Indian domestic steel prices continued their down slide on Monday after a long weekend. Long products were severely affected, which is reflected in 251 point fall in LPPI during the period. But fall in flat products was nominal. Overall, the Indian Steel Price Index fell by 128 points.

LPPI – Long Product Price Index
FPPI – Flat Product Price Index
ISPI – Indian Steel Price Index

Long products

Flat products

To know more about these indices please visit
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The price of long product has declined significantly as the market opened after a long weekend. The fall is particularly sharp in TMT bars being more pronounced in the South

TMT
Fe 415
12mm

Change is on August 18th as compared to August 14th
Change is in INR per tonne

The changes in other long products are as under

Chennai

Change is on August 18th as compared to August 14th
Change is in INR per tonne

Kolkata

Change is on August 18th as compared to August 14th
Change is in INR per tonne

Delhi

Change is on August 18th as compared to August 14th
Change is in INR per tonne

This trend of falling prices for long products is in line with the deflationary trend in international prices for these products in the last six weeks. Internationally the price of TMT bars, Billets and Wire Rods have fallen as follows in the last 6 weeks.

Change on August 15th is with respect to prices on July 4th 2008
Change is in USD per tonne
Delivery FOB Black sea

Mahindra & Mahindra Ltd announced that it has signed an agreement to form a JV in China with a leading Chinese tractor manufacturer Jiangsu Yueda Yancheng Tractor Manufacturing Co Ltd. Yancheng Tractor’s Huanghai Jinma brand is the no. 3 tractor brand in China in terms of tractor volumes in 2007.

The tractor related assets & current liabilities of Yancheng Tractors will be transferred to this JV. The value of net assets transferred to this JV will be CNY 335 million (USD 50 million). Mahindra will hold 51 per cent (USD 26 million) in the JV through its subsidiary, Mahindra Overseas Investment Company (Mauritius) Ltd. (MOICML). The transaction is subject to receipt of necessary approvals.

This would be the second tractor venture of Mahindra in China, in addition to Mahindra’s current tractor business namely, Mahindra China Tractor Company Ltd.

Mr Anand Mahindra vice CMD of Mahindra Group said that "I have always believed that India and China have unique and complementary strengths, which, when pooled together, can take on the world. We already have a successful Joint Venture with Jiangling Tractor Company. The JV between M&M and Yancheng Tractor will further combine Indian entrepreneurial and managerial skills with Chinese competitiveness and efficiency. I am sure this formidable combination will contribute substantially towards realizing our ambition to be the leading tractor manufacturer in the global market”.

The flat product domestic prices in India are expected to follow long products as the artificial margin created by the local traders is likely to vanish soon due to lack of demand coupled with pressure to clear of the stock.

The simmering of this can already be seen in Chennai and Ludhiana where the price of Hot Rolled coils has dropped by 1.85% and 1.59% respectively in the weekend.

Internationally too the price for flat products has shown correction of USD 100 pmt for HR Coils and USD 50 pmt for plates from Black Sea sources, which will brighten the import to India as the price parity with domestic market is attained in the mid term.

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It is reported that Cochin Shipyard Ltd is planning to raise around INR 800 crore through an initial public offering to fund its expansion and for capital restructuring.

According to a senior official in the shipping ministry, the plan is awaiting Cabinet approval. The official said that if the Cabinet clears the proposal, CSL will be the first state owned shipyard to be listed.

The proposed expansion plan of CSL includes expanding the current shipbuilding and repair facilities. The official said that at present, the yard builds fighter carriers for the Indian Navy. The IPO proceeds would be used to create additional facilities to construct offshore vessels and tugs, which will ensure better margins. Part of the money would be used for capital restructuring. The official added that the Centre recently awarded the mini-ratna status to CSL. This would allow it more financial and operational autonomy.

CSL, which became operational in 1978, has two dry docks the first can build ships with capacities of up to 110,000 tonne and the second can repair vessels with capacities of up to 125,000 tonne.

The other government owned shipyards include Hindustan Shipyard, Mazagon Dock, Goa Shipyard, Garden Reach Shipbuilders and Engineers, Hooghly Dock and Port Engineers and Central Inland Water Transport Corporation.

Bangladesh Ship Breakers' Association said that demand for steel is booming in Bangladesh, due to 6% annual growth over the past 4 years, the biggest boom period in the country's history.

According to the BSBA, Sitakundu's 22 ship breaking yards demolished 1 million tonnes of steel in the year ended June 30th 2008. Once removed from the old ships, steel plates are melted down by Bangladesh's 200 small re rolling mills and turned into steel rods.

Sitakundu Yard owner Mr Alhaj Mohamed Yusuf said that Sitakundu's frequent tides and low wages have made it the best place in the world to break ships. He added that "Due to frequent tides we can beach the ship just two hundred yards from the coast. It saves us thousands of dollars for every ship we break, whereas in Alang and China they beach ships two or three kilometers out into the sea."

Mr Yusuf said that Bangladesh, with a population of 144 million people, also has some of the world's cheapest labor costs. The natural conditions, combined with growing demand for steel, have also attracted bigger ships to the yards. He added that "We are handling ships as big as 80,000 tonnes these days. Unlike neighboring India, Bangladesh has no iron ore and is dependent on imported steel either from scrap or more expensive billets."

Mr Alihussein Akberali MD of Bangladesh Steel Re rolling Mills said that "It is a lifeline for Bangladesh. The rods made from scrap ships are inferior to those made by top steel producers, but they're at least 20 percent cheaper than high grade steel and therefore are overwhelmingly used in the country's construction industry."

Mr Akberali said that says two and a half years ago, he was paying almost a third of what he pays now for billets from India. He added that "Back then we were paying USD 430 a tonne. About three months ago it was about USD 940 a tonne but in May 2008, India introduced a 15% export tax and the price is now around USD 1,150 to USD 1,200 a tonne."

LPPI – Long Product Price Index
FPPI – Flat Product Price Index
ISPI – Indian Steel Price Index

Long products

Flat products

To know more about these indices please visit
http://steelprices-india.com/spi_services/spi.html

If you want to know the prevailing prices and changes across the week on daily basis, please subscribe to services of www.steelprices-india.com

PTI reported that with heavy rains slowing down the pace of construction work in the northern region, steel prices in Punjab have dipped by INR 700 per tonne in the past one week, giving relief to consumers.

Mr KK Garg president of North India Induction Furnace Association said that "The demand for steel has come down by 25% because of slackness in construction activity triggered by torrential rains. As a result of it, steel prices have softened a bit."

A local steel trader said that nearly after a gap of one month, prices of ingot have witnessed fall after touching a peak of INR 42,500 per tonne. Now, the prices have come down to a level of INR 36,800 per tonne from INR 37,500 per tonne last week.

Another trader said that "The scrap rates have not shown signs of softening for the past one week in view of high prices in global market. That is why its rates are prevailing at INR 30,500 per tonne adding that if the scrap rates come down it will eventually cause further decline in rates of ingot prices."

A steel analyst said that "The cost of making ingot is hovering around INR 38,000 per tonne including conversion cost, to furnaces but the lack of demand has pushed down prices the prices below the mark of INR 38,000 per tonne resulting into a loss of INR 1,200 per tonne per day to a furnace unit. Therefore, furnace units have drastically reduced their output to prevent losses.”

Project today reported that three of the 7 hydro electric projects, which are proposed to be funded from the proceeds of the initial public issue by NHPC are running behind schedule.

The hydro electric power generation projects, which will miss the deadline include 2,000 MW Subansiri Lower project in Arunachal Pradesh, 240 MW Uri II project in Jammu and Kashmir and 160 MW Teesta Low Dam-IV in West Bengal. The company is proposing to utilize the proceeds of the issue for part financing 7 hydro electric projects which also include 231 MW Chamera III and 52 MW Parbati III in Himachal Pradesh and 45 MW Nimmo Bazgo and 44 MW Chutak in Jammu and Kashmir.

As regards the projects running behind schedule, the company has already spend INR 2,229 crore towards the mega Subansiri Lower project, which was originally scheduled to be completed by September 2010.

The completion date for the 2,000 MW Subansiri hydel project, according to the draft offer document has been shifted to January 2012.

ENS reported that Essar Shipping Ports & Logistics Ltd has added two Supramax dry bulk carriers to its fleet, the m v Malathi and m v Malavika both dedicated to carry three million tonnes of coal over a period of five years.

Essar Shipping said that these vessels were both built in Japan in 2005 and 2004, respectively. It added that both the vessels are equipped with modern gadgets for emission control and waste water management, which enables them to sail all over the world.

It is reported that India government has granted excise duty exemption to goods procured for setting up Ultra Mega Power Projects based on super critical coal thermal technology.

Certain conditions have been prescribed for availing the benefit of the exemption which comes into effect from August 14th 2008.

The exemption is applicable to goods procured for projects which are set up under government of India initiative and have an installed capacity of 3960 MW or above.

As per the report, this move will help lower the import cost for equipment supplies from abroad to such projects, as there would be no countervailing duty on imports.

It is reported that Nuclear Power Corporation of India has shortlisted 4 major reactor manufacturers namely Westinghouse Electric Company, GE-Hitachi, Areva and the Russia's atomic energy agency Rosatom for new projects planned across the country.

As per report NPCIL has shortlisted these 4 reactor manufacturers based on suitability of technical parameters for placement of orders that will form the first phase of the Center’s plan to build 40,000 MW of nuclear capacity by 2020.

Once nuclear trade commences, NPCIL hopes to set up nuclear parks or reactor clusters for which 4 coastal sites have been identified across Gujarat, Andhra Pradesh, Orissa and West Bengal. These parks are being envisaged with a capacity of housing up to 8 reactors of 1,000 MW each at a single location. The orders will initially be placed for around 2 reactors of 1,000 MW at each of the locations, following which more reactors could be added.

The model will be on the lines of the Koodankulam project where 2 1,000 MW reactors were initially set up and subsequently the site is being expanded to accommodate more reactors.

BS reported that Transport Corporation of India is planning to venture into the real estate sector with pan India presence. Currently, the company has 200 properties and will develop a number of them for residential and commercial projects.

Apart from the foray, TCI also plans to build a number of large warehouses across the country. It already has 7.5 million square .feet of warehousing facility available which it plans to increase 12.5 million square feet in the next 2 years to 3 years. It is also looking at opening offices in China, Thailand and in few European countries by March 2009.

As per report, the company will also be investing INR 200 crore in the next 2 years for purchase of trucks and ships.

Project Today reported that Titagarh Wagons and FreightCar America JV is yet to get the possession of land allotted to it, for the USD 30 million aluminum wagons manufacturing unit is yet to get the possession of land allotted to it.

As per report the West Bengal government has already allotted about 100 acres of land near Barrackpore-Kalyani Highway and the process to design and build the aluminum wagon prototypes at the existing facility for seeking approval from the Railway ministry has begun.

The name and the financing structure of the JV and board will be finalized soon. The project was cleared by the FIPB recently. FreightCar will hold 51% stake while, Titagarh Wagons will restrict to 49% in the JV. Work on the project is expected to commence by March 2009 and commercial production is likely to begin in 2010-2011.

It is reported that Indian government on August 17th 2008 has initiated a new scheme Generation Based Incentive Scheme for wind power generation in a bid to tap the 45,000 MW power potential of the non conventional resource.

The objective of the scheme is to attract new and large independent power producers to wind sector. The GBI will be paid only to Grid Interactive plants with a capacity of 5 MW or more. The rate of GBI be 50 paise per unit of electricity and will be paid for a period of 10 years.

The present wind power production stands at 8,760 MW and the Ministry of New & Renewable Energy has set a target of 10,500 MW, for the 11th Five Year Plan.

It is reported that Bihar government has cleared 135 proposals worth INR 71,290 crore submitted by big entrepreneurs for setting up medium and large industries.

All these proposals have been approved by the State Investment Promotion Board.

The proposals approved include opening of 23 new sugar mills and the expansion of the 7 existing ones, apart from the production of ethanol in 2 sugar mills and 5 sugar cane juice production plants. The projects regarding 5 power plants, 12 food processing units and 15 steel processing and cement plants have also been cleared.

As per the report, a sum of INR 603 crore had already been spent on various activities pertaining to the cleared projects, which are likely to create job opportunities for over 0.114 million people.

Project today reported that India Infrastructure Finance Company has approached international lenders including a consortium of Japanese banks to increase over USD 1.2 billion debt.

The report added that in addition, IIFCL wants the government to chip in with an additional INR 200 crore equity that will see its paid up capital base increasing to INR 1,000 crore. On August 14th 2008, the Union Cabinet approved a proposal to double its authorized capital to INR 2,000 crore.

Besides, IIFCL board will soon discuss a proposal to increase INR 1,000 crore from the National Small Savings Fund and another INR 500 crore from LIC. The loan from NSSF will come at a rate comparable to 10 year government securities, while the company has proposed to increase funds from LIC at 50 basis points above the prevailing rate on the 10 year paper.

Of the foreign funds to be raised, IIFCL intends to mop up by USD 600 million from World Bank, EUR 280 million from German financial institution KfW and USD 250 million from Sumiotomo, Mizuho and JBIC.

Project today reported that the Maharashtra government has finally set December 2009 as the deadline to issue work orders for the Mumbai Metropolitan Region Development Authority's Charkop-Bandra-Mankhurd Metro Rail Project. However the bids are expected to be finalized by end October 2008 and work will begin by January 2009.

MMRDA has opened the technical bids for the corridor and consortia led by Reliance Industries and Reliance Infrastructure have submitted their offers among others.

As per report, the 38 kilometer project, estimated to cost INR 12,000 crore may comprise 9 corridors in 3 phases. The first phase, spanning 3 routes is expected to be completed by 2012.

The Union Minister of Shipping, Road Transport and Highways, Thiru TR Baalu has approved a sum of INR 172.50 crore for road improvement works under Central Road Fund Scheme. This amount would be spent on 75 different stretches of Major District Roads and State Highways in various districts in the state of Andhra Pradesh.

Some of the major projects out of these 75 projects are:

1. Improvement of Penukonda to Madakasira Road at a cost of INR 60 million in Anantapur district.

2. Improvement of Rayachoty to Vempalli Road at a cost of INR 50 million in Kadapa district.

3. Improvement of Kalva-Bethamchela-Banganpalli Road at a cost of INR 50 million in Kurnoor.

4. Widening and Improving Bugga Illathur Road at a cost of INR 50 million in Chittoor.

5. Improvement of Suryapet-Nimmikal-Danthalapally Road at a cost of INR 40 million in Nalgonda district.

6. Improvement of Chelgal to Itlkyal Road at a cost of INR 35 million in Karimnagar.

7. Improvement of Inada Junction to Vizianagaram Road connecting Chinthalavalasa Road at a cost of INR 35 million in Vizianagaram district.

8. Widening and Improving of Bellary to Gundiapalli Road at a cost of INR 35 million in Anantapur.

9. Improvement of Peapally-Banganapalli-Gajuiapalli Road at a cost of INR 30 million in Kurnool.

10. Improvement of Keesara to Turakapally Road at a cost of INR 30 million in Ranga Reddy district.

11. Improvement of Kuppam-Gudipalli-Karnataka border Road at a cost of INR 30 million in Chittoor district.

The other Districts where the road improvement works have been sanctioned include Adilabad, East Godavari, Guntur, Khammam, Krishna, Mahabub Nagar, Medak, Nalgonda, Nellore, Nizamabad, Prakasam, Srikakulam, Visakhapatnam, Warrangal and West Godavari.

It is reported that NTPC’s 2x490 MW coal based power generating units at Dadri in Uttar Pradesh being established as part of the infrastructure for the Commonwealth Games will be commissioned on schedule by September 2009 and January 2010 respectively.

Mr Jairam Ramesh minister of State for Commerce and Power after a visit to the power plant complex of NTPC said that 90% of the power generated will be destined for Delhi and the balance 10% for Uttar Pradesh. BHEL is the supplier of boilers and turbine generators.

He said that Dadri already has 4x210 MW coal based units operating for a number of years and in 2007-08 these units achieved the highest PLF of 98.02% in the country.

Mr Ramesh complimented the Dadri management for this achievement and also paid tribute to the maintenance protocol adopted at the plant complex which has led to the lowest annual forced outage of 0.26% in the country. He said that “Dadri is one of the few power plants in the country where the PLF is higher the availability factor demonstrating the extraordinary efficiency of management at the plant. Dadri has also 829 MW of gas-based capacity which is now running at around 72% PLF largely because of the shortfall in the supply of gas.”

Mr Ramesh also said that Dadri’s greatest accomplishment has been in environmental management which should serve as an example to all other power plants in the country. He lauded the establishment of the Ash Utilization Technology Park as also the creation of the eco friendly 550 acre ash mound which has led to the emergence of a first rate nature park in the power plant complex. Over the time, this nature park may well have a positive impact in reducing emissions of carbon dioxide from the Dadri thermal power plant complex. This will need actual measurement and monitoring.

It is reported that Mr LN Mittal CEO & chairman of ArcelorMittal told FT that the shock of credit crunch should moderate by early next year, with the crisis mainly affecting the financial and consumer sectors. Mr Mittal told FT that "I am sure that there will be some calmness in the whole turmoil in the next six to nine months.”

FT cited Mr Mittal as saying that that large parts of manufacturing industry would not suffer the same problems as those parts of the world economy more closely linked to banking and finance such as housing and consumer goods. FT cited Mr Mittal as saying that "The world has to differentiate between the industrial and consumer parts of the global economy and recognize that they would behave differently as a result of today's difficult conditions, including tightness in credit markets and commodity and food inflation.”

He is reported to have said that substantial parts of the broad industrial sector across the world would perform in a satisfactory way in the next one to two years. He also added that much of this related to the demand for manufactured products in emerging economies such as China and India. He said that "They are continuing to grow and they need to grow. They are not stopping even if they have slowed down their progress.”

Tuoi Tre reported that steel and cement prices in Vietnam have plummeted in the last two weeks and with demand becoming sluggish, manufacturers are struggling to sell their products.

Mr Nguyen Quoc Dai director of a private construction business in Ho Chi Minh City said that steel prices have fallen by VND 2 million per tonne to VND 2.5 million per tonne since the beginning of July to VND 18.2 million per tonne to VND 18.5 million per tonne (USD 1,096 to USD 1,114). He said that “You can buy as many tonnes as you want and the producers will make free delivery.”

As per report, the Vietnam Steel Corporation, whose prices are already VND 500,000 a ton lower than private and joint venture manufacturers, is offering a further cut of VND 300,000 per tonne to VND 340,000 per tonne for big buyers.

In the early part of this year prices had doubled and building contractors faced a hard time but the situation has changed now with consumption of building materials falling sharply in the rainy season.

Mr Nguyen Tien Nghi VP of the Vietnam Steel Association said that “Constant rains hinder construction and also delay new projects. Steel demand is even weaker in the north and the average price there now stands at VND 17.5 million a tonne.” VSA figures show that its members sold 250,000 tonnes in July, 16.5% down from June.

Billet imported from China is now USD 230 to USD 240 per tonne cheaper than at the end of July.

Nippon Steel Corporation said that it is advising Usinas Siderurgicas de Minas Gerais on its plan to build a new plant in Brazil, but it hasn't decided whether to invest in the project.

A Nippon Steel spokesman said that "We are cooperating with Usiminas on the planning of the plant, but nothing has been decided on whether to invest in it."

It may be noted that Nippon Steel plans to invest JPY 300 billion in the plant its Brazilian affiliate plans to build in 2013 or later.

Reuters reported that steel firms taking a massive bet on furnaces fed on cheaper scrap metal rather than more traditional iron ore could find themselves in trouble as scrap supplies become both more expensive and increasingly difficult to find.

As per report, around 40% of the world's new steel capacity being built in 2008 will be in the form of electric arc furnaces, double the share built last year. These so called mini mills are being forced to scour the world for new sources of scrap steel as traditional sellers like Japan and Russia reduce offers.

Mr Moon Jung up an analyst at Daishin Securities said that "Aggressive capacity expansion by mini mills globally from Turkey to Russia and to South Korea will push scrap prices higher and that means they will be exposed to great risks. They will be able to pass on higher material costs, but when economies slow, it will be small mills, rather than bigger blast furnaces, which will be dealt a bigger blow."

Companies with expansion plans include Korea's Hyundai Steel and Dongkuk, China's Baosteel and Shagang Group, Russia's Novolipetsk and Severstal and Turkey's Colakoglu. Bigger rivals like Nippon Steel and POSCO are still focused on blast furnace projects, with POSCO planning USDS 12 billion integrated steel mill in India and USD 5 billion in Vietnam.

Japan, along with the United States and Russia, has long been a major source of steel scrap, as its mature economy guarantees a relatively standardized and stable supply from used cars and electrical goods. But Japan reduced exports of iron and steel scrap by 20% in May and June 2008 from a year ago and quadrupled imports to meet strong domestic demand.

South Korea consequently boosted scrap imports from the United States by 60% between January and June 2008. Purchases from countries such as the United Kingdom, Costa Rica, the Philippines and Dominican Republic surged from almost nothing to make up for a 13% fall in shipments from Japan.

Average scrap prices in Japan, which quadrupled in three years, rose to a record above JPY 68,000 per tonne in July 2008, while US scrap prices also doubled this year to all time highs, with the US composite scrap price index hitting a record above USD 523 in July 2008.

EC has published the 12.8.2008 the COM(2008) 511 final related to the first monitoring report on steel restructuring in Bulgaria and Romania which describes the progress in restructuring made by Bulgarian and Romanian steel companies that are subject to the requirements set out in the specific chapters of the Europe Agreement and the Treaty of Accession respectively.

It said that “In general terms existing plants in Romania and Bulgaria are being modernized so as to adapt production to the quality of steel required by the EU and export markets. Changes in management structures took place in parallel with the ongoing concentration processes, especially in Romania but there are some delays, sometimes significant, in the implementation of the obligations and requirements as specified in the respective Decisions and Protocols.”

Results in Bulgaria
The only company to undergo the restructuring process with the help of public funding was Kremikovtzi AD. Two other companies included in the NRP managed to successfully complete the restructuring process in 2006 without recourse to state aid.

In 2006 Bulgaria indicated that Kremikovtzi AD, although it did not need more aid than previously authorized, would not be in a position to complete its restructuring plan before 31 December 2006. It therefore submitted a modified restructuring program and business plan to the Commission, in which it proposed the extension of their implementation until the end of 2008. The assessment prepared by the Commission indicated that the implementation of the plan would allow the company concerned to reach viability and meet the requirements of Protocols.

Results in Romania
The Accession Treaty identifies the maximum state aid allowed for each of the following six steel producing companies: Mittal Steel Galati, accounting for about 60% of crude steel production in Romania, Mittal Steel Hunedoara, Mechel Targoviste, Mechel Campia Turzi, TMK Resita and Tenaris Donasid Calarasi.

According to the information at the Commission’s disposal, Romania granted a total amount of ROL 49 985 billion of restructuring aid in the period 1993-2004. These amounts of total state aid granted are in line with the ceiling specified in Annex VII of the Accession Treaty.