Dr Irani opposes iron ore export policy decision

The Telegraph reported that Dr JJ Irani director of TATA Sons and former MD of TATA Steel while in Jamshedpur to deliver a lecture at the MS Khan Memorial Lecture organized by the local chapter of the Indian Institute of Metals criticized the recent decision to allow free export of iron ores from India and termed it as anti development and against India’s interests.

Dr Irani stressed that Indian government, by allowing export of iron ores from India, would do the same thing, as the British did to the country. He said “We should never forget that it was because of free export of cotton and import of finished textile products by the British that led to the weakening of Indian textile industries. We always blamed the British for the lack of development of Indian textile industry.”

Dr Irani said “This decision, if implemented, would go down in the chapters of Indian history as a blunder and would be deterrent to India’s industrial growth. It would also deter the country as a whole.”

Dr Irani said “I am of the opinion that we should not export ore. Instead we should work to develop more industries and utilize the resources what nature has given to us. Why should we land in a situation when we are forced to import steel made from our own ore at a higher cost, as it happened with our textile products before independence.”

POSCO starts winding up its setup in Orissa – Report

PTI reported that POSCO has started to wind up its set up in Orissa and has started shifting its top South Korean executives to South Korea. The report also cites some sources as saying that POSCO India, which had acquired two floors of the Fortune Tower in Bhuwneshwar, is interested in selling one floor.

As per report, out of 38 senior ranking South Korean officials, 20 have already left for South Korea in last two months and 8 more are packing their belongings to go back.

However, the report cites a POSCO official as denying it as a process of withdrawal from the project by saying that "Only 10 Koreans will stay here till beginning of the earth work at the project site near Paradip.” He said that the executives were being shifted because they had other jobs to do in South Korea and that a number of South Koreans would again come to Orissa after beginning of construction work.

The issue relating to POSCO India's move to shift its staff was raised at the meeting between Mr Song Sik Cho MD of POSCO India and Mr Naveen Patnaik chief minister of Orissa recently and Mr Cho was asked to explain the strategy behind shifting South Korean officials.

RINL considering pellet and iron ore imports

Rashtriya Ispat Nigam Limited is thinking of using pellets as inputs on experimental basis to overcome difficulties of processing iron ore with higher levels of alumina content. It is also looking at the option to import one shipload of iron ore from Brazil and a long term shipping contract.

Mr PK Bishnoi CMD of RINL while making a presentation during quarterly review meeting of its performance by Mr Ram Vilas Paswan union minister of steel, chemicals & Fertilizers said that RINL had tried this earlier two years back with good results.

Karnataka tightens licensing for iron ore mining

BL reported that Karnataka government has decided to prevent private iron ore mining by rejecting fresh applications, which do not highlight value addition to the iron ore to be mined.

As per report, Mr HD Kumaraswamy chief minister of Karnataka has recently directed that no more applications for private iron ore mining should be entertained.

The move is aimed at curbing export of iron ore and only companies with integrated steel plants or similar facility can apply for license. The state government has now imposed a set of conditions, including value addition. With this decision, any private mining company can take up iron ore mining only if it has an integrated steel plant or other facilities to add value.

Karnataka will now have to find ways of stopping the mining activities of the existing license holders as there are several hundred private iron ore mining companies and not one of them run a steel plant and they are all linked to iron ore exporting companies or directly export the ore. The annual production of iron ore in the state is estimated around 40 million with more than 75% accounted by exports.

TATA Groups turnover to cross USD 50 billion in 2007-08

It is reported that TATA Group expects to more than double its turnover to USD 50 billion in 2007-08 with the acquisition of Corus.

The report cites a TATA official as saying that "We should touch the USD 50 billion turnover mark in 2007-08. With a 30% percent growth this year, our USD 22 billion turnover in FY 2006-07 will become USD 28 billion in 2007-08 and Corus would bring in an additional turnover of USD 22 billion. All these together, we should well cross the USD 50 billion turnover mark by 2007-08.”

The official added that steel and overseas operations would be major contributors toward the top line. With acquisition of Corus the international business will account for 50% of the total turnover as compared to 30% of the USD 22 billion turnover in 2006-07.

Last year, the US was the largest contributor to TATA’s total overseas revenues while this year, the UK seems poised to bag the number one slot.

Indian shipbuilding sector growth linked to subsidy extension

It is reported that the fortune of India’s shipbuilding industry is hanging on the subsidy extension decision to be taken by Indian finance minister. There are just 39 days left for availing of the shipbuilding subsidy that began in the mid 1990s to expire and shipbuilding companies are lobbying with the finance ministry to grant an extension of the subsidy scheme.

The current 5 year subsidy, introduced on August 15th 2002 is due to expire on August 14th 2007. Under the scheme, shipbuilders get 30% extra on every ship they build of a certain size or for the export market. The scheme has already been extended twice. When the subsidy was last extended in 2002, shipyards had orders worth INR 1,500 crore. Indian government has already given out INR 300 crore in the last 5 years and another INR 300 crore is slated to be given out.

Under the subsidy scheme shipbuilders gets a 30% subsidy for building ocean going merchant vessels that are more than 80 meter in length, if they are manufactured for the domestic market. For export orders, however, ships of all types and capacities are eligible for the subsidy.

Domestic shipbuilders are looking to grab a higher share of the international shipbuilding market and capture the space that was vacated by the closure of yards in Europe and other developed regions. With the attractive subsidy, shipbuilders have lined up investments of INR 10,000 to INR 15,000 crore to upgrade and modernize their yards and set up new facilities to boost capacity and if the subsidy is not extended part of these investments might not materialize.

L&T is understood to be waiting for a final decision on the subsidy before formally unveiling plans for its mega shipyard. Mr AM Naik CMD of Larsen and Toubro Ltd said that “Subsidy is a key issue to shipbuilding in the country. Without the subsidy, it is not attractive to put up a shipyard. If L&T does not get into shipbuilding, no one will because no one is willing to have competition with unequal balance of advantage or unequal balance of favoritism."

Indian Railways to convert 5,500 kilometers tracks to broad gauge

PTI reported that Indian Railways is likely to invest about INR 20,000 crore for conversion of 5,500 kilometer of rail track into broad gauge in the coming years.

Mr Laloo Prasad Yadav union railway minister at the foundation stone laying ceremony for conversion of the 51 kilometer long Katwa to Burdwan line into broad gauge, to be completed by 2012, said that "We have decided to convert 5,500 kilometer of rail track into broad gauge." Mr Yadav however did not give any timeframe for completion of the gauge conversion plan.

There are about 13,000 kilometers of rail track nationwide, which are yet to be converted into broad gauge, out of which 9,000 kilometer is meter gauge and 4,000 kilometer is narrow gauge. The standard cost of conversion of 1 kilometer of railway track into broad gauge is estimated to be INR 3 crore.

Paradip Port introduces measures for faster vessel turnaround

BL reported that Paradip Port Trust, after achieving 16.33% YoY growth in traffic at 38.52 million tonnes in 2006-07, has set target for 2007-08 at 45.78 million tonnes, an increase of more than 7 million tonnes and has introduced a series of measures to reduce pre berthing detention times for vessels for a quicker turn around.

Mr K Raghuramaiah chairman of Paradip Port Trust in an interview said that following steps have been decided to introduce berthing reservation for vessels to reduce pre berthing detention and vessel’s congestions at the port from July beginning.
1. Two berths at the port will reserved for iron ore export vessels
2. One berth at the port will be reserved for coking coal & non coking coal vessels
3. From the reserved category of cargo & berth the berthing will on first come first serve basis
4. Vessels carrying combined parcel of iron ore, chrome ore, chrome concentrate etc. will not be treated as iron ore vessels to avail the reserved berth
5. Vessels jumping queue on account of above reservation policy will be required to pay priority charges as per rules
6. Vessels loading iron ore or coal should have at least three cranes in working condition to get in to reserve berth or shifted at vessels cost if found otherwise later

Paradip Port has a capacity of handling 55 million tonnes to which will be added another 15 million tonnes or so in current fiscal. By 2010, when the coal and ore berths are to be ready, the capacity will be up by another 20 million tonnes and further by another 20 million tonnes by 2012 when the Indian Oil Corporation’s berths and the container berths will be ready for operation. By 2011-12, the port’s capacity should reach 110 million tonnes.

CERC estimates 12,000MW of captive power into national grid

According to Central Electricity Regulatory Authority data, central Indian government is banking on sale of surplus power to the grid from around 12,000MW of new captive power capacity that is expected to come through over the next 5 years as capacity addition targets has consistently faltering.

While the Electricity Act of 2003 provides for a liberal framework for harnessing spare captive generation into the grid, captive power unit owners have faced some degree of resistance from state electricity boards in wheeling power from their units to the grid for sale of surplus power. In view of the difficulties generally faced by captive power project owners to inject surplus electricity from their respective units to the grid, the central electricity regulatory authority has initiated a detailed information collation exercise under which all owners and operators of existing and under construction captive and co generation plants and renewable energy stations of over 1 MW have been asked to furnish data on their respective stations, including their capacity and locations.

A government official said that “In order to estimate the future installation of captive power plants, various manufacturers were asked to furnish details of orders in hand as well as their estimation of future orders in the next 5 years to assess additional captive power capacity coming up in the country. Details were sought for captive power plants of 1MW and above and a total estimated capacity of around 12,000MW is expected to be in the pipeline as per the information supplied by manufacturers.”

The new capacity on the anvil is over and above the installed captive power capacity of 19,485MW in India out of which 14,866MW is already connected to the grid while the remaining 4,619MW is currently operating in isolation to meet captive requirements of the plant owners.

Dedicated freight corridor team proposes changes in RITES plans

It is reported that Dedicated Freight Corridor Corporation of India Limited in a recent report has suggested changes in the proposed route for Indian Railways dedicated freight corridor project. The proposal is to avoid building 873 bridges over roads to ensure project implementation within the stipulated time of 5 years.

The report points out that the current alignment of dedicated freight corridor, as proposed by the RITES study, goes alongside the existing Indian Railways track and thus involves dismantling of several railway stations breaking into habitations alongside stations increasing height of the existing road over bridges already present on tracks.

The Dedicated Freight Corridor Corporation of India Limited has started work on implementing 320 Kilometer of tracks on each corridor and has pointed out that these hurdles will significantly delay the project implementation. The report mentions that “At present every year the Indian Railways manages to build some 300 Kilometer of parallel rail tracks next to the present network on its entire network since these works involve clearing habitations facilities right next to the present track and now Indian Railways wants to build 2,762 kilometer of parallel tracks for freight corridors. From one of the studied routes there were 44 railway stations handling both passenger and freight traffic out of which about 18 had to be dismantled. Now if we build the freight corridor track in the station area then the station area shifts further from the present railway network.”

According to the RITES report, the 1,483 Kilometer long western corridor involves building 262 major bridges, 505 new roads over bridges, 200 new roads under bridges raising the height of the 24 existing road over bridges and 33 flyovers. The 1,280 Kilometer long eastern corridor involves 104 major bridges, 368 new roads over bridges 189 road under bridges raising the 9 existing road over bridges and 21 flyovers. While the western corridor is estimated to cost INR 16,592 crore the eastern corridor is estimated to cost INR 11,589 crore.

PGCIL likely to announce IPO after getting 5 independent directors

Indian government has appointed 5 independent directors on the board of transmission major Power Grid Corporation of India Limited thus clearing the way for PGCIL's stalled initial public offer. PGCIL has 12 directors in all now of which two are government nominees.

The newly appointed directors are
1. Mr PK Shetty head of administration National Institute of Advanced Studies Bangalore
2. Mr MS Kapur former CMD of Vijaya Bank
3. Mr AS Narang dean faculty of management studies of Delhi University
4. Mr Anil Agarwal former president of Assocham
5. Mr FA Vandravala former MD of TATA Power Company.

As per earlier reports, PGCIL was planning to hit capital market but could not do so due to SEBI norms on independent directors. PGCIL is likely to issue 10% fresh equity in the market with each share carrying a face value INR 10 and Indian government will sell 5% stake in the corporation. The proceeds from the fresh equity would be retained by PGCIL to part finance upcoming projects and a portion of the proceeds from the disinvestments would go to the government and the balance would be retained by PGCIL.

PGCIL has planned an investment of INR 6,500 crore in the current fiscal and an investment of INR 55,000 crore in the Eleventh Plan period. Over the next five years, it plans to increase the capacity of its inter-regional power transmission capacity to 37,000 MW from about 12,000 MW at present.

Patel Engineering eying overseas coalmines to feed power plant

It is reported that Patel Engineering is planning to acquire coalmines in Indonesia or Australia for its upcoming INR 5,000 crore 1,200 MW thermal power plant near Bhavnagar in Gujarat.

The mines may cost between USD 2 million and USD 10 million and will have reserves to produce 4 million tonnes per annum of coal.

The thermal power plant is expected to start operation within the next 18 months. As per report the power project will be implemented through a special purpose vehicle and will be financed through a mix of debt and equity. The electricity generated will be sold to power traders, captive consumers and state governments.

Norms for transmission services bidding amended

It is reported that union power ministry has amended the guidelines for tariff based competitive bidding for transmission services, which were notified on April 13th 2006 under the provisions of the Electricity Act of 2003, for attracting private sector investments in the transmission sector.

According to the amended guidelines
1. The transmission service provider will enter into a Transmission Service Agreement with the concerned utilities. These may include the utilities falling in the region where the load is located, any intervening region and the inter regional transmission lines between the regions.
2. The bid document for the concerned project will provide a draft of proposed Transmission Service Agreement.
3. The successful bidder will be designated as the transmission service provider after executing the Transmission Service Agreement and acquiring the special purpose vehicle
4. The transmission service provider will seek transmission license from the appropriate Regulatory Commission, if it is not a deemed licensee. The Transmission Service Agreement will be effective from the date of grant of license from the appropriate Regulatory Commission.
5. At the bid evaluation stage, ratio of minimum and maximum transmission charge including both the non scaleable component and the scaleable component incorporating escalation as per index being used for the purpose of evaluation over the term of the license will not be less than 0.7 to avoid excessive front loading or back loading during the period of contract.
6. The Transmission Service Agreement proposed in the request for proposal stage may be amended based on the inputs received from bidders during the pre bid conference and it will be made available to all bidders. No further amendments will be carried out in the Transmission Service Agreement.
7. The request for proposal will also specify the discount factor that will be used for evaluation of bids. It will also specify the bid bond as well as the Contract Performance Guarantee that the bidders will have to furnish and the liquidated damages that will apply in event of delay in start of providing the transmission services.
8.The Empowered Committee will constitute a committee for evaluation of the bids with at least one representative from Central Electricity Authority and not less than two representatives from the concerned Regional Power Committees with at least one representative from every concerned RPC and one independent member. The independent member shall have expertise in financial matters and bid evaluation.

As per report, power ministry has already invited bids for 14 transmission projects.

India offers assistance to Libya in power sector

It is reported that India has offered assistance to Libya in expanding their infrastructure in the power sector and training human resource.

Mr Sontosh Mohan Dev union minister for heavy industries & public enterprises made this offer while receiving Dr Ali Abdullah Al Essawi minister of economy, trade & Investment of Libya.

Mr Dev said that “BHEL is our flag ship power equipment manufacturing company. We will be very glad to help you in expanding your infrastructure in power and training human resource so that infrastructure in power sector in Libya can be maintained.”

He expressed hope that the Indo Libyan JV Company ECCO formed in 1979 would become the flag ship company for both the countries to promote mutual interest in not only Libya but also in other African countries. He said “It would be a win situation for both the countries.”

Ratnagiri project to generate 1,400 MW power

It is reported that the recent commissioning of Dahej Uran and Panvel Dabhol pipeline at the project site will enable Ratnagiri Gas and Power Private to generate 1,400 MW. It will supply power to the Maharashtra State Electricity Distribution Company.

As per reports, Petronet LNG has already entered into an agreement valid up to September 2009, for the supply of 1.2 million tonnes per annum for the project and it has already succeeded in tapping 0.6 million tonnes per annum needed to generate 700MW from the third unit.

Commercial production from the Dabhol plant was earlier planned to begin from December 2006 but due to the non availability of gas and resolution of various other issues it has been re scheduled.

The board of NTPC has approved an advance of INR.500 crore to Ratnagiri Gas and Power, the first tranche of which will be released immediately. Earlier, GAIL India, which holds 28.33% equity in Ratnagiri Gas and Power Private had offered to pump in INR 500 crore for takeover of the LNG facility. However, GAIL argued that prima facie it did not see the standalone LNG project as viable. Subsequently GAIL withdrew its proposal and NTPC later offered to make available funds up to INR.500 crore with a first right of refusal if and when it is decided to hive off the LNG facilities.

BHPB considering bidding for Alcoa – Reports

Speculation intensified over the weekend that BHP Billiton could offer about USD 55 a share for the Pittsburgh based company Alcoa, which until earlier this year was the world's biggest aluminum company.

FT reported that BHP Billiton has asked Merrill Lynch and JPMorgan to weigh up the merits of it making a bid for US aluminium group Alcoa, the following Rio Tinto’s USD 38 billion offer for Alcan of Canada.

Credit Suisse analysts said BHP Billiton might have to offer a 30% premium for Alcoa, which could push the bid price to around USD 50 billion, a figure other analysts said was within BHP Billiton's capacity, without help from private equity partners.

And London's Sunday Times said hedge funds that had joined the Alcoa register since the beginning of the year were demanding that Mr Alain Belda CEO of Alcoa sell or break up the company.

Analysts say Alcoa is a less attractive target for BHP than Alcan as its aluminum smelters are less efficient and it has lots of downstream assets, such as packaging divisions, that BHP is not interested in. But Alcoa does have a strong position in the mining and refining of aluminum’s raw materials, bauxite and alumina, which would appeal to BHPB.

BHP Billiton is already heavily involved with Alcoa through marketing arrangements in the US and its 39.25% stake in Alcoa of Australia, which operates the Portland and Point Henry aluminium smelters in Victoria that provide about 30% of Australia's aluminum production, and the Kwinana, Pinajara and Wagerup alumina refineries in Western Australia.

Nippon Steel president speaks on MoU with ArcelorMittal

Japanese Nikkei reported that Nippon Steel Corporation is not considering a capital tie up with ArcelorMittal and would continue to compete with each other in areas other than specified in the recently inked agreement.

Mr Akio Mimura president of Nippon Steel in an interview with The Nikkei, when asked about the memorandum of understanding that Nippon Steel signed with ArcelorMittal to strengthen their partnership, said that a key feature of this agreement is that the firms will work together in some areas but there will be competition in others. Mr Mimura said “Both companies do business in many different regions. ArcelorMittal is setting up an integrated steelworks in India, and Nippon Steel intends to bolster relations with major Indian steel maker TATA Steel in areas such as joint production. So we will be competing there.”

Mr Mimura, on the question of whether Nippon Steel and ArcelorMittal will hold each other's shares, said that such an arrangement was not being considered and did not even come up in the negotiations between the two firms. He said “But we will deepen our ties with South Korea's POSCO. This is different from our relationship with ArcelorMittal.”

Mr Mimura declined to comment when asked whether the memorandum of understanding signed with ArcelorMittal contains provisions to prevent technology leaks and hostile takeovers. He said “But I do not believe that the risk of being taken over has declined. The threat of being taken over always exists.”

Ohio courting MMK for possible investments

It is reported that Mr Lee Fisher Lieutenant Governor of Columbus state in US traveled to Russia last week with his top economic development advisors at the invitation of Russian Magnitogorsk Iron & Steel Works.

An official release said that “ Mr Fisher will tour the company's mill and meet with MMK Chairman Mr Victor Rashnikov and discuss potential economic partnerships between MMK and the state of Ohio.” Further details were not disclosed.

Development spokeswoman Ms Kimber Perfect said that the trip could lead to what she describes as a major investment for Ohio. She declined to comment further.

Cape Lambert to sell 70% stake iron ore project to Chinese investor

Cape Lambert Iron Ore Limited announced that it had entered into a sale agreement with Mr Ding Liguo Chinese investor to sell 70% of the Cape Lambert iron ore project for approximately AUD 250 million in cash. The sale agreement requires the satisfaction of several conditions precedent, including verification by an independent geologist of a minimum Indicated Mineral Resource of 300 million tonnes. The final condition precedent to be satisfied as part of this sale agreement is shareholder approval. The company expects to receive this at an EGM to be held on July 16th 2007.

Under the terms of the sale agreement Mr Ding Liguo will pay Cape Lambert 30% of the sale price at settlement of the transaction which is likely to be August 2007 with a further 55% of the sale price being paid three months after that date. The final installment being 15% will be paid on completion of the BFS and commencement of construction.

Mr Tony Sage ED of Cape Lambert said we are one step away from one of the biggest transactions in the life of Cape Lambert Iron Ore. The company will receive approximately AUD 250 million for selling 70% of the project." He added that "Importantly we will retain a significant stake in the project and play an important part as this project develops towards production. We believe this project will be significant in terms of the scale of the project and what it will provide the state and are pleased to have retained an interest in it. We expect our shareholders to overwhelmingly support this sale agreement as it will provide significant upside to them not only as this project develops, but also as the company acquires and develops further iron ore projects.”

Independent geologists RSG were appointed by Mr Ding Liguo to complete this task and have completed their review and advised the Company of its findings. RSG has confirmed that the indicated component of its mineral resource estimates exceeds the minimum requirement of 300 million tonnes and as such Cape Lambert has satisfied one of the final conditions precedents to the sale agreement.

Italian steel exports to non-EU markets in 5 months dip by 11% YoY

According the data released by Federacciai, Italian steel exports to non European Union countries declined by 11.2% YoY during January to May 2007 falling to 2.027 million tonnes and Italy's steel trade balance with non EU countries registered a deficit of 3.811 million tones as compared to 2.087 million tonnes in January to May 2006.

An overall fall was seen during the period in question in Italian exports of flat products down by 18% YoY to 577,000 million tonnes. Coil exports fell by 18% to 283,000 million tonnes, hot rolled sheet and plate exports were down by 10.1% YoY to 98,000 million tonnes, cold rolled sheet declined by 38.9% YoY to 58,000 million tonnes while HDG exports saw a drop of 39.7% YoY to 44,000 million tonnes.

A contrary tendency however was seen during January to May 2007 as regards Italy's exports of long products to non EU countries, which registered a rise of 20.6% YoY reaching 569,000 million tonnes. Of this figure exports of beams climbed by100% YoY to 66,000 million tonnes merchant beam exports went up by 30% YoY to 130,000 million tonnes while wire rod exports rose 11.7% YoY to 124,000 million tonnes. Rebar exports formed the sole exception to the overall upward trend in longs exports declining by 2.6% YoY to 185,000 million tonnes.

Italian exports of semi finished steel to non EU countries in the first five months of the current year fell by 45.7% YoY to 204,000 million tonnes. Meanwhile, seamless tube exports increased by 35,000 million tonnes YoY to 243,000 million tonnes. Welded tube exports, however saw a strong decline of 103,000 million tonnes dropping to 195,000 million tonnes.

Minnesota Steel plant may be delayed

AP reported that the proposal to build North America's first combined mine and steel making operation in the Iron Range town of Nashwauk could be held up unless the state comes through with USD 30 million, which was part of a bonding bill vetoed by Governor Tim Pawlenty earlier 2007.

The owners of the operation to be built in the Iron Range town of Nashwauk expected the state money to pay for a natural gas pipeline, connecting roads and a short line railroad. They said it makes sense for the state to support a project that will employ some 700 people and create as many as 2,100 additional jobs in related industries. Mr John Elmore president of Minnesota Steel Industries said that “Construction is supposed to begin later this summer, but the project is contingent upon the fact that the state will provide the infrastructure that is required to move the project forward."

Essar Steel Holdings agreed to buy Minnesota Steel Industries recently and build the plant but Mr Elmore said that Essar would not finalize the deal until the environmental permits are in hand. Mr Elmore said that "It's just the signal that it sends to business and to investors. Essar's looking at investing USD 1.6 billion into this state. That's a big investment, and you want to make sure that the state is willing to support you as you go forward."

Mr Alex Carey a spokesman for Mr Pawlenty said the governor did sign an omnibus bill with USD 14.9 million for Iron Range development through the 21st Century Minerals fund. With the expectation that this will be available for the Minnesota Steel project. He added that "The governor also fully expects now that the Iron Range Resources Board should be able to match that money, that USD 15 million so we can move forward and indeed go ahead with the project."

Rio Tinto says its bid for Alcan is fair

Mr Tom Albanese CEO of Rio Tinto Group and Mr Elliott finance director told reporters in a conference call that its USD 38.1 billion bid for Canada’s Alcan Inc is a fair price.

Mr Albanese said that the move is something that the shareholders of Alcan will like and that the overall structure of the Rio Tinto organization will stay unchanged with a bulked up aluminum products group. He added that “The three key metals that we can associate with the growth of China and just as importantly the urbanization of China are steel, aluminum and copper."

Mr Elliott said that “We believe this is a fair price. It’s absolutely in keeping with the strategy of Rio Tinto, which has always been to focus on value and quality. We were seeking to differentiate ourselves from the other offer that was on the table. We have been able to present ourselves in a manner that is well understood by the countries that are the hosts of the Alcan assets. Our balance sheet is getting quite strong and that the offer is keenly competitive.”

Spanish steel makers concerned over rising energy costs

It is reported that Association of Spanish Steel Producers UNESID, held their 39th annual general assembly in Madrid recently in which participants looked back at the record year for production in 2006 and also expressed concerns over the effects which rising electricity costs up by 30% in 2 years would have on the competitiveness of the Spanish industry.

Mr Gonzalo Urquijo president of the UNESID in his concluding speech at UNESID's General Assembly said that 2006 was a good year for the Spanish steel industry and remarked that producers in the sector were making considerable efforts to meet the levels of demand, which are continuing to increase at a very fast rate. Remarking on the favorable economic context and steel's essential role in economic development, Mr Urquijo said that "The Spanish steel industry has a clear horizon for expansion before it."

After commenting on the record production figures for 2006 of over 18 million tones, Mr Gonzalo Urquijo remarked that Spanish steel industry export grew by 2.7%YoY in 2006 to reach a total value of EUR 6.500 billion while imports grew by 25.9%YoY with a resulting increase in the trade deficit. As a result, apparent consumption of steel rose by 13.1%YoY.

He stressed the sector's concerns regarding the rise experienced in electricity charges, which were directly harming the steel industry competitiveness at a time when the world markets were completely open and when the international flow of commercial steel was continuing to increase. Mr Urquijo recalled that the electricity costs had raised by 30% over the past 2 years while the price of natural gas had gone up by 85%. He added that while the increases had been absorbed without great trauma over the last 2 financial years due to the high levels of demand when consumption would fall, the sector would be left facing the accumulated increases in energy costs with the negative knock on effects as regards competitiveness. In this context, the Mr Urquijo appealed to the Spanish minister for industry to ensure competitive energy rates for the domestic steel industry. At the same time, he referred to the steps which the domestic steel industry had taken to tackle CO2 emissions, stating these had fallen considerably since 1990 even though production had practically doubled since then.

Global mining industry to boom further in 2007- PWC Report

According to the PricewaterhouseCoopers’ report on global trends in the mining industry in the year 2006 called ‘Riding the Wave 2007’, the year 2007 is likely to see the global mining industry clock record financial results and witness further consolidation as industry leaders continue to spread out from their geographical homes to operate assets globally.

Mr Hugh Cameron global mining leader and Mr Tim Goldsmith mining leader in Asia Pacific & mine project leader in the report said that “The prospect of takeovers of companies of all sizes means that CEOs must remain focused, both on moving their companies forward and managing their position, in the current environment of mega mergers hunt or be hunted.”

The report provides an aggregated view of the global mining industry in 2006, represented by 40 of the world’s largest mining companies based in 14 countries. These 40 mining companies account for over 80% of the global industry by market capitalization.

According to the report, China and India are key markets as far as total revenue by customer location is concerned, with both accounting for 8% each, however Europe and North America continue to dominate totally accounting for 37%. The report said that “Unprecedented demand, primarily driven by Asia, continues. There remains confidence that demand will exceed supply, leading to the continuation of high commodity prices for the time being. This transaction activity is often hostile and no one is immune to their attentions. High cash flows and easily accessible funds mean that this trend will continue.” It added that there are growing indications of potential for private equity funds to share in the returns from the industry.

According to the report, the mining boom experienced over the last few years has some way to go. Urban migration and Asia’s appetite for commodities point to strong demand; in general terms, supply has not yet caught up to demand and is struggling to do so. Many issues such as lack of skilled workers and equipment shortages are impacting input costs. Mine developments take a long time and the cost of development has risen rapidly besides, health and safety remain key issues to manage.

For 2006, total industry revenue has rose by 37% YoY to USD 249 billion while net profit has rose by 64% YoY to USD 67 billion. During 2006, takeover activity picked up as a number of mega deals were sealed.

Salzgitter expects big pipeline order from Gazprom

Reuters reported that Germany’s Salzgitter AG expects to get a big order from the construction of a Baltic Sea natural gas pipeline.

Mr Wolfgang Leese CEO of Salzgitter AG said that "We assume that we will be a part of this in any event. Simply because of our competence in offshore areas we hope to get a significant share of the project."

Mr Leese said that Russian gas group Gazprom is building the pipeline under the Baltic Sea to bring supplies to Germany from Siberia. It has already invited Salzgitter and other companies to bid on the project. A decision is due later this year.

The first phase of the gas pipeline project is worth around EUR 1 billion. A second pipeline is supposed to follow and Mr Leese said Salzgitter also wanted to take part in that phase too.

Ukraine proposes to limit rebar exports to Russia to avoid AD duty

It is reported that the Ukrainian ministry of economy and the Ukrainian ministry of industrial policy are currently holding negotiations with the Russian Federation's Ministry of Economic Development and Trade on the possible self regulation of Ukrainian origin rebar supplies to Russia.

The report added that Ukrainian side has proposed to limit rebar exports to Russian to the following yearly levels from August 14 to December 31st 2007 to 112,000 tonnes, in 2008 to 330,000 tonnes, in 2009 to 363,000 tonnes and in 2010 to 400,000 tons.

The report further added that if Russian Federation's Ministry of Economic Development and Trade accepts this proposal, it will then also cancel the antidumping investigation into imports of Ukrainian rebar to Russia which was recommenced in April 2007.

View of Chinese plate industry

It is reported that China's medium plate market appears to be healthy in the H1 of 2007 bolstered by robust export demand however the export volume is very likely to slide in the second half as a result of the export tax and Chinese medium plate producers have to improve their product mix if they intend to stabilize the price. In addition, from the second half of 2006, 12 new rolling mills of medium plate have come on stream, with more under construction with capacity of 15 million tonnes and such rapid capacity expansion is set to put Chinese domestic medium plate market under pressure in near future.

China’s plate output in January to May 2006-07 in terms of share of overall production is as under

The above table shows that the ratio of common carbon plate output dips to 38.6% YoY in January to May 2007 from 45.2%YoY. Another notable change is that the ratio of shipbuilding plate production increases to 20.7% YoY in the same timeframe from 16.4% posted in the previous year. The breakdown of specialty plates shows that the output growth of shipbuilding plate, container plate and pipeline outpaces the average growth of medium plate. By contrary, the boiler plate and bridge plate production expands a bit slower.

Most mills have stepped up output of ship plate this year in view of premium export price and strong domestic demand. In the first quarter, China has built 2.87DWT of ships up by 19% YoY. The new order has jump by 67% YoY to 12.43DWT, and 79.86 DWT on the order book up by 86% YoY. It can be noted that domestic civil ship output has increased remarkably in 2007 despite continuous decline for 3 straight months. The production maintains a YoY growth rate over 40% which reflects that most of the material has been exported.

Chinese boiler industry expands at a much slower rate due to government's control in energy consumption, pollution and safety issues. Shanxi province has unveiled a list of 1000 boilers to be shut down before end of July 2007 to ensure the provincial 11th five year goal of saving energy consumption and reducing pollutant emission. Urumchi intends to demolish 3000 small boilers in May 2007, so the industrial boiler output has shown sign of slowdown in the first half this year. Meanwhile, the growth of power boiler has also been checked by governmental tight grip. The leading power boiler producers all have cut production significantly last year. Wuhan Boiler Group has scaled down production by 34.21% YoY, Wuxi Huaguang Boiler Company Limited has reduced its output by 13.78% YoY and Hangzhou Boiler Group Co Ltd has trimmed its output by 17.25% YoY. China's containers export has shown hectic growth in the January to April 2007 period with the export value rising over 17.8% YoY from the year before.

The containers export has soar by 135% YoY in the January to February 2007 period then moderates to 60% growth from March 2007 onwards. Robust demand for containers is believed to underlie the dynamic export growth.

The bridge plate demand is likely to expand in the future as China is to build a number of steel structure bridges. However, bridge plate output has started to fall back from 2007 and even shown negative growth in April and May 2007. Therefore, bridge plate market is set to render great opportunity for the producers in days to come.

The key producers have produced 1.67 million tonnes of pipeline steel in 2006 out of this, medium plate rolling mills account for 6.13%, with hot conti rolling and Steckel mill contribute 83.4% and 10.42% respectively. Currently, quite a few medium plate steelmakers are supplying pipeline steel, including Baosteel, Anshan Steel, Xiangtan Steel, Nanjing Steel, Xinyu Steel and Wuyang Steel. And only Baosteel can supply large volume at the moment. China National Petroleum Corporation is to start 2nd line West East Gas Transmission Project, which would use X80 pipeline steel, which would be the world's biggest pipeline steel project using largest volume of X80 pipeline steel.

(Sourced from MySteel.net)

MMK to modernizes its Rolling Shop No 4

Magnitogorsk Iron and Steel Works has signed the contract for supply of the process equipment and services for the revamping of hot rolling mill 2500 in its Rolling Shop No 4.

Following the reconstruction Mill 2500 process equipment will include highly efficient walking beam reheating furnaces of 370 tonnes per hour to produce at least 5 million tonnes per year, new slab charging systems, primary descalers of the roughing train, roughing train consisting of two high capacity universal stands equipped with all necessary actuators like electric motors, spindles, screw down units, work roll changing devices. The roughing train will also be equipped with new roller tables, side guides, water descalers and auxiliary tables.

The existing intermediate roller table between the roughing and finishing trains will be replace by a new one. In front of the flying shears there will be Coilbox system installed ensuring preliminary coiling the input material of up to 45mm thick fed from the roughing stands followed by feeding the plates to the finishing train with simultaneous uncoiling of the preliminary coil. Instead of the existing shears installed before the finishing train , the new flying shears will be mounted ensuring cutting the input material of up to 65mm thick for further processing in the finishing stands.

The reconstruction of Hot Rolling Mill 2500 will allow increasing the production rate of the mill to 5 million tonnes per year with ability to produce coils and sheets for pressure vessel construction, shipbuilding and bridge building industries. Moreover, the range of sizes and steel grades produced on this mill will broaden, and the production of quality input material in coils will be ensured for further production of cold rolled strip and coated strip.

The reconstruction of the mill will be performed in the environment of on going operation. The approximate deadline of the project implementation is the year of 2010.

The contract for the equipment supply has been awarded to NKMZ JSCO.

Commercial metal gets OK to build steel plant at Mesa

It is reported that Texas based Commercial Metals has received approval from the Mesa City Council to build a recycling plant in southeast Mesa in Arizona state of US.

According to the company’s plans submitted to the city, the steel plant would recycle steel into reinforcing bars for the Arizona construction industry. The steel mill could manufacture 280,000 tons of the products per year.

As per report, Commercial Metals is in the process of purchasing more than 225 acres from TRW Vehicle Safety Systems, which manufactures automotive airbags.

SA communist party calls for re nationalization of Sasol and Mittal Steel SA

It is reported that Mr Blade Nzimande general secretary of South African Communist Party has called for the re nationalization of Sasol and Mittal Steel SA to ensure sustainable energy security for SA. He said that it was absurd that SA was paying high prices for steel and oil produced in the country.

Mr Nzimande urged delegates to pass a resolution calling on the state to take control of the two companies amidst debate over the role of the state and state owned enterprises in economic development. Mr Nzimande said that “Why do we now have to pay not just import parity prices but as much as a 30% premium when compared to India and China for our own steel? About 40% of our oil comes from Sasol, but we are paying international prices. We could be paying much less.”

At the recent African National Congress policy meeting, delegates supported a strong developmental state actively intervening in the economy. Mr Nzimande said that many ANC delegates supported the nationalization of the two companies. This was in line with the affirmation of a strategic state-owned sector. The ANC conference had also called for the setting up of a public sector housing bank and a state owned mining company.

South African Communist Party has said that the state led infrastructure development program is tending to have a perverse effect on the country’s balance of payments. While construction sites are booming across the country, this has led to major imports of capital goods for this construction. The party added that “The infrastructure program is also adversely impacted upon by multinational corporations operating and producing within SA but charging us import parity prices for key inputs like cement and steel.”

MMX's move to acquire AVG seen as a positive one

BNamericas reported that Brazilian mining and metals company MMX's plan to acquire AVG Mineração is a positive move for MMX.

The report cited Mr Pedro Galdi an investment analyst with ABN Amro Real Corretora as saying that "Adding volume is positive for any miner. I consider the purchase positive even though the asset is small. The iron ore market remains strong." According to Mr Galdi the disbursement is not likely to weigh too heavily on MMX.

Under the terms of the agreement, MMX will purchase all AVG shares for USD 224 million, which it aims to pay in 5 installments over 4 years. MMX also agreed to pay an additional USD 50 million upon environmental licensing of another mining right to which it has an option to purchase. The deal, which is subject to due diligence, is expected to generate important synergies with MMX's Minas Rio project.

AVG owns a producing mine and additional mining rights and leases in the Serra Azul area of Minas Gerais state in Brazil. Its iron ore production is expected to reach 2.5 million tones in 2007 as compared to 1.6 million tones in 2006.

Salzgitter to takeover another 78% stake in Klockner-Werke

It is reported that after fulfillment of the mandatory requirements, particularly approval of the takeover by the EU Commission, Salzgitter AG is to take over another 78 % of the shares of Klöckner-Werke AG on July 5th 2007. Together with the 5 % stake acquired prior to this date, the Salzgitter AG will hold 83 % of the share capital.

For the remaining shares in free float, a voluntary public offer to buy the shares for EUR 15 per share in cash was made on April 30th 2007. The deadline for acceptance of this offer expired on July 9th 2007.

Klöckner-Werke AG is an industrial holding with subsidiaries that operate worldwide. The mainstay of its business operations is the Dortmund based KHS AG, which ranks among the global leaders of industrial filling and packaging systems for beverages. Other activities include the construction of plastic processing machines as well as food process technology. Klöckner-Werke Group has a workforce of around 5,500 employees worldwide. In the financial year 2006, the company generated sales in excess of EUR 870 million.

Klöckner-Werke AG will form the nucleus of the new Technology Division, alongside the Group's already existing divisions of Steel, Tubes, Trading and Services.

As per release “Salzgitter AG is pleased to have the opportunity of actively supporting the strategic and operational development of the Klöckner Werke Group in its capacity of a financially strong industrial majority shareholder an the Group will be included in the financial statements of Salzgitter AG.”

BHPB plans maintenance at Kambalda smelter in August

Metals Insider reported that BHP Billiton’s Kambalda smelter is scheduled for a maintenance shutdown some time in August 2007.

A BHP Billiton’s official was quoted as saying that the current planning is for operations to stop for 11 working days and the maintenance shutdown is a routine event but will be longer in 2007 to comply with statutory provisions.

The official said "The shutdown is in addition to our usual maintenance commitments and is part of our best practice methodologies that include improving the efficiency of the asset and a commitment to minimizing unplanned outages. He added that however as a planned event the shutdown should not affect overall production targets.

Xuanhua Steel setting up long product mill

It is reported that China’s Xuanhua Steel invested a rolling mill with annual capacity of 700,000 tonnes in June 2007 for long products including rolling angles, H beams and steel round bars with diameter between 50mm and 100 mm.

The report added that by combining with Tangshan Iron & Steel, Chengde Iron & steel and Xuanhua Iron & Steel, Xuanhua Steel has became an affiliation of the new Tangshang Iron & Steel Group which is located in north China’s Hebei province.

In late 2006, Xuanhua Iron & Steel increased its crude steel production from 3.5 million tonnes to 6 million tonnes per year and expects to reach a volume at 8 million tonnes which contains beams, wire rod, bar, welded pipe and hot strip products by the end of 2010.

Tenova sells Goodfellow EFSOP system to Tenaris Dalmine

Tenova’s subsidiary Tenova Goodfellow Inc has announced that it has sold Goodfellow EFSOP® system to Bergamo based Tenaris Dalmine. Project work will include development and implementation of closed loop control in response to off gas chemistry with the ultimate goal of achieving a reduction in conversion costs and the optimization of productivity.

Goodfellow EFSOP® is the off gas based process control system for electric arc furnaces. It measures and analyzes electric arc furnaces off gases like CO, CO2, H2 and O2 continuously at the fourth hole for real time closed loop process control of EAF steel making, resulting in improved operations, energy savings, lower conversion costs and safety benefits.

Estar opens Rostov Electrometallurgical Plant in Shakhty

It is reported that the launching ceremony for the first section of Rostov Electrometallurgical Plant Limited at the city of Shakhty in Rostov region of Russia was held on July 12th 2007.

It was reported that in 2005, in Rostov region, the ESTAR began construction of an electrometallurgical plant, which is to become the mainstay of the company’s facilities producing long products.

Mr Andrey Saltanov general director of ESTAR said that the new plant is to process metal scrap, which will be supplied to another plant managed by CJSC Lomprom. He added that the new plant is to have most up to date equipment with a capacity of up to 750,000 tonnes per annum and that the plant is to employ fewer than 700 workers.

Presently the ESTAR manages 8 metallurgical companies, including the Novosibirsk Metallurgical Plant and the Zlatoust Metallurgical Plant.

Ferroalloy demand in Russia on steep rise

Rusmet reported that during January to May 2007 volumes of ferroalloy consumption in Chelyabinsk region of Russia reached the level of 0.11 million tonnes up by 26% YoY.

Intensity of consumption in other regions of Russia was rather high. In particular, deliveries to Vologda region made up more than 56,000 tonnes or up by 37% YoY as to the result of the period, and consequently, the region took the second place in Russia in volumes of demand.

Among the three leaders, Sverdlovsk region takes the last place about 53,000 tonnes of ferroalloys or up by 27% YoY were shipped to its enterprises during January to May 2007.

As a result, total consumption of ferroalloy products at the enterprises of three mentioned spheres practically reached the level of 0.22 million tonnes which makes up 58% from total Russian demand for this resource during this period.

SA mine workers declare dispute over wages

It is reported that National Union of Mineworkers and Solidarity have declared a dispute with South Africa’s biggest coal miners represented by the Chamber of Mines after they increased their wage hike offer to 7.25% as against 15% hike they demand from the previous 7% offer.

Mr Lesiba Seshoka, National Union of Mineworkers spokesman said that "Their offer is even below what the public sector workers settled for." He added that the trade unions would propose that the parties should meet as early as July 18th 2007.

Meanwhile, the Chamber of Mines confirmed that all the unions had declared a dispute. It said that "The unions’ demands, put together, still have significant cost implications for the companies," said the chamber, in an emailed statement. We have made significant offers to address the total package of demands, however, there were several other demands that the industry was unable to meet due to the cost implications. These included higher contributions to retirement funds, funeral cover, service increment and the roll up of job categories."

After a dispute is declared, the parties will hold talks with a facilitator appointed by the Commission for Conciliation, Mediation and Arbitration, failing which workers can apply for a strike notice. From the outset of the current round of wage talks, unions have stressed that they would not accept any wage increase offer that was less than a double digit percentage.

EBRD to increase investment in Ukraine

Kyiv Post recently reported that the European Bank for Reconstruction and Development hopes to boost investments into Ukraine in 2007 by EUR 200 million as compared to last year to a total of EUR 1 billion through financing and equity investments.

As per report, plans also envisage increased EBRD investments making their way into the country’s industrialized heartland with the Bank opening a new branch office in Dnipropetrovsk to help facilitate such investments and supplement its Ukraine headquarters located in the capital Kyiv. The new office will help the Bank enhance its marketing activity, monitor current projects and facilitate cooperation with authorities in the region

Mr Anton Usov a spokesperson for the EBRD’s central office in Ukraine said “During the last several years the Bank has been doubling the amount of new business and mainly the new projects are geographically located in the eastern and central regions.” He added that the industrialized central and eastern Ukrainian regions in the vicinity of Dnipropetrovsk are badly in need of financing for modernization efforts, as much of the infrastructure is based on inefficient, outdated Soviet technology. This, however, opens many opportunities that make these regions very attractive investment targets.

EBRD, regarded as the single largest investor in Ukraine, has in recent years provided vast amounts of financing and equity capital investments into municipal infrastructure and private sector businesses. As of the beginning of this year, the EBRD has invested about 2.8 billion euros into Ukraine so far through loans and equity investments. Currently the Bank has two major clients in the region ArcelorMittal Kryvy Rih and Dnipropetrovsk Oil Extraction Plant.