rosa power project at Shahjahanpur in Uttar Pradesh and the 1,200 MW Dahanu project in Maharashtra. For the INR 5,500 crore Rosa plant, the ministry of coal had already ensured a long term fuel supply linkage for the project from Ashoka mine in North Karanpura blocks. But the Dahanu expansion project needs additional coal. The project is waiting to get necessary approvals from the state government.

Reliance Energy is also planning a couple of new coal based projects in the country and has already proposed to set up an imported coal based 1,500 MW plant at Pipavav in Gujarat.

As per reports, Reliance Energy had bid for a 30% stake of Bumi Resources’ two coal mines in Indonesia, but TATA Power Company acquired the stake by quoting USD 1.3 billion.

BHEL to get power plant pump technology form Mitsubishi Heavy

It is reported that Bharat Heavy Electrical Limited has signed an agreement with Mitsubishi Heavy Industries for power plant pump technology and that the delivery of the first pump unit produced under the agreement is expected by end 2009.

Under the agreement, Mitsubishi will license design and production technologies of boiler feed water pumps, boiler feed water booster pumps, circulating water pumps and condensate pumps for sub critical and super critical pressure power plants with generation capacities between 500MW to 1,000MW.

BHEL has been aiming to manufacture key equipment for power projects, including pumps, to build super critical plants with more than 500MW generation capacity.

Indian government eases BIS norms for cement imports

It is reported Indian government has permitted for import of cement from pre identified sources which have a licence to use ISI mark in accordance with the foreign manufacturers' certification scheme of the Bureau of Indian Standards to ease procedural delays in cement imports. The directorate general of foreign trade has notified these changes and these will be in force till March 31st 2008.

The report cited Mr Anand J Gupta chairman of Builders' Association of India Mumbai Chapter as saying that the builder fraternity would be in a position to reduce prices by at least INR 55 per square foot if they were allowed to import cement without hassles. Mr Gupta informed that while a 50 kilogram bag of cement costs INR 251 in Mumbai, foreign manufacturers were ready to supply cement at INR 140 per bag.

Foreign manufacturers have to apply for the BIS certification, which involves inspection of their factories and satisfactory testing of samples by the Indian agency. The exporting company will have to pay 1% of its annual export contract value to the BIS as marking fees, in addition to a minimum marking fee of USD 2,000. The licence is valid for 2 years and can be renewed. As on April 24th 2007, BIS had certified 11 cement manufacturers from the UAE, Bangladesh and Bhutan.

In an effort to curb rising domestic cement prices, Indian government had removed all duties on cement imports to increase availability.

CIL’s ECL to expand mining for revival

It is reported that Coal India Limited’s Eastern Coalfields Limited is likely to come out of the purview of board for reconstruction of public sector enterprises by 2008-09 when its net worth may turn positive.

Mr Deepak Chakravarty CMD of ECL said that the cabinet committee on economic affairs had approved a revival plan of the company during October 2006, with a guideline that the company should undertake steps for augmentation of underground and open cast production from the present level of 9 million tonnes to 13.81 million tonnes by 2010-11.

Mr Chakravarty said that “To increase departmental open cast production to the level of 33.70 million tonnes by 2012-13, Rajmahal open cast project is being expanded from 10.50 million tonnes to 17 million tonnes.” He further added that the union government has already approved the project report and the tender is under finalisation.

Two Greenfield projects at Chuperbhita for 4 million tonnes per year and Hura ‘C’ for 3 million tonnes per year are being implemented. Sonepur Bazari Project is being expanded from 3 million tonnes to 8 million tonnes and Chitra from 1.22 million tonnes to 2.50 million tonnes. These project reports are under preparation and the company proposes to invest INR 2,591.40 crore for augmenting through internal accruals.

ECL operates 115 mines in West Bengal and Jharkhand. It earned a maiden profit of INR 363.86 crore in 2005-06 and is poised to announce substantial profit over a turnover of around INR 4,480 crore during 2006-07.

Work begins on dedicated freight corridor

It is reported that Indian Railways has appointed a team of about 20 officers to start preliminary work on the dedicated freight corridor project and that these officials have joined Dedicated Freight Corridor Corporation of India Ltd on deputation from the ministry.

The appointed team would work towards constructing 320 kilometer of rail link on each corridor, which would be taken up on a priority basis. The team has started working on the final location and design survey for these 2 sections. The two rail routes are Ajmer to Palanpur section on the western corridor and Aligarh to Kanpur section on the eastern corridor.

Meanwhile, the Japanese Investment Cooperation Agency has suggested several junctions where the dedicated freight corridor would be linked to the Indian Railways network through feeder routes. The junctions in the western corridor, which would link JN port with Dadri include Vasai, Gothangam, Makarpura, Sabarmati, Palanpur, Marwar, Phulera, Rewari, Rithala, Dadri and Tughlakabad. Similarly, in the eastern corridor, which would link Ludhiana to Sonnagar, the junctions include Sonnagar, Ganjhhaya, Mugalsarai, Jeonathpur, Prempur, Bhaupur, Tundra, Dandkha, Dadri, Kalanam, Rajpura, Sirhind and Dandarikalan.

JICA has said that setting up each depot would cost about INR 155 crore on the western corridor while they would cost INR 141 crore on the eastern corridor. JICA, which is conducting a feasibility report, expects to submit the final report by September 2007.

The search committee at Cabinet Secretariat is yet to firm up the board members for DFCCIL, the special purpose vehicle that would manage the project. DFCCIL has an authorized capital of INR 4,000 crore initially, which is likely to be increased subsequently depending on the requirement.

Rajasthan plans Kalisandh hydel project in Jhalawar

Rajasthan government has announced that it will set up a 1000MW to 1200 MW Kalisandh hydel power project in Jhalawar district.

Rajasthan Rajya Vidyut Utpadan Nigam has done the detailed project reports for the INR 4,600 crore projects and further approval is awaited. Rajasthan government will provide nearly 20% of the funds and balance would be provided by Power Finance Corporation and financial closure will be achieved by June end 2007.

Rajasthan government has allotted 800 bigas of land for the purpose while remaining 1,500 bigas would be private land for which land acquisition process was underway.

Rajasthan Rajya Vidyut Utpadan Nigam has done the detailed project reports for the INR 4,600 crore projects and further approval is awaited. Rajasthan government will provide nearly 20% of the funds and balance would be provided by Power Finance Corporation and financial closure will be achieved by June end 2007.

China’s Q1 investment in steel sector up by 13.5% YoY

According to a report from China’s the National Development and Reform Commission investment in China's steel sector amounted to CNY 36.9 billion (USD 4.8 billion) up by13.5% YoY in the January to March 2007 quarter as compared to January to March 2006 quarter.

The report added that "Exporting low end steel products that devour a lot of energy and contaminate the environment is by no means acceptable where the steel industry accounts for 15 % of the country's total energy consumption and discharges 14% of the total pollutants. The authorities should pay more attention to preventing further investment hikes in the high energy consuming industry.”

The report said that "It may take a while before the measures take effect and current demand for steel remains high in the global market indicating fast growth of steel export would continue. China will strictly levy higher water and electricity bills and waste treatment fees on the steel plants to ensure further progress being made in energy saving and pollution reduction.”

NDRC said the status of net steel exporter contradicted China's industrial policies and hindered the attempt to meet energy efficiency and pollution reduction targets and the steel industry restructuring.

The Chinese government has set a goal of reducing energy consumption per unit of gross domestic product by 20% between 2006 and 2010 while pollutant discharges should drop by 10%.

SS producers to promote low or non nickel grades - MEPS

MEPS in a recent update said that the global stainless steel scene is changing rapidly against the rising cost of nickel has been taken on board by the producers and mills are now taking seriously market demand for low or non nickel grades.

POSCO has added a nickel free stainless steel into its portfolio and Outokumpu, which has traditionally been mainly a supplier of austenitic grades, is increasing its production of ferritic types. Output of ferritic grades is also to be expanded from the new melting shop at Lianzhong in China. This follows similar actions earlier by Japanese producers.

MEPS said that Global supplies of 300 series SS in the past formed about 75% of total stainless deliveries. But ThyssenKrupp recently announced that it may lift output of nickel free steel from the existing figure of 30% up to 35%. MEPS added that “We have reports that an Arcelor Mittal senior executive sees the potential to push up production of non nickel grades to 70% in the long term.”

MEPS concluded that “The growth in nickel demand in the future is likely to be slower than the overall expansion of the stainless steel sector. This is even more probable now that the producers are investing in new facilities to manufacture ferritic specifications. This fresh capacity will be actively promoted by the mills which was not the case in the past.”

MEPS also added that this situation proves the point that clever speculation on the LME can only work for a limited period. It said “Any commodity can be priced to unacceptable levels but eventually market fundamentals will prevail. When the price of a product becomes excessive buyers will seek out substitute materials or in this case grades.”

Slovakia to opt out of Krivy Rih Iron Ore project

Interfax reported that Slovakia is not seeking a stake in the JV between the Ukrainian government and Ukrainian Ore Mining and Metallurgical Company that will finish building the Krivy Rih Oxidized Ore Beneficiation Plant.

Mr Lubomir Jahnatek economics minister of Slovakia's in a recent press conference of the Ukraine Slovakia cooperation commission at Kiev said that "Slovakia has no interest in the JV. We are giving Ukraine its chance to finish building the mine.

Mr Jahnatek said that a new valuation of the unfinished mine is underway. He added "We'll suggest two options: settling in cash or in goods and there are goods that we are prepared to accept.”

Work on the mine began back in 1985. The USSR and several Eastern European countries financed the project however some of the participants pulled out when the USSR broke up and Ukraine inherited the project. Ukraine's interest in the project was estimated at 56.4% at the time, Romania's at 28% and Slovakia's at 15.6%. The Krivy Rih mine will be capable of producing 10 million tonnes of iron ore pellets per year. Overall project costs are an estimated USD 2.4 billion of which more than USD 1.6 billion has been spent. The mine is two thirds complete.

Russia's Metalloinvest and Ukraine's Smart Group which have been selected to partner Ukraine in the project have formed the 50:50 Ukrainian Ore Mining and Metallurgical Company. The Ukrainian government will own 50% plus one share and Metalloinvest and Smart Group will own the remaining equity in the JV. It will cost an estimated USD 804 million to finish building and commission the Krivy Rih mine.

AnSteel to make strategic investment in Gindalbie Metals

Western Australian iron ore group Gindalbie Metals Ltd announced that it has reached agreement with its JV partner in the Karara Iron Ore Project, leading Chinese steel and iron ore company Anshan Iron & Steel Group Corporation, for AnSteel to take a strategic equity position in Gindalbie. The release adds that "The proposed investment will further strengthen the relationship between Gindalbie and AnSteel and represents a strong vote of confidence by AnSteel in the forthcoming joint development of the Karara Project, as well as in Gindalbie’s long term growth strategy as a mid tier Australian iron ore producer.”

Under a Share Subscription Agreement signed with AnSteel, Gindalbie will issue 65 million shares at 60 cents each to AnSteel’s Hong Kong investment vehicle, Angang Group Hong Kong Co., Limited, to raise AUD 39 million. Following completion of the share placement, AnSteel will become Gindalbie’s second largest shareholder with a 12.94% interest. The Share Subscription Agreement is conditional upon AnSteel receiving approval and sign off from relevant Chinese regulatory authorities, which are expected to be received within two months.

After completion of the placement, AnSteel will be invited to nominate a representative to join Gindalbie’s Board, with the timing of this appointment to be jointly determined by Gindalbie and AnSteel.

Mr George Jones executive chairman of Gindalbie said that “I am very pleased that AnSteel has agreed to take up this strategic investment in Gindalbie, which represents another important chapter in our relationship. I believe that AnSteel has sent a very clear message, not only about their commitment to the development of the Karara Project, but also about their confidence in Gindalbie’s future as a rapidly growing Australian iron ore company.”

Mr Zhang Xiaogang president of AnSteel said “We have been working closely with Gindalbie over the last 18 months to advance the Karara Project to a position where we are very confident in the capacity of this Project to be able to deliver a long-term supply of high-quality iron ore for us. This strategic investment in the Australian resource sector is a very important step by Ansteel into the international capital and metals markets. While the Karara Bankable Feasibility Study is still to be completed, we are very confident that the Project will be developed.”

AnSteel and Gindalbie will make a final decision to proceed with the Karara Project following completion and delivery of the Bankable Feasibility Study in August 2007, with the overall Karara Magnetite Project targeted to commence production at the rate of 8 million tonnes per annum of blast furnace quality pellets and concentrate by early 2010. The Bankable Feasibility Study on the Mungada Hematite Project is also targeted for completion by the end of August 2007, ahead of a development decision and proposed commencement of construction during the second half of 2007.

CVRD to support investors for setting up steel mills in Brazil

BNamericas has reported that CVRD is in talks with international steelmakers to bring new steel projects to Brazil. It quoted Mr Fabio Barbosa CFO of CVRD as saying that "We are in talks to bring a steel project to Maranhao and other regions, including Espirito Santo state. Whoever wants to install a steel project in Brazil should look for us, and can count on our support. Our clients know this."

CVRD and Chinese steelmaker Baosteel are already in talks to install a steel project in Maranhao. It also has interests in alumina, aluminum, bauxite, kaolin, potash, nickel, copper and railroads, among others.

CVRD has a 10% minority stake in the under construction CSA steel mill in Rio de Janeiro state, due to start operations in 2009, while German industrial conglomerate ThyssenKrupp has the other 90%. CVRD is also part of the Ceara Steel slab project, though the local steel sector is against proposed subsidized natural gas for Ceara Steel from federal energy company Petrobras.

ThyssenKrupp opens new steel service center in Poland

ThyssenKrupp Steel AG’s subsidiary ThyssenKrupp Stahl Service Center GmbH has opened a service center in the southern Polish town of Dabrowa Górnicza near Katowice was on May 31st 2007.

ThyssenKrupp Stal Serwis Polska it will produce 125,000 tons of hot and cold rolled coils and coated slit strip per year for customers in Poland the Czech Republic, Slovakia, Belarus, Hungary and Ukraine.

The centerpiece of the new facility will be a slitting line to process flat rolled steel from ThyssenKrupp Steel production into slit strip. The slitting line can process coils in weights up to 30 tons and strip thicknesses from 0.4mm to 4mm. The strength of the material can be up to 1,400 mega Pascals. Materials which such high strength levels are used for example for side impact protection in car doors. The slit strip will be available in widths from 25mm to 1,800mm.

Dr Jost A Massenberg a member of the executive board of ThyssenKrupp Steel AG at the opening ceremony said that the new service center reflects the strategic importance of Eastern Europe, a region in which the company aims to expand. He added that “In Poland and its southern neighbors alone, demand for processed steel products in 2005 was 2.2 million tons per year and this is expected to rise to 3.7 million tonnes by 2010. That’s a growth rate of more than 11%.”

The main customers targeted in the Eastern European markets place particularly high demands on the surface quality and dimensional accuracy of processed steel products. They include car producers, automotive suppliers, stamping plants and appliance manufacturers and suppliers.

DBCT coking coal export in 2007 to fall by 17%

Bloomberg reported that MaCarthur Coal Ltd, Rio Tinto Group and other Australian coal exporters may face as much as a 17% shortfall in meeting orders out of the Australia second largest coal port because of rail and loading congestion.

Mr Nicole Hollows CEO of Brisbane based Macarthur in an interview last week said that “Miners may only export 50.4 million tonnes of coal from Dalrymple Bay terminal in Queensland in 2007 compared with a contracted 61 million tonnes.”

Goldman Sachs JBWere Pty said that coking coal prices may have their first gain in three years in 2008 because of rising demand from Indian steelmakers and infrastructure congestion in Australia.

Mr Rob Clifford an analyst at ABN Amro Holding NV in Melbourne said "Exports are going to be crimped and we’re getting bullish on coal prices because of this.”

Vietnam - A hot place for steel investments

International investors are considering Vietnam an ideal place for steel mill projects and have committed for many big projects worth several billion dollars each in Vietnam. But experts have warned that too many steel mills will lead to surplus situation in the country.

According to the Vietnam Steel Association, Vietnam now has to import 3.5 million tonnes of steel a year. It is estimated that the total demand for flat steel will be some 4.7 million tonnes by 2010, 7.2 million tonnes by 2015 and 10.2 million tonnes by 2020. If counting the demand for construction steel, which is expected to see the same growth rate in demand as flat steel, Vietnam will need 10 million tonnes of steel of different kinds by 2010, 15 million tonnes by 2015 and 20 million tonnes by 2020.

Such a big demand can be seen as a big opportunity for investors and the steel industry which explains why foreign investors are rushing to set up steel mills in Vietnam. The Vietnam Steel Corporation on May 29th 2007 signed a MoU on the implementation of the USD 3.5 to USD 4 billion Ha Tinh steel complex project with TATA Steel, which will produce 4.5 million tonnes to 5 million tonnes a year. Another big steel project is waiting for licensing the one to be run by the JV between POSCO and Vietnam’s Vinashin. The USD 5 billion steel projects expected to be located in Khanh Hoa province will put out 5 million tonnes a year. The two projects alone will have the total capacity of 10 million tonnes a year by 2015.

Other big steel projects are to also be kicked off in near future. These include the one invested in by Tycoons Group International’s USD 1 billion, which was licensed in September 2006. The 2 million tonne steel mill invested in by Essar and VSC in Ba Ria-Vung Tau is awaiting a license. In addition, the construction of a series of smaller projects, capitalized at USD 30 million to USD 60 million, is to start in a short while.

If considering the current capacity of 6 million tonnes a year of operational steel mills and another 6 million tonnes able to be produced by that time, Vietnam will be able to produce 20million tonnes of steel of different kinds by 2015. However experts have warned that too heavy of investment in the steel industry will cause waste as supply will exceed demand.

HRC overcapacity unlikely to affect China’s domestic market in H2

Hot rolled coil is a key indicator of steel market due to its far reaching impact in various related sectors. Strong demand for HR pushes up the slab price. In addition HRC can be used as both substitute for medium plate and HR strip or feedstock for CR steel as well.

Market players are at a loss from late May 2007, in the face of frequent tax changes, HRC price has dropped some CNY 300 per tonnes in a couple of days following the latest export tax increase. Both the traders and steel makers are unsure about future market trend, which is behind the dwindling market inventory.

China's HRC export front appeared quite strong in March 2007 leading to less material available for domestic market. Moreover, the exporters rushed out materials in early April 2007 due to speculation for removal of tax rebate which also reduced HRC supply to domestic market. Meanwhile, the traders are quite cautious in placing orders in anticipation for clearer market direction.

The statistics show that 12 hot rolling lines are slated to come on stream this year, with a combined capacity of 37 million tonnes. Of this, 5 lines boast designed capacity of over 3 million tonnes per year and the remaining 7 lines exceed 2 million tonnes per year. It is expected that China's HR capacity would reach 140 million tonnes by the end of this year.

China's planned new HR capacity includes

However, there is a time lag of a couple of months for these HR lines to start volume production after commencing operation.

Domestic HRC capacity has registered a record growth in 2005, when the fresh HRC capacity rose by 49.9% YoY to 27 million tonnes leaving the total capacity at 81.15 million tonnes. However, domestic commercial HRC output only increases by 36.1% YoY to 51.92 million tonnes.

Another key reason is that a large amount of these HRC has been used as feedstock for those high value added products like CR steel and special steel due to expanding demand. That has also restricted the growth of HRC products available in the market. Almost half of the above 12 HR lines are slated to produce base material for CR steel or other downstream processing.

(Sourced from MySteel.net)

Acesita aiming to produce 60,000 tonnes of CRGO in 2007

Business News Americas reported that Brazilian specialty steelmaker Acesita expects to see its grain oriented silicon steel capacity at 60,000 tonnes per year by end 2007 as compared to 50,000 tonnes per year in 2006.

Spokesperson of Acesita without citing an output forecast for 2007 said that production of the grain oriented silicon steel in 2006 came in at some 45,000 tonnes as compared roughly 39,000 tonnes in 2005.

Acesita has a planned capital expenditure of BRR 263 million (USD 138 million) for 2007, out of which BRR 44.1 million was already spent in the first three months of the year. Disbursements will focus on the silicon steel capacity increase and investments at subsidiaries.

Minas Gerais state based Acesita has liquid steel capacity of 900,000 tonnes per year and calls itself the only integrated stainless and silicon stainless steel producer in Latin America.

China's export of rebar & wire rod likely to reduce

Middle East, South Korea and US markets outlook has a significant impact on Chinese wire rod and rebar shipment to the three key markets in the future.

MySteel reported that Iran, South Korea and HK are the top three recipients of Chinese rebar shipment during February and March 2007adding up to 62% of China's total rebar export in the period.

In 10,000 tonnes

36% of Chinese wire rod export goes was accounted by South Korea, US and Vietnam.

In 10,000 tonnes

The key motivator for Chinese mills to export has been a large gap between Chinese export equivalent prices and domestic prices in other parts of the world. Chinese export equivalent prices are estimated by adjusting Chinese domestic prices for transport to port, customs clearance and the relevant export rebate or tax. They do not include the cost of freight. The effect of the export tax would reduce these margins but the table shows that the margin for Chinese rebar exported to key markets will remain significant.

In USD
Chinese export price is equivalent to USD 480 per ton after adding 10% export tax
The price is as reported on May 23rd
Margin’s are without taking freight into account

However, steel demand is expected to wane in the major destinations of Chinese exports as the summer approaches. Both rebar and H beam price weakens in Iran in recent days on increasing concern for likely price limit on steel products and international sanction. Meanwhile, EU traders revealed that the buyers have ordered sufficient Chinese shipment in the fist quarter, and there is no new import order for wire rod at the moment. Softening scrap price and weakening demand are set to drag down wire rod price in US market in near future. In Southeast Asia, flooding Chinese bar products import has triggered market panic and the governments have put restrictive policy to block influx of Chinese construction steel.

It seems that the price spread still provide some opportunity for Chinese steel exporters despite the export tax. However, market analysts expect export of wire rod and rebar to fall back in following months since foreign buyers have already built up sufficient stock in previous months. Besides, international price is unlikely to be driven up by China's export tax in short term.

A reduction in the volume of exports is likely to have a negative effect on the Chinese domestic market. The increased supply may cause prices to soften. However, market observers are not expecting any price slump similar to same period of last year on back of limited supply across the country. Therefore, domestic price of rebar and wire rod is expected to tend towards stable from Jun onwards.

(Sourced from MySteel.net)

Mittal Steel Kryvy Rih cut workforce by 17% - Report

Kyiv Post reported that Ukraine’s largest steel mill, Mittal Steel Kryvy Rih has succeeded in cutting down its massive workforce by almost 9,000 employees through a voluntary retirement program intended to boost efficiency. The program, launched this March 2007, has enabled Mittal Steel Kryvy Rih to cut its workforce by about 17% since the beginning of the year, when it had 54,000 employees.

As per report, the program has cost Arcelor Mittal UAH 31 million (USD 6.2 million). On average UAH 30,000, or about USD 6,000, was paid to each retired worker. The single payout amounts to more than the average annual USD 400 a month salary for employees.

Mr Yuriy Bobchenko chairman of the metallurgical plant’s trade union in a press conference said that 8,887 employees had left the company from March 2007 through April 2007 by accepting voluntary retirement packages, out of which 6,426 had reached retirement age. He added that just over 10,000 workers applied for voluntary retirement since March 2007. Almost 300 applications were withdrawn.

The report cites Mr Frank Pannier a spokesman of Arcelor Mittal as saying that the program is also aimed at helping workers who are eligible to retire early while giving them a decent amount of money to survive for a year after leaving the plant and possibly enough to start up their own businesses. He added that “We are not talking about workforce reduction or mass layoffs of the enterprise workers by the administration.”

Mittal Steel Kryvy Rih has many more employees as compared to steel mills in the West. It had about 57,000 employees when Mittal Steel acquired it for USD 4.8 billion through privatization tender in the fall of 2005. Arcelor Mittal has boasted major successes at the plant since its takeover. Production of finished steel in 2006 increased by 12.2% YoY, steel by 8.9% YoY, cast iron by 10.4% and agglomerate by 13.1% YoY.

Kyoei and Godo Steel tie up for rebar business

JMB recently reported that Japanese electric furnace based Godo Steel and Kyoei Steel announced that they have achieved agreement to shares of 3% each other and that they will acquire the interest by the ended of December 2007.

As per report both companies reorganized Nakayama Steel Products which proceeded corporate reorganization in 1999, in tandem and are operating Nakayama Steel Products on a conjoint basis.

Both companies aims stabilization of Japanese rebar market, which will response international increasing competition and changing of steel demand, and which will build up business fundamental.

Tubacex aims to be a leading supplier of SS seamless tubes

Tubacex group recently announced its financial results for 2006, after its annual accounts were approved in a general meeting of Shareholders.

Consequently consolidated sales are up by EUR 539.07 million a figure 25.2% higher than in the preceding financial period. Two markets which must be highlighted are Europe the destination for 65% of the Group’s sales where growth was 28.3% higher than the previous year and North America where sales up by 9.2% in spite of the strength of the euro against the dollar penalizing the sales of European exporters.

The consolidated net profit reached EUR 30.95 million which means an increase of 21.7% with regard to the profit obtained the previous year. The net cash flow generated amounted to EUR 47.69 million and therefore 16.1% higher than in the preceding financial year.

Result for the consolidated Tubacex Group

In EUR million

Mr Álvaro Videgain president and CEO of TUBACEX described it as historical because the company’s figures for production sales profits and cash flow all set new records.

In addition, development of the Strategic Plan that defines the business project of TUBACEX of 2010 continued throughout the financial year. The purpose of this Plan is to guarantee future growth and profitability and to convert the Company into the leading seamless stainless steel tube manufacturer in the world.

The Plan foresees the growth of the company through optimizing use of the capacity of the current production structure and by means of the quest for commercial excellence affecting consolidation of the position of leadership and profitability in Europe growth in traditional areas such as the US and Canada as well as in those areas where a greater increase in the demand for tubes is forecast such as in the case of Asia. Among other aspects expected to have a positive influence are new high added value products strong growth potential commercial excellence and customer service.

Tubacex SA said that it aims to become the world's leading manufacturer of seamless stainless steel tubing by 2010. It also said the future growth in its financing will allow it make 'acquisitions of any kind and also reiterated its optimistic forecasts for 2007.

Mr Prokhorov launches private investment fund Unexim Group

Mr Mikhail Prokhorov part owner of Norlisk last week launched a new private investment fund Unexim Group which has USD 17 billion in assets and will focus initially on mining, energy and nano technology. Mr Prokhorov will be president of the group. Mr Dmitry Razumov, former deputy CEO of Norilsk Nickel, has been appointed as GD.

Mr Prokhorov is dividing his assets with former business partner Mr Vladimir Potanin. The fund has been created on the basis of Mr Prokhorov’s 50% share in the Interros banking and industrial group and his 22% stakes in Norilsk Nickel and Polyus Gold, Russia’s largest gold miner.

Mr Prokhorov said "We are putting a stake in projects where Russia has objective competitive advantages." He said the fund would invest in developing energy projects including hydrogen fuel cells as well as high technology projects and non ferrous and precious metals mining.

Mr Razumov said "We have a very ambitious task to build one of the largest private investment funds in the world specializing mainly in innovation projects. We already have everything necessary to achieve this task. We have a unique team combining rich experience both in the financial and investment sectors as well as in the development and management of production assets."

US coal price likely to increase due to supply constraints

Coal prices may rebound from a two year slump as China buys more than it exports for the first time in history. A recent report from Fitch Ratings said that continuing demand for coal through the second half of 2007 coupled with supply issues will push coal prices up.

The Fitch report said “Transportation bottlenecks and outages the availability of labor and equipment a challenging regulatory environment and geology will all constrain supply growth improving the price environment for coal. In the very near term high cost production has been taken off line given softness in the spot market.”

However, Fitch report added that “Prices negotiated in the current year are unlikely to show gains over those negotiated in 2004 and 2005 when supply was tight and inventories were low.”

Iron ore boom pushes Ms Rinehart up in the list of Australian billionaires

The Australian reported that the resources boom and a gravity defying share market has more than doubled the wealth of Ms Gina Rinehart and created 9 new billionaires in Australia.

In the annual BRW Rich 200, published recently, Ms Rinehart, daughter of that other well known Pilbara prospector, the late Mr Lang Hancock was ranked number four with AUD 4 billion fortune up from AUD 1.8 billion.

BRW predicted that, as she unlocked the value of her iron ore tenements, could overtake the three super rich Australians ahead of her within five years. They include perennial number one the Packer family, now headed by Mr James Packer, at AUD 7.25 billion, property magnate Mr Frank Lowy at AUD 6.51 billion and paper & packaging entrepreneur Mr Richard Pratt at AUD 5.4 billion.

Another Queensland mining entrepreneur, Mr Clive Palmer is the richest debutant on the list. The 53 year old property developer turned mining entrepreneur bought some Pilbara tenements in 1985. Last year, his private company Mineralogy sold mining rights over part of his holdings to the Chinese company CITIC and there are now more deals on the way. Construction of the AUD 1.5 billion mine has begun and first shipments are expected next year. Production is estimated to reach 30 million tonnes a year by 2012.

The resources boom, driven by China's modernisation, keeps setting records for the price of the Australia’s key commodities, with the price of iron ore, in particular, surging by 153% since 2003.

South Africa’s SS demand in 2006 up by 29% YoY

Reuters reported that Stainless steel demand in South Africa is up by 29 % in 2006 fuelled by the transport sector and that more growth is expected in 2007.

Southern Africa Stainless Steel Development Association said that SS demand went up by 29% in 2006 to 192,657 tonnes with the transport sector accounting for 42% of demand, engineering and capital equipment for 18% and metals goods for 17%.

SASSDA added that "The growth outlook for the local market remained positive driven by strong demand and project activity within South Africa and the region." It added that helping demand in 2008 will be a pipeline of infrastructure projects over the next decade in South Africa worth around USD 55 billion.

AISI, SMA and SSINA give detailed comments on white paper on Chinese steel industry

The American Iron and Steel Institute, the Steel Manufacturers Association and the Specialty Steel Industry of North America announced that while they understand the efforts of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters to produce a May 2007 White Paper to provide accurate information about the Chinese steel industry and to clarify the intentions of the Chinese mills and thereby reduce concerns in the U.S. about the expansion of China’s steel capacity, they take a significantly different view on a number of key points.

The three leading steel associations in the United States had the following comments
1. The CCCMC paper does not address at all the major problem of Chinese government subsidies to the steel sector. These subsidies, which have been described at length in several recent papers by US steel producers, have already provoked a WTO challenge by the United States. With assistance from these subsidies, China's crude steel production increased by 200 million tonnes from 2003 to 2006, an amount roughly equal to twice the total crude steel production in the United States. Steel from China does not have a right to unfettered access to the US market, with little regard for WTO rules.

2. The CCCMC would like people to believe that recent Chinese government policy will help resolve the existing imbalances in China’s steel market. But, as noted above, China's government policies are, in large measure, the cause of the current problem. Because of these policies, China went from being a net importer of 34.7 million tonnes of steel in 2003 to being a net exporter of 33.2 million tonnes in 2006. In other words, China's trade balances with respect to steel shifted by almost 68 million tonnes in only three years. This incredible shift not only threatens US steel producers; it is also disrupting markets around the world.

3. With regard to the CCCMC's claim that exports account for only 10% of total Chinese steel production, this completely overlooks the fact that this represents an enormous figure, given the sheer size of China's steel industry. China exported 52.1 million tonnes of steel products last year. That volume exceeds half of all steel production in the United States, which was 98.5 million tonnes in 2006. Moreover, during the first quarter of 2007, the increase in China's net steel exports accounted for nearly 58% YoY increase in China's crude steel production. This shows that increases in Chinese production are being driven to a large extent by higher export volumes.

4. While the CCCMC may assert that China’s steel industry presents no threat to industries in other countries, significant injury has already occurred. US imports of steel from China rose from 2.3 million net tons in 2005 to 5.4 million net tons in 2006, an increase of 133% in a single year. These heavily subsidized imports took sales from domestic producers even with respect to high end items like corrosion resistant steel and welded and seamless tubular products. In terms of adverse effects downstream, the damage and job losses took place in many product lines, from fence posts to auto parts. In January 2006, the Chicago Federal Reserve attributed the large job losses in the US auto parts industry in recent years directly to the dramatic increase in auto parts imports from China.

5. The CCCMC is correct that increasing Chinese steel demand contributed to global steel price restoration in the post-2002 period. But the problem is that any benefits from this increase in demand are more than outweighed by the unprecedented increase in government-supported production that has taken place during this same period. For example, between 2005 and 2006, China's apparent steel consumption rose by 9 percent, but its steel production increased by 17.7%. A main result of these divergent growth rate lines is that China is now a major net exporter of steel products, and global producers are facing severe and unfair competition from import surges of subsidized Chinese steel.

6. Neither market forces nor China’s economic expansion requires that China become self sufficient in steelmaking, let alone a major net steel exporting nation and the world’s number one steel exporter. In fact, China has to import enormous volumes of iron ore in order to supply its government-supported factories. While it is difficult to talk about the costs of steel production in China, given that China is not a market economy, there can be little doubt that China is not a low cost steel producer.

7. Market forces also do not require that China balance steel capacity/production and consumption. Instead, they require that China allow the market to determine the proper ratio between production and consumption. In any event, China's steel trade is far from balance. Chinese steel exports at a rate of 7 million tonnes per month are upsetting the global supply & demand balance. While the CCCMC says that this is a temporary phenomenon to be solved by the end of 2008, US mills, already facing a surge of steel imports from China, should not have to rely on the good intentions of the Chinese government, particularly in light of China’s track record in turning goals into meaningful results. Under the WTO, US trade with China should reflect market forces, not government policies.

8. Despite the CCCMC's claims, there is no reason to believe that Chinese steel capacity and consumption will be brought into "balance." According to the IISI, China's apparent demand for finished steel in 2008 will be 442.8 million tonnes. Assuming a yield loss of 10%, this translates into demand for crude steel of 487.1 million tonnes. However, Steel Business Briefing recently reported that, according to the China Iron and Steel Association, China's total steelmaking capacity at the end of 2007 will be 550 million tonnes per year. These projections indicate that, even if China added no steel capacity in 2008, its capacity next year would still exceed demand by almost 63 million tonnes.

9. Other sources support a similar conclusion. Recently, World Steel Dynamics analyzed Chinese capacity and demand with respect to seven key steel products: hot-rolled coil and strip, cold-rolled coil and sheet, galvanized sheet, cold-rolled electrical sheet, plate, wire rod and rebar. It reported that, in 2006, Chinese capacity to make these products exceeded Chinese demand by 40.2 million tonnes. It also predicted that, by 2010, this gap will have widened to 74.5 million tonnes.

10. The CCCMC paper points to recent changes in tax policy by the Chinese government that will allegedly discourage exports. But the Chinese government has a pattern of temporarily increasing and decreasing value added tax rebates and export taxes for its own purposes, and the American steel industry cannot count on such policy announcements because: these manipulations of market dynamics have had limited success in the past, they often change and they do not address the fundamental problem of a steel industry dominated by government decree rather than market forces. Indeed, China's most recent announcements of VAT rebate eliminations and export taxes continue to reflect a government policy of intervening in steel and raw market markets by
(1) Channeling or targeting exports of pipe and tube and other high value steel products
(2) Taxing or restricting exports of key raw materials and inputs

11. There is, no doubt, several reasons for China's failure so far to close down obsolete, heavily polluting steel capacity, including subsidies and the need to maintain social harmony. But the reason the CCCMC gives “The continued strength of both the Chinese and global markets”, hardly explains why these inefficient and environmentally unfriendly facilities remain in operation. The government of China has itself recognized that there continues to be inadequate enforcement of environmental standards, both national and local.

12. China’s central government has made many positive-sounding policy pronouncements in recent years, to shut down obsolete steel capacity, enforce environmental standards for steel facilities and promote consolidation in the Chinese steel industry, but such pronouncements, by and large, have yet to translate into real world results.

13. Much of the new capacity being built in China will belong to state owned enterprises such as Baosteel and other major producers. Plainly, China's government could stop new capacity at plants that it controls if it really wanted to. Unfortunately, it appears that China
(1) Wants to continue to direct and control steel industry development
(2) Is unwilling to allow market forces to work
(3) Does not want to end government ownership of, support for and intervention in the steel sector and related sectors.

14. While steel continues to be a good example of what is wrong in China’s economic development and in the US China trade relationship, it is not the only example of how China is intent on becoming the world’s factory thanks to massive government subsidies.

15. It should also be emphasized that, despite urgings by the IMF, the US Administration, Federal Reserve Board Chairman Ben Bernanke and representatives of many other nations, China maintains a vastly undervalued currency that results in a subsidy estimated at 40% or more on its exports. This major concern is not addressed in the report.

The releases adds that “America’s steel industry supports the US China Steel Dialogue as a way to clarify some of the key points at issue. We believe strongly that there would be less steel trade friction between the United States and China if market forces and transparency, instead of government directives and non-market behavior, governed the Chinese steel sector. In sum, instead of relying upon additional government intervention as a means to solve problems, China should simply trust the market to work efficiently.”

The releases said that “One obvious step in this direction is to move toward private ownership of steel mills, with a full and fair opportunity for non Chinese companies to own Chinese steel producers. Another needed step is complete elimination of subsidies for Chinese steel production. Other forms of market intervention, including currency manipulation, efforts to control raw material markets and dictating the structure and operation of the Chinese steel industry, should also end if China hopes to move toward true market status and to place its economic relations with foreign countries on a sustainable footing. Changes of this type would begin to alleviate the serious concerns that US and other global producers have regarding China's market-distorting practices. Unfortunately, the May 2007 CCCMC paper does not provide grounds for confidence that China intends to move in this direction.”

2009 deadline for new international climate change pact

It is reported that European and Asian foreign ministers have agreed to set a 2009 deadline to complete negotiations on a new international climate change pact to limit greenhouse gases. Mr Frank Walter Steinmeier Foreign Minister of German who hosted the two day talks among the 45 top diplomats said that everyone agreed on setting a 2009 deadline on a climate change pact to replace the Kyoto Protocol, which ends in 2012.

As per report, under the agreement, which came during two day talks, Asian nations including China and India will not have to adhere to binding targets for reducing carbon dioxide emissions.

Mr Yang Jiechi Foreign Minister of Chinese said the EU should not expect developing countries like China or India to share the same burden of cuts as richer nations. He said that “China is not to be blamed for the problem of climate change.” But he added that China has taken measures to reduce its emissions.

The 27 nation EU bloc is eager to get China and other major polluters on board a new climate change pact and negotiations are scheduled to begin in December at Bali in Indonesia.

Japanese officials have also expressed reservations about setting specific targets in the early stages of negotiations for fear of discouraging major emitters such as the United States, China and India from participating. Tokyo has said the new pact should be flexible, strike a balance between environmental protection and economic growth, and promote new green technologies.

A US government report issued said that Asian nations could reduce a quarter of their greenhouse gas emissions by 2030 if they increase renewable energy use, improve coal fired power plant efficiency and switch to biofuels. However, the report from the US Agency for International Development did not mention setting mandatory greenhouse gas emission cuts, which European countries and many environmentalists say should be part of the solution.

Rusal interested in taking a stake in Norilsk - Report

It is reported that a report of United Company Rusal is interested in acquiring a stake in MMC Norilsk Nickel boosted the latter’s share price by nearly 7% on last weekend. Shares in Norilsk rose to a high of RUB 5,090 (USD 197) a share up by 6.7% on the MICEX stock exchange by 12:19 local time.

Interfax quoted an unnamed source saying that "Rusal has approached Russian authorities for clearance for a potential acquisition of assets on the traded base metals market. Norilsk Nickel is Rusal’s priority asset."

Rusal said that it was too early to talk about which assets they were planning to buy but that they were considering the possibility of diversification of business.

Norilsk refused to comment saying "we are not commenting on market rumors."

Tangshan starts production of ultra low carbon steel grades

China's Tangshan Steel has realized successful trial production of qualified ultra low carbon HR plates for electric steel and can now produce high value added ultra low carbon steel. It is the first time that Tangshan Steel has produced these grades.

Ultra low carbon electric steel is a high value added product in steel market which requires ultra low carbon and low sulfur thus it is extremely difficult to produce.

(Sourced from MySteel.net)