July, 14 2007
Structural work starts for billet yard of SMS 2 of RINL
BL reported that Mr PK Bishnoi CMD of Rashtriya Ispat Nigam Limited inaugurated structural erection works in the billet storage yard of the steel melt shop No 2 on Friday as a part of the expansion project. It is expected to be finished in 20 months.
Sunil Hi-tech Engineers Limited of Nagpur has been awarded this job, which involves approximately 34,000 tonnes of structural fabrication and erection.
Nisshin Steel, Sumitomo and Neel Metal to form tube JV
It is reported that Japanese Nisshin Steel and Sumitomo Corporation have signed an agreement with JMB Group’s subsidiary Neel Metal Products (India) to establish a three party JV for manufacturing and supply ordinary steel and stainless ERW precision rubes in Haryana for auto segment.
TATA Metaliks to cross INR 1,000 crore mark in 2007-08
TATA Metaliks Limited hope to cross INR 1,000 crore mark in 2007-08 with a 30% YoY increase in production during the year. Dr T Mukherjee chairman of TATA Metalik on the sidelines of its AGM said that it would cross INR 1,000 crore turnover mark this year based on the proposed capacity enhancement of 30% and expectations of stable price for pig iron during the year.
Mr Harsh K Jha MD of TATA Metalik said that the installation of the third furnace, built at a cost of INR 31 crore at the Redi plant in Maharashtra would increase the installed production capacity to 0.65 million tonnes. He added that “The installed capacity will go up to 650,000 tonne of foundry grade pig iron but actual production during the year is likely to be 550,000 tonne.”
TATA Metalik achieved a turnover of INR 781.75 crore in 2006-07.
CIL SECL to cut losses from underground mining in 2007-08
FE reported that Coal India Limited’s subsidiary Southern Eastern Coalfields Limited is hoping to reduce losses incurred due to under ground coal mining by 50% in 2007-2008.
Mr BK Sinha CMD of Southern Eastern Coalfields said that “Though SECL earned a profit of INR 1,800 crore in 2006-07, it suffered losses from underground coal mining production. We plan to reduce losses by 50% this fiscal 2007-2008.”
Mr Sinha said that “We’re focusing on augmenting underground mining. We have imported 42 cubic meter excavators along with two 40 tonnes dumper from the US. These machines will reduce cost of production.”
SECL has suffered a loss of INR 130 crore in 2006-07 in its underground coal mining operations. In 2006-07 SECL produced 16 million tonnes of underground coal, which, was approximately 40% of total underground production.
JSW Energy to float IPO to fund power generation plans
It is reported that JSW Group’s JSW Energy will come out with an INR 1,000 crore initial public offering for funding its expansion programs. Mr Seshagiri Rao director finance of JSW Steel said that plans for the IPO would be finalized over the next few months.
Post issue, promoters’ stake in the company would be diluted by around 10%. At present, promoters hold 100% stake in the company. IPO proceeds would be used for funding JSW Energy’s INR 12,000 crore expansions and the investment would be made over a period of three years.
JSW Energy is setting up a 1,000MW lignite based power plant in Rajasthan and a 1,200MW coal based plant in Maharashtra and has signed MoU with the government of Gujarat to generate a 1,000MW power in Junagarh district. Plans are on the anvil to execute power projects in West Bengal, Jharkhand and Andhra Pradesh. JSW Energy is also pursuing plans to enter into the hydel energy sector in Himachal Pradesh and Sikkim. JSW is planning to foray into the transmission sector.
JSW Energy has been awarded the operation and maintenance contract of the 100MW captive power plant for JSW Steel. The O&M contracts for the 130MW captive power plant at JSW Steel and the 2X30MW plant at Siscol being executed by JSW Steel would also be entrusted to JSW Energy.
JSW Energy was formed in 1994, as a joint venture between the Jindal group and Tractebel SA of Belgium. The name was Jindal Tractebel Power Company. When Tractebel sold its shares in 2001 to ICICI, IDBI and the Jindal group, it consequently came to be owned fully by the JSW group.
TATA projects and EIL plan engineering JV
Project Today reported that TATA Projects plans to setup a 50:50 JV with Engineers India is planning to float a new engineering and construction company.
The JV will undertake engineering, procurement and construction jobs in India and abroad mainly in the areas of oil and gas fertilizer power and infrastructure.
The JV also said that it would undertake EPC jobs all over the globe barring United Arab Emirates where EIL is already talking to another foreign company for collaborating in this region.
UGSL to bank on exports for products from expanded capacity
Mint reported that Uttam Galva Steel Limited, which is expanding capacity from 0.45 million tonnes a year to 1 million tonnes, would continue to focus on exports despite the rupee’s rise against the dollar, which reduces it’s earnings from exports because its products do not have many takers in India.
Mr Ankit Miglani director of Uttam Galva Steels told Mint that Uttam Galva Steel hopes to minimize the erosion of its margins caused by the depreciation of the dollar against the rupee by importing key raw material hot rolled coils. He said we also hedge our requirement of zinc on the London Metals Exchange in full.
Mr Miglani said “The kind of new products that will be producing after expansion comes on line from September 2007 like high grade super thin galvanized auto steel currently do not find a market in India as car manufacturers here use lower grades of non galvanized steel. But with high end cars increasingly being manufactured in India, Uttam hopes it will eventually be able to increase its percentage of domestic sales.”
Mr Miglani added that “We expect to sell around 300,000 tonnes of cold rolled close annealed to Mahindra Renault Private Limited this year. General Motors India Private Limited and Daimler Chrysler India Private Limited too are putting up car manufacturing plants in Maharashtra which can be best served from our Khopoli processing unit where we’ve recently added another 30,000 tonnes a month processing capacity.”
Exports accounted for 54.32% of the UGSL’s revenues of INR 2,567 crore in 2006-07.
Assocham study reveals impact of transmission losses on Indian power scenario
According to a recent survey, about INR 270,000 crore which is one third of the total investment of INR 810,000 crore earmarked for the power sector in the 11th plan will go down the drain if immediate and effective steps are not taken to check transmission and distribution losses.
According to Assocham Eco Pulse study on mounting T&D losses, India would not be able to come out of the power crisis if the T&D losses of about 30% to 40% are not controlled, as these losses would result in the deteriorating financial health of the power utilities. The report added that India could overcome the power shortage if T&D losses are reduced by 50% and the losses could be reduced by stoppage of theft and up gradation of T&D system.
The study said that there was a peak power shortage of 13.8% in fiscal 2006-07 and the figure is expected to scale up to 14% to 15% in the next few months. The increasing T&D losses may also act as a major deterrent to private as well as global investments in the sector, which may lead to an under achievement of the ambitious target of adding 78,000MW of power generation capacity during the 11th Plan period of 2007 to 2012.
Mr Venugopal Dhoot president of Assocham said that "The T&D losses have resulted in widening of the demand supply gap and worsening of peak shortages."
The past records show that India had achieved only 54%, 47% and 43.44% of the targeted capacity addition in the 8th, 9th and 10th plan. India has a power generation capacity of about 130,000MW out of which about 40,000MW is lost because of transmission and distribution related loopholes.
NPCIL selects Pati Sonapur for nuclear power plant in Orissa
It is reported that Nuclear Power Corporation of India has identified Pati Sonapur under Chikiti block of Ganjam district in Orissa as the suitable site to set up a 6,000 MW nuclear power plant.
NPCIL has already proposed drilling six bore wells to re confirm suitability and the state government is considering the proposal.
As per report of the 17 nuclear power plants presently operating in the country that produces 4,120 MW of power, none matches the capacity of the proposed project of 6,000 MW of power. Of the 17 nuclear power plants 4 units each were located in Maharashtra and Rajasthan 3 in Karnataka and 2 units each in Tamil Nadu, Uttar Pradesh and Gujarat.
PTC likely to pick up stake in MCX Indian Energy Exchange
Power Trading Corporation India Limited announced that it is likely to pick up 26% stake in the Indian Energy Exchange being launched by multi commodity exchange MCX.
Mr TN Thakur chairman of Power Trading said that “MCX has offered us 26% in the proposed power exchange being put under operation by MCX and agreed in principle to partner them and are evaluating the offer. We would soon decide on the level of our participation in the power exchange. He said apart from MCX and Power Trading the exchange may also get equity participation from financial institutions and power sector utilities.”
The release said PTC is already the largest trader of power in the country having power purchase agreements with generation companies for trading 7,000MW. The new exchange would protect all the existing PPAs of PTC while allowing it undertake trading of additional power being made available through the exchanges.
MCX’s Indian Energy Exchange has already received in principle clearance from CERC and has been registered with the registrar of companies. The regulator is finalizing the norms for setting up the exchanges after which a formal approval for the country’s first power exchange may be given. The regulator has proposed multiple power exchanges in the country.
The power exchanges have been proposed by the government to develop a transparent market for power trading. As per released the power exchanges are expected to emerge as market based institutions for providing price discovery and price risk management to the generators, distribution licenses traders, consumers and other stakeholders. It will operate like any other exchange and will provide a platform to cut the forward and spot deals.
The model for power exchanges has been proposed to ensure a more balanced distribution of power that is in deficit in the country. The peaking shortage in the country is more than 13% totaling 14,000MW. The exchanges would ensure that power surplus in one region at a particular period could be purchased by the deficit region even if it means paying a premium.
Besides MCX, NCDEX, the other commodity exchange is also likely to float a company to set up a power exchange.
L&T and Mitsubishi boiler JV likely to come up at Hazira
It is reported that Larsen & Toubro is likely to finalize Hazira in Gujarat as the suitable location for setting up two manufacturing facilities for turbines and boilers.
L&T has joined hands with Japan's Mitsubishi to float a 51:49 JV that will build the INR.350 crore boiler factories while other JV with Toshiba for manufacturing turbines will spend another INR 350 crore.
L&T is slated to commence boiler manufacturing by 2009.
Himachal cancels Kuther hydropower contract with DS Construction
According to unconfirmed press reports, Himachal Pradesh government on July 11th 2007 cancelled the contract of the 261MW Kuther hydroelectric project in Chamba district to the DS Constructions that was awarded through competitive bidding.
The report said the allotment was cancelled because the company failed to achieve the set milestones and did not deposit the 50% of the upfront premium of INR 7.60 crore. It also did not agree to the condition of reverting the project back to the government after 40 years.
It is learnt that the company had written to the Himachal government and sought some changes in the conditions. DS Constructions wanted that the upfront premium should be included in the project cost so that it was taken into consideration by the electricity regulatory commission while determining the generation cost.
Kuther hydroelectric power project was one of the three projects to be awarded through competitive bidding for the first time in the state. The other two were bagged by Brakel a Dutch company for the Jhangi Thopan and the Thopan Powari projects in Kinnaur district.
SC notice to Jharkhand government on TATA plea
It is reported that TATA Steel has moved to the Supreme Court seeking refund of more than INR 2.15 crore it paid to the Jharkhand government towards electricity duty and surcharge. Recently, Supreme Court issued notice to the Jharkhand government on TATA Steel’s plea seeking refund of the amount plus interest at the rate of 18% per annum on the deposited amount.
Mr Gaurav Bannerjee counsel of TATA said that the company was entitled to the refund deposited pursuant to the demands made by the tax authorities, as there was no provision for reassessment or reopening of closed assessment under the Jharkhand Electricity Duty Act. He said that “TATA was using power for captive consumption and thus it was not a licensee. TATA was not liable to pay electricity duty at the rate of 15 paise per unit on electricity consumed for washing and screening of coal as the activity did not fall within the meaning of mining, the petition stated.”
TATA Steel had challenged the show cause notice issued by deputy commissioner of commercial Taxes Ramgarh circle asking it to pay more than INR 2.15 crore for periods between 1998-2001 on the ground that completed assessments could not be reopened on the basis of audit objection. The Jharkhand HC had quashed the demand notices saying that no surcharge or electricity duty was leviable. However it had failed to decide the issue of refund of duty already paid by it.
Severstal to setup a rebar mill in Saratov Region
It is reported that a memorandum of intent would be signed between the Administration of the Saratov Oblast and Severstal for construction of a new reinforcing steel mini mill in the municipal unit Bykovo Otgorskoe, located 160 kilometer from Saratov, on July 18th 2007. Mr Pavel Ipatov governor of the Saratov Oblast and Mr Anatolyi Kruchinin, GD of Severstal’s Cherepovests Iron and Steel Work will ink the framework agreement.
The annual output of the new enterprise to be commissioned in 2010 will be 1 million tonne of bar sections. Projected investments will be about USD 500 million. The mini mill will use metal scrap as a feedstock. Logistics of the production process and supplies under the new project will be presented at the Investment Committee of the Saratov Oblast in late July.
Mr Kruchinin said “The location of the construction of this plan was not chosen by chance. The Russian construction market keeps growing. Over the last year alone, the use of reinforcement in Russia increased by 30%. The Saratov region and the Privolzhsky market have a shortage of bar product. Severstal’s experience of producing quality reinforcing steel at the Cherepovests Iron and Steel Work enables this problem to be resolved in the future. Even today quality heat strengthened reinforcing steel, grade A 500 C, which is in maximum demand on the market, accounts for about 80% of total shipments to Russian construction companies.”
IPSCO and SSAB deal approved by Canadian regulators
IPSCO Inc and SSAB Svenskt Stal AB announced that approval from the Canadian Minister of Industry under the Investment Canada Act has been obtained and the companies have obtained clearance from the Canadian Competition Bureau in connection with the Plan of Arrangement pursuant to which SSAB Canada Inc, a subsidiary of SSAB, would acquire all of the outstanding shares of IPSCO for USD 160 per share.
The completion of the arrangement remains subject to shareholder approval on July 16th 2007, approval of the Ontario Superior Court of Justice on July 17th 2007 and the satisfaction of certain other conditions described in the Management Proxy Circular dated June 11, 2007.
IPSCO and SSAB expect the transaction to be completed on July 18th 2007.
IPSCO is a leading producer of energy tubulars and steel plate in North American with an annual steel making capacity of 4.3 million tons. IPSCO operates four steel mills, eleven pipe mills, and scrap processing centers and product finishing facilities in 25 geographic locations across the United States and Canada. The Company's pipe mills produce a wide range of seamless and welded energy tubular products including oil & gas well casing, tubing, line pipe and large diameter transmission pipe. Additionally, IPSCO is a provider of premium connections for oil and gas drilling and production.
SSAB is a Swedish based publicly traded corporation with a leading European position in Quenched & Tempered heavy plate and EHS/UHS steel sheet. The Group comprises four divisions: Division Sheet and Division Heavy Plate are the steel operations with steel shipments of 3.1 million tonnes in 2006, Plannja is a processing company in building products, and Tibnor is the Group's trading arm supplying a broad product range of steel and metals. The Group has sales revenues of almost USD 4.6 billion. SSAB has 8,800 employees and has operations or offices in over 40 countries and a worldwide sales presence.
Chinese steel sector poised for severe M&A activity
China Capital Stock cited steel experts as saying that, under joint pressure of cost and the policies, China's steel industry is likely to see an explosion of M&A cases.
China's steel sector, which is highly de fragmented, has been haunted by impropriate product mix for a long time. In line with the blueprint, China would try to form three 30 million tonnes grade steel producers and a number of 10 million tonnes grade mills to bring the top ten steel makers' output to take above 50% ratio by 2010. This lays great pressure on the sector's restructuring.
Among the A share listed companies in China, 48 are steel focused, which are believed can represent the industry's overall development direction. Particular capital expansion capability and scarcity of resource decide the listed companies will play a leading role in M&A.
An analyst from Tianxiang Investment Consulting said that "M&A in China's steel industry may involve two ways first overall listing of the group by listed unit's buying its assets second, horizontal mergers between the steel enterprises."
For the moment a host of listed company is facing opportunities for M&A or overall listing ie Baosteel, Laiwu Steel, Jinan Steel, Baotou Steel, Bayi Steel, Handan Steel, Shaogang Songshan, Panzhihua New Steel & Vanadium, Hongxing Steel of Jiuquan Steel Group and Hunan Valin Pipeline. In particular Baotou Steel's buying assets from the Group has been approved by China Securities Regulatory Commission; and Hongxing Steel is also expected with overall listing prospect.
(Sourced from Mysteel.net)
Territory Resources to launch firm bid for ConsMin now
It is reported that Australian iron ore miner Territory Resources will lodge a formal takeover offer to the Consolidated Minerals board on Monday after it completes due diligence on the manganese miner.
Mr Michael Kiernan chairman of Territory Resources said the group had found no surprises in the ConsMin data room and would lodge a formal offer on Monday. He said that "The weekend is going to be a good weekend. I'll watch the footy, go to church and put together a deal and we anticipate coming out Monday with what we intend to do.''
Earlier Territory lodged an informal offer of AUD 2 a share plus one Territory share or three Territory shares for every ConsMin share after a Pallinghurst Resources led consortium launched a takeover for the manganese miner.
ConsMin has continued to back the Pallinghurst deal of AUD 1.68 in cash for every share in the manganese and nickel miner plus two shares in a new company citing it had not received a formal offer from Territory.
CAP approves USD 637 million CAPEX
It is reported that the board of Chilean iron and steel group CAP has approved two projects, worth a combined USD 637 million to produce pellets and galvanized steel. Operations at both projects are to be kicked off in 2010
1. USD337 million investment for the Hierro Atacama II project in northern Chile's region III to produce 4 million tonne pallets per year
2. To invest USD 300 million to build a 250,000 tonnes per year galvanized steel plant and to modernize the hot rolling facility at Huachipato steel plant in region VIII
CAP has an expansion scheme calling for USD 1.1 billion to 1.2 billion investment over the next five or six years to increase iron ore output from its current 8.5 million tonne per year to 11.5 million tonne per year in 2008 and 15.5 million tonne per year by 2010. In steel, CAP is aiming to increase from 1.2 million tonne per year to 1.4 million tonne per year at Huachipato by 2008 and beyond in later years.
CVRD may outbid Rio Tinto for Alcan – Report
Reuters reported that Brazilian CVRD was not in talks to buy Canada's Alcan Inc but it did not rule out bidding for the company in the future. A source familiar with the deal told Reuters that CVRD had also bid for Alcan.
CVRD issued the statement shortly after Anglo Australian miner Rio Tinto Plc agreed to buy Alcan for USD 38.1 billion to create the world's biggest aluminum producer. CVRD in a statement said that “It is always analyzing opportunities to strengthen its strategic position, including acquisitions of assets in the mining and metals industries."
CVRD, already the world's largest producer and exporter of iron ore have been aggressively expanding overseas in recent years as it seeks to diversify into other metals. Some analysts questioned whether CVRD was ready for another large acquisition. Ms Catarina Pedrosa a mining analyst at Banif Investment banking in Sao Paulo said that "It's not a good moment for CVRD to make a bid because they would have to rush and Alcan's board has already accepted Rio Tinto's offer. Besides, CVRD is still incorporating Inco."
Vinashin to enter power sector to secure its needs
VietnamNet reported that the Vietnam Shipbuilding Industry Group, which has recently signed big contracts to build ships for foreign partners, is now planning to make investment in power plants. The report added that Vinashin has recently submitted to the Vietnam ministry of industry the report on its plan to make investment in power plants with the total capacity of 8,000 MW.
In its development strategy, Vinashin plans to upgrade and expand existing factories while building new shipyards in new places. In the future industrial zones for shipbuilding industry will take shape in three regions, the north, central region and the south, including Cai Lan IZ in Quang Ninh, My Trung, Dung Quat and Soai Rap. The competitiveness of Vietnam’s shipbuilding industry depends much on input materials like steel and diesel engines, which in turn depend on electricity sources. Vinashin thinks that one of the most important things it needs to do now is to develop power plants which would allow it to provide stable electricity and at reasonable prices. The total electricity output Vinashin needs in 2007-2015 is 8,300 MW to serve the shipbuilding industry.
There are several factors Vinashin considers as big advantages in implementing power projects.
1. The group plans to raise the localization ratio of its products to 60% by 2010. In order to reach that end, Vinashin has been making heavy investment in its mechanics manufacturing, which, Vinashin believes, can help it in designing power plants.
2. Vinashin’s IZs are all located near the coal and mineral exploitation area, as well as big rivers, which would make the providing of materials to power plants more favorable.
The power plants Vinashin plans to build include
1. Coal run thermo power plants
Hau Giang (3x1,200MW), Hai Ha (3x676 MW+2x150 MW), Song Hong (3x 65MW), and Ninh Thuan (2x600MW).
2. Engine run thermo power plants
Dung Quat Da Nang (8x12,5 MW), Soai Rap (10x12,5 MW), Khanh Hoa Nha Trang (220 MW).
3. Hydr0power plants
Tram Tau (Yen Bai, 22MW)
4. Wind power plants
one in Quy Nhon City in Binh Dinh province in the central region (40x600KW).
It is clear that the investment in a series of power plants, which have the total capacity of 8,000 MW, will require a huge sum of capital. On average, the investment capital for 1 MW is USD 1million for thermo power while the figure is even higher for hydropower. Experts have estimated that Vinashin will have to budget some USD 8 billion to develop power projects by 2015. The amount of capital for power projects turns out to be much higher than the investment capital for the shipbuilding industry, the main production field of Vinashin.
PSM steel production hit after converter motor trips
Pakistan’s Daily Times reported that production from steel making plant of Pakistan Steel Mills stopped on Thursday at 11:30 am after the exhauster motor of the converter number 1 tripped. The plant produces 2500 to 3000 tonnes of steel products everyday. As the production is likely to remain affected for two or more days, the mills may face production loss of over PKR 80 million.
The report cited a PSM official as saying that “As a result of this the steel making plant of the mills is producing only pig iron and production of rest of the products stopped. However, rolling mills continue to work.”
The official added that the 4MW electric machine of the motor that burnt will take 48 hours to repair. The converter number 2 was already on refractory lining and it would take between two and two and a half days to start functioning.
A press release issued by the public relations department of the mills said that one of the converters was on refractory lining since Monday according to schedule when the electric motor of the other tripped. It said the motor was being replaced. The release added that both blast furnaces of iron making department were fully functional and so were the three re rolling mills.
This is the second time in last 6 months that the production of the mills has been affected severely. Pakistan Steel Mills was hit by a massive breakdown in February 2007, which had brought its steel making process to a halt for more than 12 hours.
Chinese mills settle HRC price with South Korean re rollers
YIEH reported that Chinese steel mills have finished the negotiation for hot rolled coil price with South Korean re rollers.
The export price of HR coil from China’s major mills including Baosteel to South Korea is at C&F USD 590 per tonnes, but the contracted price from some other mills is at C&F USD 570 to USD 580 per tonnes.
China’s mills are expected to raise the price of hot rolled coil in fourth quarter of 2007 due to high production cost.
Corus' breaks steel recycling target
According to Corus’s 2006 annual Packaging Recovery Notes report, Corus Steel Packaging Recycling has broken through the Government’s target for steel packaging recycling. The report demonstrates how Corus’ PRN funds have been invested to help boost steel packaging recycling rates to a record level of 57.3%. This surpasses the Government’s 2008 target of 54%.
The document shows how 53 local authorities have benefited from Corus’ investment of PRN funding. For example, Cardiff Council has been provided with new baling equipment to help process more than 700 tonnes of steel it collects each year from some 60,000 households.
Mr David Williams’s manager of Corus Steel Packaging Recycling said “With the UK’s steel packaging recycling rate already surpassing the 2008 target of 54% set by the UK Government two years early the challenge now is to continue this momentum.”
He said that “Our priorities are to maintain record recycling levels of steel, and to ensure that as many people as possible recognize that steel is a safe, sustainable and successful packaging medium. The strategic application of PRN funds will help to ensure that our previous achievements in this field continue, demonstrating to our customers and the packaging industry as a whole our commitment to investing in the future of steel packaging recycling.”
Baosteel &CVRD steel project to be located at Anchieta in Brazil
INTERFAX CHINA reported that Mr Guillermo Dias the development secretary for the Brazilian state of Espirito Santo would travel to Shanghai over the next weekend to meet with officials from Baoshan Iron and Steel Group to discuss the possible installation of a steelworks project in Anchieta Municipality.
LOI install hot skid system at Cascade Steel
LOI Inc recently announced that it successfully installed its Adapt Hot Skid System at Cascade Steel in US
The new Hot Skid System has the ability to reduce both the thermal skid mark in the billets and the water consumption when compared to the existing skid system. In addition, the heat loss to the water was greatly reduced, resulting in more heat going into the billets and less into the cooling water. This resulted in a reduction in MMBTU per ton when compared to the existing skid system.
LOI's patented double offset was incorporated into the skids to ensure the reduction in the thermal skid mark met Cascade Steel's expectations.
LOI Inc is a wholly owned subsidiary of LOI Thermprocess.
Further ore price hike may not well grounded-MySteel
Global iron ore market has been hit by a string of negative news so far in 2007.
1. The Indian government suddenly decided to levy an export tax on iron ore in March 2007
2. Ocean shipping rates peak in May 2007.
Therefore, a host of leading institutes gives positive forecast for benchmark ore price for fiscal 2008. However Mysteel analysts believe that current market fundamentals may not well justify further ore price rise in 2008.
China's iron and steel industry has started to boom up since 2001 when the China's economy posts hectic growth. The crude steel output growth peaks at 27.2% in 2004 and then slows to 24.9% in 2005 and 18.48% in 2006 respectively. Domestic pig iron output expansion almost follows the same path with crude steel, and struck a 5 year low at 17.53% in January to May 2007. China's production of crude steel and pig iron are set to slow down in following years as a result of moderating investment in the sector.
China's ore imports growth hit an all time high of 32.28% in 2005, and then retreats to 18.56% in 2006. However, the import growth rate notches up again to 21.52% in January to May 2007 surpassing the growth rate recorded for 2006. However, the robust growth of ore imports is mainly driven by high steel export rather than domestic demand. In particular, iron ore consumed by steel export accounts for 16.1% of China's ore imports in 2004 and 16.6% in 2005 respectively. However, the ratio increased to 26.6% in 2006 and even hit 32.2% in January to May 2007. Massive steel export is the major reason behind surging ore imports.
Mysteel analyst said that the ore imports growth have fallen back in recent years. Last year, ore imports growth keeps sliding while domestic crude ore output maintains robust growth. Mysteel analyst expects that China's demand for iron ore is set to decline as the authority tightens its grip on the steel industry.
The Chinese government is determined to put more teeth into eliminating obsolete capacity. China's top planning body National Development & Reform Commission convened a meeting in early June with local officials from 18 provinces/regions and BaoSteel urging them to hand in lists of outdated iron and steel capacities that should be closed. The first list, issued in April 2007, covered 10 regions. Moreover, Beijing has rolled out a string of restrictive measure to curb steel export every few weeks, which would undoubtedly have far reaching impact on steel export in days to come. These policies would also greatly dampen demand for iron ore in the future.
(Sourced from MySteel.net)
China concerned on increased coal import
In first five months of 2006, China reported net coal import of 3.67 million tonnes shifting to be a coal importer. This January to May import volume yet reached 22.97 million tonne up by 44% YoY compared with 2.12 million tonne in whole year of 2000.
Before, China only imported certain kinds of scarce resource in order to meet domestic demand. Under such circumstances the enterprises are warned to ensure supply channel, guard against speculation from the global market and prevent from price bidding up.
As per survey the import enterprises are mainly located in Guangdong, Fujian and other coastal provinces with imports mostly from Indonesia, Vietnam and Australia. Experts said that the imported ore is competitive in quality and price and the Southern coastal areas boast lower transport costs for importing this material compared with sourcing from North China.
Mr Wu Chenghou counselor of China's coal transportation and sales association explained that the import volume is just a small fraction compared with coal output in China which would not shake the international at present.
China's coal importers are thus warned to be careful, not to be utilized by the international sellers to hike the price as in the iron ore case and encouraged to go out for coal resources to shun risks of price change in future.
(Sourced from MySteel.net)
SMS Demag, Midrex and Kobe ink alliance agreement
During the METEC 2007 trade fair a strategic alliance agreement was signed between SMS Demag of Germany, Midrex Technologies Inc of USA and Kobe Steel Ltd of Japan. The purpose of the agreed cooperation is to achieve a joint market presence for suitable projects in order to implement a mini mill iron and steel plant on behalf of customers.
The combination of the MIDREX® direct reduction process and the steelworks technology of SMS Demag with downstream Compact Strip Production facility constitutes an optimally tuned mini mill concept for producing high grade hot strip in a manner which efficiently reduces energy and costs.
The MIDREX® process is a method for the large-scale industrial production of direct-reduced iron ore in the form of direct reduced iron or Hot Briquetted Iron. These products can be charged as Fe carriers into electric arc or CONARC® furnaces and melted down there.
The MIDREX® process provides an alternative to the classical blast furnace route and by the nature of the process, produces a considerably lower degree of CO2 emissions.
Kobe Steel is the licensor of the MIDREX® process.
BMZ H1 steel output up 4.6% YoY
It is reported that Zhlobin based Belarusian Metallurgical Plant has produced 1.139 million tonnes of steel in January to June 2007 up by 4.6% YoY. Its rolled steel production increased by 4.2% YoY to 909,000 tonnes.
Hardware goods output in the period rose 15.3% YoY to 138,797 tonnes, including metal cord output at 41,636 tonnes down by 2.7%YoY.
BMZ’s output in monetary terms rose by 7.3% YoY in January to June 2007 to BYR 1.602 trillion.
State company Belarusian Metallurgical Plant was launched in 1984. BMZ exports about 85% of its output. Non CIS countries account for more than 70% of the BMZ’s exports
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ASA rules British Association of Reinforcement steel ad as misleading
It is reported that the UK based Advertising Standards Agency has rapped the British Association of Reinforcement for a second time in four months over its “You Decide” ad campaign.
As per report, in April 2007 the ASA upheld a complaint from the British Constructional Steelwork Association that an advert placed in the trade press suggested the process of steel erection was unsafe. Now, British Association of Reinforcement has been challenged by the British Constructional Steelwork Association, a second time, after a further advert implied steel was less sustainable than reinforced concrete.
The advert featured a picture of a globe with a dotted line between South America and the UK. It claimed that reinforcement was manufactured from locally sourced recycled metal, while steel sections were unsustainably manufactured from natural resources imported from thousands of miles away.
The British Constructional Steelwork Association contended that a high percentage of reinforcing steel was manufactured abroad albeit from scrap exported from the UK and then imported back. However ASA noted that the advert was misleading as not all reinforcing steel is manufactured in the UK. It said that "The ad misrepresented the sustainability of reinforcing steel and was therefore likely to mislead."
Pike River Coal downplays eco concerns
It is reported that Pike River Coal progress on its underground tunnel to access a coal deposit is steaming ahead, as it downplays environmental concerns about carbon emissions from the mine.
Mr Gordon Ward MD of Pike River Coal said the work on the 2.3 kilometers long main tunnel was 40% complete with the work having reached 917 meter by July 1st 2007. The remaining 1383 meter of tunneling at the West Coast mine site 46 kilometer from Greymouth should be achieved by the March 2008 deadline.
Mr Ward said that it was too early to bring forward that realistic target despite the good progress. He said that the installation of a rock removal conveyor was now leading to record progress in the tunnel, with 52 meter of progress achieved the week before last and 66 meter last week. The conveyor had taken 20 days to install. Rates of tunnel advance will continue to vary as is usual for projects of this nature. The conveyor will remain in the tunnel until the coal slurry pipeline transport system is installed soon after coal production has commenced.
Mr Ward said that he discounted comments made by Green Party co leader Ms Jeanette Fitzsimons about greenhouse gas emissions released during the mining process. Ms Fitzsimons earlier said that "The mining process is predicted to release methane equivalent to about 6.8 million tonnes of CO2. This is more each year than is released by all the cows on the West Coast.”
Mr Ward said that because the coal seam was exposed via an escarpment much of that carbon dioxide equivalent had already been released by natural drainage. He said that "PRC estimates from its drilling and sampling of the Brunner seam that the mine may generate 1.4 million tonnes of CO2e over its life, as the gas content in the coal seam is significantly lower than the figure assumed by Ms Fitzsimons."
He further added that Ms Fitzsimons had relied on general emissions data from Government guideline levels, rather than case specific mine conditions.
Pike River Coal has forecast coal extraction at an average of 970,000 tonnes a year over the life of the mine.
Metallica to sell its south east coal assets to Cockatoo
Metallica Minerals Limited announced that it had entered into an option agreement to sell its south east Queensland coal assets held by two wholly owned subsidiary companies to Cockatoo Coal Limited for a total value of approximately USD 10 million in cash and shares plus a coal royalty.
The principal terms of the option agreement with Cockatoo Coal Limited are
1. AUD 250,000 non refundable option fee has been paid by Cockatoo
2. AUD 4.75 Million in cash payable on exercise of the option.
3. AUD 25 Million Cockatoo Coal shares to be issued to Metallica upon exercise of the option. These will be escrowed for 12 months valued at AUD 5 million based on the share price on the day of signing.
4. Cockatoo Coal purchases Metallica's 100% owned subsidiary companies SE Qld Coal Pty Ltd and SE Qld Energy Pty Ltd holding the coal assets and agreements with JV Partners.
5. Additional Cockatoo Coal shares to be issued to Metallica upon commencement of production from any of the tenements vended in. These will also be escrowed for 12 months. The number of shares issued to be the lesser of 5 million shares or shares to the value of AUD 1 million.
If the option is exercised Metallica will receive USD 5 million in cash and 25 million shares in the ASX listed Cockatoo Coal. In the event of mining commencing on any of the coal resources, Metallica will receive further shares in Cockatoo Coal and if mining commences on the Taabinga Coal resource near Kingaroy, Metallica will also receive a 40 cents per tonnes royalty on production.
Mr Andrew Gillies MD of Metallica said that "Assuming the option is exercised the cash proceeds from the sale would with Metallica's current USD 5.1 million available cash on hand lift the company's cash position to around USD 10 million. In addition Metallica will hold a significant shareholding investment in a local coal focused company." He said "The decision to divest the coal assets places Metallica in a stronger position to further focus it’s funding and management resources on development of the company's NORNICO and Lucky Break nickel projects in North Queensland."
Mr Gilles said that "With a stronger cash position Metallica will be unlikely to seek further funding from the market in the short term. The divestment of non core assets is our preferred course of action as opposed to issuing further shares capital and shareholder dilution during our value adding growth phase. The share component of the transaction will give Metallica an approximate 8.5% stake in Cockatoo Coal's issued capital. Cockatoo already has a significant project position in the Surat Coal Basin and is a well funded and managed coal-focused company."
Metallica's coal assets subject to the Cockatoo Coal option agreement are located in the Surat and Moreton Coal Basins together with EPC 882 located in the Tarong Basin which contains the Taabinga Measured Resource 35.5 million tonnes and Indicated Resource 128.3 million tonne totaling a measured and Indicated Resource of 163.8 million tonnes of thermal coal. The coal assets include agreements with two JV partners, Cougar Energy Limited for Underground Coal Gasification and with unlisted Eastern Mining Corporation Pty Ltd who are evaluating the Coal to Liquids potential in the Felton area of the Condamine Coal Project.
OKD appeal against fine imposed for price fixing
Thomson Financial reported that the largest Czech hard coal mining company OKD will appeal against fines imposed on it by a regional financial directorate for alleged price fixing.
As per report the directorate ruled that OKD should pay fines of CZK 416 million for allegedly breaking the law on prices when it sold its coke for prices exceeding the usual price in 2004 and 2005.
OKD said it has presented data and arguments opposing the allegations and has recently filed an appeal with the Ministry of Finance against the ruling relating to OKD's 2004 coke prices and expects to file a similar appeal very shortly against the related ruling concerning the 2005 prices.
Emirate Steel ink 10 year iron ore transportation contract with Eships Olderdorff
Khaleej Times recently reported that Emirates Steel Industries has signed a 10 year iron ore transportation contract with Abu Dhabi based JV Eships Olderdorff Logistics.
Emirates Steel put out a tender for iron ore transportation in late 2006 for shipments to start in mid 2008. The transportation contract includes the shipping of about 2.4 million tonnes of iron ore pellets per year in Capesize bulk carriers to a deepwater anchorage point about 35 kilometers offshore from Abu Dhabi.
Emirates Steel, formerly Emirates Iron and Steel Factory are a subsidiary of Abu Dhabi based Basic Industries Corporation and is located at the recently developed Industrial City of Abu Dhabi.
Eships Olderdorff is a combination of two strong shipping companies with extensive experience in bulk cargo transshipment both in the Arabian Gulf and around the world. Eships is an Abu Dhabi based shipping firm controlling 11 modern tankers and bulk carriers. It is owned by Oman and Emirates Investment Holding Company, Mubadala and Abu Dhabi Investment Company.
S&P raised TMK rating to BB- on strong performance
Standard & Poor's Ratings Services announced that it has raised OAO TMK's rating to BB- from B+ citing the Russian steel pipe maker's strong operating and financial performance in 2006 and favorable dynamics in the pipe industry.
S&P said that the outlook on the rating is stable. The upgrade reflects TMK's favorable financial metrics after the TMK's loan to its shareholders was repaid from IPO proceeds in late 2006. S&P added that the rating also factors in TMK's improved financial metrics after it repaid shareholders' loan out of its IPO proceeds late 2006.
S&P expects TMK's profitability to remain strong in 2007-08, as growing input costs will be more than offset by high pipe prices on the back of strong demand from the oil and gas industry.
Mr Singleton joins Niagara Mining as CEO
Niagara Mining Limited announced to its shareholders that Mr David Singleton has accepted the role of CEO wef July 2nd 2007.
Mr Singleton was the CEO and MD of Clough Limited between August 2003 and January 2007. Prior to that he was the Group Head of Strategy Mergers and Acquisitions for BAE Systems, formally British Aerospace in London and prior to that the CEO of Alenia Marconi Systems of Italy.
Mr Singleton told that Mr Forrest's reputation as a big thinker and a major player in the mining industry was crucial to his decision. He said that "I would only have joined if it had that kind of strategy. Our intention is to be one of the major nickel producers in Western Australia."
Mr Singleton said Niagara was evaluating several nickel projects. These include reopening an open pit nickel mine, developing an old underground mine, which will soon be dewatered, and processing of nickel oxides using new technology.
Niagara's new board members include former Alinta executive Mr Chris Indermaur and Ventnor Capital's Mr Richard Monti who previously worked with Mr Forrest at Anaconda Nickel.
First Nickel delivers Premiere Ridge feasibility study to Xstrata
First Nickel Inc announced that it has received the final report of the feasibility study on the Premiere Ridge Project from Scott Wilson RPA an international consulting engineering firm based at Toronto in Ontario and that a copy of the Study was delivered to Xstrata Nickel on July 1st 2007 fulfilling a condition of the Amended Option Agreement signed on May 1st 2007.
The Study indicates that the project has an IRR of 37.1% and would generate an undiscounted pre tax cash flow of USD 27.8 million after capital recovery assuming average metal prices of USD 7.62 per pound nickel, USD 2.19 per pound copper and USD 9.00 per pound cobalt over a 5 year mine life. Based on a 10% discount rate the project has a USD 14.3 million NPV as calculated by Scott Wilson RPA. First development ore is scheduled for March of 2008, and yearly output will average 230,000 tonnes, attaining a maximum of 291,000 tonnes in 2009. The pre production and sustaining capital requirements have been estimated at USD 42.8 million and USD 4.2 million respectively. Unit cash operating costs net of by product credits are estimated at USD 5.49 per pound of nickel.
Mr William Anderson president & CEO of First Nickel said that "The positive Feasibility Study completed by Scott Wilson RPA is another indication of the viability of the Premiere Ridge Project. The capital and operating estimates in the study are in line with previous estimates made by or for FNI. With a short mine life and relatively high capital cost, the project will require strong project controls and good metal markets. The Company in the weeks ahead will continue to review ways to reduce the capital and operating costs and mitigate risks prior to a final production decision on the project."
First Nickel is a Canadian mining and exploration company. Its current activities are primarily focused on the Sudbury Basin in northern Ontario, the location of the company's producing property and four of its exploration properties. First Nickel also has two exploration properties in the Timmins region of northern Ontario.
Hangang to issue debentures to increase cash flow
China's 11th largest steelmaker Hebei Province based Handan Iron and Steel Group, in a company statement release said that it will issue a 1 year debentures with a total value of CNY 2.2 billion (USD 288.80 million) on July 2nd 2007 to aid in increasing its cash flow.
The short term debentures will be issued to various banks with China Minsheng Bank as the lead underwriter. Hangang Group's operating revenue had amounted to CNY 29.47 billion (USD 3.82 billion) in 2006 with net profits reaching CNY 580.41 million (USD 75.19 million).
As previously reported by Interfax, Hangang Group and Shanghai Baosteel Group had set up a 50:50 JV in the city of Handan to develop a 4.6 million tonnes steelworks project with an investment of CNY 19.4 billion (USD 2.51 billion) in May 2007.
