|From the CEO's Desk
The iron & steel industry in gulf region is surely on an upswing. The
demand is triggered by the boom in construction all over the region. Like
in India, most of the steel business houses in this region are carrying
out Greenfield and brownfield expansion plans. Earlier, the steel industry
was dominated by processing lines, rolling mills etc. but now the
realization of integrated facility is also fast growing and many such
units are coming up. Indian entrepreneurs are also eyeing on this region
and many big as well as medium scale Indian companies are in the process
of opening facilities in this region.
This does not mean everything is very smooth and there are no problems in
this region. Energy shortage is emerging as the single largest bottleneck
in this region. Non-availability of gas as well as electricity is
hampering the progress of steel industry and few projects are in the
process of changing the location in search of this vital input. Of course,
there are a few power projects lined up and the situation may be eased out
in years to come. Also, there is acute crisis of senior management people
from metallurgical stream. This is due to lack of metallurgical education
institutes and this problem is expected to continue for some more years.
As far as gulf steel markets are concerned, this region is in short supply
situation and this position will remain for some more years. The major
supplying countries / region are Turkey, CIS and China. Out of these,
China is emerging as the biggest supplier mainly due to price and delivery
advantage. Unfortunately, Indian companies are not having their slice of
cake. The reasons are many.
Firstly, rebars here require a special certification of CARES, which most
of the Indian companies lack. Second big issue is 'price.' Indian
companies at least today can not compete with the prices offered by other
suppliers mentioned above. Also, surprisingly, not much of Indian iron ore
comes to gulf mainly because of supplies from Iran.
But in spite of all this, the bottomline is that the iron & steel industry
in Middle-East region is growing and the growth is expected to continue at
a decent rate for at least next few years.
Editor & CEO
Evo Tech P. Ltd.
SMT Machines (I) Ltd.
Flat Products Equip. (India) Ltd.
Shanthi Gears Ltd.
UNP Polyvales (I) P. Ltd.
Simplex Engineering & Foundry Workd P. Ltd.
TMVT Industries P. Ltd.
Batliboi Environmental Engineering Ltd.
Combustion (I) Ltd.
Hamriyah Free Zone Authority
Bhagawati Oxygen Ltd.
H & K Rolling Mill Engineers P. Ltd.
Tata Steel Enters JV with Oman firm
Tata Steel, the
world's sixth largest steel maker, has entered into a joint venture
agreement with Oman-based Al Bahja group for the development of limestone
deposits in Oman. Tata Steel will hold 70 per cent stake in Al Rimal
Mining LLC, which would execute the project of developing and operating
the Uyun mine. The limestone deposits at Salalah will meet the company's
production requirement to a considerable extent, a Tata Steel spokesperson
said. Limestone is a key input for making corrugated steel.
Tata Steel would hold the stake in the Oman-based firm through its
subsidiary TS Global Minerals Holdings. The initial phase would involve
exploration and detailed feasibility studies and the project envisage
mining of limestone in the Uyun region which lies in Salalah province. “We
value our partnership with the Al Bahja group and we are sure that this
partnership will play a significant role in the mineral development of the
Sultanate of Oman,” Tata Steel managing director B Muthuraman said. The JV
agreement was signed by Al Bahja Group Chairman Ajit Hamlai and Muthuraman.
JSW gets Mining Rights in Chile for $52 million
Sajjan Jindal-controlled JSW Steel has
secured prospecting licenses through its Netherlands-based wholly owned
subsidiary to explore and exploit magnetite iron ore deposits in northern
Chile's Atacama region. According to the announcement made by JSW Steel,
the company will pay $52 million (about Rs. 200 crore) for mining licences
over 1,200 hectares. The move is part of JSW's efforts to augment captive
sources of iron ore and coal, in India and overseas, for its Indian
steelmaking operations. Sajjan Jindal, Vice-Chairman and Managing
Director, said, “The mines are expected to have good quality magnetite
iron ore deposits located near the Pacific coast, facilitating shipment of
ore at competitive costs. It acts as a natural hedge against high-cost
iron ore procured from third parties in India once these mines are made
JSW's current iron ore security is at 30 per cent. “We are in talks to
forge a joint venture to develop various iron ore mining projects in South
America,” Jindal added. “With the acquisition, the company could also look
at iron ore swapping and not necessarily ship the ore from Chile, which
could involve significant transportation cost,” a JSW official said. At
present, JSW is expanding its Vijaynagar facility and the 10 million tonne
plant at Salboni in Bengal. The company has doubled the capacity of the
Bengal project in the first phase to six million tonnes, which would be
operational by June 2011.
The Chilean venture is JSW's maiden acquisition of an iron ore asset. On
the coking coal front, JSW has secured the Rhone block as part of a joint
venture in Jharkhand as well as some licences in Africa. However, the
company is still scouting for coking coal mines in Australia and Africa,
as it targets steel making capacity of 30 million tonnes by 2020. JSW
Steel is engaged primarily in the manufacture of flat products, hot rolled
coils, cold rolled coils, galvanised products, etc. auto grade/white goods
grade CRCA steel.
Neo Metaliks Plans New Steel Unit
Neo Metaliks, promoted by hosiery goods
manufacturer, Rupa & Co, is planning to set up a 1.5 million ton steel
plant in West Bengal. The company had submitted a proposed to the state
government and was awaiting feedback. Ravi Agarwal, Director, Neo Metaliks
said, the investment in the project would be Rs. 2,500-3,000 crore in the
project. The plant would produce long products and value added material.
The company has also sought coal linkages from the government and plans to
use pellets for the plant. Agarwal said, a pellet plant would be set up in
Jharkhand or Chhattisgarh. The pellet plant would have an initial capacity
of 0.5 million tonne and was likely to cost Rs. 100-150 crore.
Neo Metaliks has applied for iron ore mining lease in Jharkhand, Orissa
and Chhattisgarh. For coal blocks, the company is tapping Madhya Pradesh,
Jharkhand and Chhattisgarh. Agarwal explained that the company chose
Bengal to set up the plant because the group was Kolkata-based. Neo
Metaliks has an integrated steel plant at Durgapur in West Bengal. In the
first phase, the company is eyeing 150,000 tonnes of pig iron capacity
along with captive power plant of 4.5MW.
Agarwal said that, Neo Metaliks was planning a forward integration
programme, which could entail either manufacture of auto casting or high
grade alloys. “A decision will be taken in the next 2-3 months,” he said.
In 2007-08, Neo Metaliks was likely to achieve a turnover of Rs 300 crore
and in 2008-09 Rs. 1,000 crore. He added that the turnover in 2008-09
would come from the existing project at Durgapur and trading activities.
The company plans to commence trading in iron ore and other minerals.
Vedanta Plans Rs. 24,000cr Orissa Plant for Steel foray
Non-ferrous metals giant Vedanta
Resources is planning to enter the Indian steel sector with a 5 million
tonne plant at an investment of about Rs. 24,000 crore in Keonjhar
district of Orissa and envisaging up its commissioning by 2012-13. “We are
impressed at the growing consumption of steel in India and are keen to
enter its steel sector. We are planning to build a 5 million tonne steel
plant at Keonjhar district of Orissa. If we find a suitable partner, we
should be able to commission it by 2012-13 at an investment of about Rs.
24,000 crore,” company sources said.
Vedanta, which is the holding company of Sterlite Industries, has proposed
to form a company - Sterlite Iron and Steel Company - for the project.
Apart from the plant, the project would involve developing iron ore mines.
The company would be a joint venture between the Vedanta group and Volcan
Investments, Vedanta's holding company. The project is estimated to
generate more than 7,000 jobs. The project would be a fully integrated one
and its produce would range from hot rolled and cold rolled coils to long
products. M. N Dastur and Company has been entrusted to prepare the
feasibility report of the project.
For 5 MT plant, the company would require 500 million tonne of iron ore
reserve, for which it is expected to apply for the necessary mining lease.
Meanwhile, Vedanta has began trial run of its Rs 3,500 crore alumina plant
at Lanjigarh in Orissa but is yet to ensure adequate bauxite linkage for
its different projects. “We envisage being number one producer of
aluminium next year in the country,” Vedanta Head Business Development, C
V Krishnan said.
Steel Ministry Recommends Navratna Status for NMDC
The steel ministry has recommended granting Navratna status to
nation's biggest miner NMDC Limited for excelling in its activities and
unfurling major capacity-expansion plans. “From a modest profit of about
Rs. 48 crore in 1990-91, NMDC has come a long way to pay the highest
dividend of 352 per cent in 2006-07 with production of about 27 million
tonnes of iron ore and a profit of over Rs 2,300 crore. So, clearly there
was a case for recommending Navratna status to NMDC,” a top Steel Ministry
official said. The Ministry has written to Department of Public
Enterprises in this regard. NMDC is a Miniratna-1 company.
NMDC entered the coveted Rs 2 trillion market cap club last November,
becoming the most coveted PSU after ONGC. The current market cap of the
company is around Rs. 1.69 trillion. Its shares have risen by more than
Rs. 3,000 during the past one month and closed at Rs. 12,161.95 in
mid-week of January'08. The PSU has 1.6 per cent of its shares listed on
the bourses. NMDC would invest about Rs.18,000 crore to ramp up its
production capacity to 50 million tonnes and conduct fresh explorations
within the next five years. It is targeting Rs. 3,005 crore this year and
has paid 100 per cent an interim dividend amounting to over Rs. 130 crore
to the government already. “We would invest about Rs. 18,000 crore in the
next five years to ramp our production capacity to 50 million tonnes of
iron ore, besides conducting fresh explorations,” company's new Chairman
and Managing Director Rana Som said recently.
He said NMDC would produce 3.10 lakh tonnes of iron ore this year and was
chalking out plans to acquire mines both within and outside the country.
NMDC will be a global company, he asserted. Besides, NMDC, along with SAIL
and RINL, is building a 4-million-tonne steel plant in Chhattisgarh at the
cost of Rs. 1,244 crore, he added. The project's final DPR was under
consideration. The mineral giant would be setting up two pellet plants of
one million tonne each at Donimalai in Karnataka at a cost of Rs. 700
crore. Granting of Navratna status would enable NMDC to establish
financial joint ventures and wholly-owned subsidiaries in India or abroad.
The company earned a profit of R.
JSW Bengal Steel to Double Capacity
Sajjan Jindal-promoted JSW Bengal Steel
is likely to double the first phase capacity of its project to six million
tonnes as it has tied up the required raw material linkages. Biswadip
Gupta, Joint Managing Director and Chief Executive Officer, JSW Bengal
Steel, said that, three million tonnes would be onstream by March 2011 and
six million tonnes would be operational by June 2011. The investment in
the first phase would be in the region of Rs. 15,500 crore to Rs. 18,000
crore. The total project would cost around Rs 35,000 crore. The project
would achieve financial closure in three months' time. It would be
financed through a mix of debt and equity.
Gupta announced that JSW Bengal Steel would go for an initial public
offering (IPO) but did not specify a timeframe. The IPO would give an exit
option to the land owners who received free shares of JSW Bengal Steel as
part of the compensation package. The package has three components,
employment for at least one person per family, compensation for land price
(50 per cent cash and 50 per cent annuity) and free shares at-par
equivalent to the land price. The company was on the verge of completing
land acquisition for the project, with a mere 10-15 acres of private land
still to be acquired.
The total land requirement was a little less than 5,000 acres, of which 90
per cent was vested with the state government. The project recently got
clearance from the ministry of environment and forests. JSW Steel's (the
parent company's) 7 million tonne and 10 million tonne capacity
enhancement at Bellary was running ahead of schedule. The same model would
be emulated in Bengal as there were some common contractors working on
both the projects. JSW Steel has a target of achieving 30 million tonnes
capacity by 2020.
Surana Inds in JV with Malaysian Company
Surana Industries (which is investing Rs. 473 crore to set up an
integrated steel complex and a 35-MW captive power plant at Raichur in
Karnataka), has entered into an agreement with Malaysia's Agate Group,
floating a 49:51 joint venture to procure coal from Indonesia. Surana's JV
with the Agate Group comes on the back of the company meeting its coal
requirements for its steel mill and captive power plant at the Raichur
Steel Complex. The steel complex will have a sponge iron facility with a
capacity of 1.28 lakh tonne per annum (tpa), a steel melting shop with a
capacity of 2.25 lakh tpa, and a rolling mill with a capacity of 2 lakh
tpa. It is expected to commence production by March 2008.
Kuala Lumpur-based Agate Group, engaged in finance, mining, consulting and
technology activities in Malaysia, Singapore, India and Indonesia, has
already set up a company called 'PT Agate Resources Indonesia' in
Indonesia to exploit coal reserves in that country. PT Agate Resources
will be hived off as a joint venture firm with Surana Industries picking
up 49 per cent stake, amounting to Rs. 40 crore. Surana expects to save
around Rs 60 crore on its bottomline through this deal. It will spend only
about Rs. 2,800 ($70) per tonne as against the present market price of Rs
4,000 ($100) per tonne, thereby providing savings of Rs. 1,200 per tonne.
The company intends to import 500,000 tonne of coal from Indonesia. The
Indonesian coal will have less ash content ranging between 1.5 per cent
and 10 per cent. Through this deal, Surana expects to ensure regular
supply of coal to the Raichur plant. The mines operated by PT Agate
Resources have 50 million tonne of coal reserves.
PT Agate has a capacity to produce 1.2 million tonne of coal per annum,
which would be scaled up in the future. After meeting Surana's
requirements, the remaining coal could be sold in the market and profits
accrued to the Indonesian company will also be shared between the two
partners, thereby boosting Surana's profits further, said a company
official. The coal mined in Indonesia will be shipped to Chennai port from
Indonesian port. From there, it will be transported to Raichur by trucks
Steel City looks for strategic investor
Securities Limited (SCSL), a stock broking company in the north coastal
Andhra Pradesh, is scouting for a strategic investor to expand its branch
network. “Initially, we had planned to raise funds through an initial
public offering (IPO) and submitted our application with the Securities
and Exchange Board of India (Sebi). Later we changed our plan and are now
looking for a strategic investor, who can invest Rs. 40-50 crore for our
immediate requirements,” G Rajagopal Reddy, Executive Director, SCSL,
said. The company plans to add 130 new branches across the country, mostly
in the four southern states. “We would take up the expansion as soon as we
get a strategic partner,” Reddy added.The company would also provide some
funds to its members to increase their margin trading.
“At that time we expect our yearly revenues to go up to Rs. 100 crore with
Rs. 30 crore net margins,” he added. He said a few companies had expressed
their interest in joining hands with SCSL and the company would soon
finalise the strategic partner. SCSL currently operates 270 branches
across the country of which about 70 per cent are in Andhra Pradesh. Last
fiscal, SCSL registered a net profit of Rs. 4.38 crore while its daily
trading turnover was between Rs. 120 crore and Rs. 150 crore. “Now, due to
bullish trends in the stock market and expansion of network, the trading
turnover has increased to Rs 500-600 crore a day,” he said, adding that
the company was expecting a net profit of around Rs. 9.5 crore with Rs.
34-35 crore revenue this year.
SJK Steel Chalks Out Rs. 1,200 cr Spend
The Andhra Pradesh
government has promised all support to the proposed expansion plans of SJK
Steel to keep with the state's industrial policy. SJK plans to scale up
its capacity to 1 million tonnes from the present 270,000 tonne, for an
investment of around Rs. 1,200 crore by the promoters. Andre Gerdau
Johannpeter, Chief Executive Officer of the Brazilian steel company Gerdau
SA, which holds a 45 per cent equity on a par with that of Baba N Kalyani
Group in the company, and representatives of Kalyani Steels met Chief
Minister Y S Rajasekhara Reddy to brief on their company's plans apart
from seeking incentives from the government for the same.
It may be recalled that Kalyani Steels Ltd. had entered into a joint
venture partnership with the Brazilian steel company by offering a 45 per
cent stake in SJK Steel, which it bought for Rs. 30 crore last year, for
expanding the capacity of the plant. Gerdau has a capacity to produce
close to 16 million tonne of steel in Brazil and the joint venture with
Kalyani Steels is its first Asian investment foray. Industries department
officials said the government had committed to extend incentives that were
part of the state industrial policy 2005-10 to the company. SJK Steel is
an integrated alloy steel plant spread over an area of 900 acre at
Tadipatri in Anantapur district of Andhra Pradesh.
Salem Steel Forges New Production Record
Salem Steel Plant (SSP),
a Steel Authority of India Limited undertaking, has produced 1.72 lakh
tonnes of saleable steel during the nine-month period from April-December
2007. This output surpasses SSP's previous best saleable production of
1.46 lakh tonnes in the corresponding period of 2006. The output includes
1.29 lakh tonnes of carbon steel, representing 31 per cent growth over the
comparable figures of the previous year. SSP achieved capacity utilisation
rate of 131 per cent for saleable steel production during the period,
bettering the 111 per cent achieved in the previous year.
During the first three quarters of 2007-08, SSP's hot rolling mill
produced 1.58 lakh tonnes of carbon and stainless steel, compared to 1.56
lakh tonnes a year earlier. This includes 29 per cent growth to touch 1.30
lakh tonnes of carbon steel from 1.01 lakh tonnes produced during the
previous year. Capacity utilisation at the hot rolling mill increased to
113 per cent from the 112 per cent a year earlie.
Jharkhand to Assess Sail's Chiria Iron Ore Needs
The dispute over the
right to mine iron ore from Chiria mines by Steel Authority of India
Limited (SAIL) was likely to intensify if the Jharkhand Government
insisted on making its own preliminary assessment using the state's mines
department for assessment of SAIL's iron ore requirement from Chiria.
Jharkhand Chief Secretary, P. P Sharma recently wrote to the Union Mines
Ministry, suggesting that the steel major after meeting its present and
future requirement should hand over the balance iron ore reserve to the
state for allocation to other prospective investors in the interest of the
Union steel ministry had earlier written to the Prime Minister's Office
that SAIL could not share any iron ore from Chiria with any other entity
as the entire volume of reserves in the Chiria mines were required for its
present and future expansion plans.
However, Union Steel Minister, Ram Vilas Paswan had indicated his
willingness to split the Chiria reserves. Now, the Jharkhand Government
was insisting on making its own 'realistic' assessment on SAIL's present
and future demand of iron ore from Chiria.
According to one Jharkhand mines department assessment data, SAIL's total
iron ore for present and future requirement including expansion plans
could not be more than 750 million ton per annum over a period of 30 years
while the total reserve in the Chiria mines was estimated to be about 2.44
billion ton according to SAIL's own record.
However, sources in SAIL here refused to pay any importance to remarks or
assessment of the state's mines department. The sources said SAIL's
requirement was at least of 5,700MT of iron ore for the next 50 years. The
ore was needed operate its present and future plants and all the reserves
at Chiria were not enough to meet SAIL's requirement, sources claimed.
Considering this, SAIL had applied for prospecting license for the
Ghatkuri mines to the state government and aimed to develop this new mine.
'12 mt' is the Iranian Steel Producion for 2007
Iran increased its steel production
by a 12% escalation in private section and a 4% growth in state companies.
As per reports, Iran has produced 12 million tones of steel in 2007, 9
million of which made by state companies. Although as per IISI figures
Iran is likely to produce 10.0182 million tonnes in 2007 up by 2.3% YoY
compared to 9.788 million tonne since 2006.
Iran's steel imports registered 30% growth in 2007. It imported steel
mostly from Russia, China, Ukraine and Kazakhstan. As per reports Iranian
companies will be able to provide domestic needs and boost exporting steel
to other countries if the government follows appropriate approaches
including allocating some budget to purchase the ingredients.
Saudi Arab Expects a 11% Demand growth in Steel for 2008
It is reported that the demand for steel in
Saudi Arab in 2008 is likely to surge due to projects announced under the
2008 State Budget. The report cited Mr Mohamed Ibn Saleh Al Jabr deputy
chairman of SABIC and chairman of the Arab Union for Iron & Steel said
that projects announced in Saudi Arabia under the 2008 State Budget would
increase demand projections for steel by 11% YoY in 2008. He said that
“Steel demand is projected to reach 5 million tonnes up from 4.5 million
tonnes consumed in 2007.
Turkish Billet and Rebar Prices Soar to Record Levels
It is reported that Turkish rebar
producers have successfully raised the export price by USD 55 to USD 65
per tonne to USD 700 to USD 720 per tonne on FOB basis. According to
reports, Turkey's billet export price has reached FOB USD 620 per tonne
and mills are expecting that billet export price will hit FOB USD 640 per
tonne. As per reports, the main reason for this surge is high scarp prices
HMS 80:20, which is reported to be ruling in the range USD 430 per tonne
on CFR basis.
China Coal unearth coal reserves in Turkey
It is reported that a team of 4
engineers, sent by the China Coal Energy Company, assigned to detect coal
reserves have found a reserve of an estimated 200 million tonnes of coal
in Manisa's Soma province in Turkey. The research lead by Polat Madencilik,
operating in the mining sector since 1988 and the Chinese team covered an
area of 2,000 hectares.
Mr. Muzaffer Polat, Chairman, Polat Madencilik, said that the reserve may
meet Turkey's coal demand for the next 20 years. He added that, “New
reserves were found on land belonging to general directorate of Turkish
coal. We predict that there is a reserve of 200 million tonnes here. We
will open eight more wells in the coming months. The definite size of the
reserve will be determined then.”
Mr. Polat said that, the China Coal Energy Company aims to become partner
in coal processing. He added that “There is not a definite figure
concerning costs yet. Continuous investments will be required from
drilling works to mining. The dimension is not apparent, as the size of
the reserve is not known precisely. However, according to the estimated
reserve, we are on top of a very large mine.”
He said that, some 200 million tonnes of high quality coal means high
income for Turkey. Turkey's annual coal production reaches 68 million
tonnes. It also imports 8 to 9 million tonnes of coal per year. The mine,
which is expected to start operating next year, will target the domestic
market at first. The development, which occurred during the last few days
of the year, presents new hope for the ministry of energy and natural
resources, which found new zones covering 800 million tonnes of coal last
year. Foreseeing the potential, the China Coal Energy Company had sent the
4 engineers to take part in the search for reserve at no cost.
Rebar prices in Egypt hit an all time high
El Ezz steel rebars abruptly
increased steel prices an extra EGP 250 per tonne as of January 1st 2008.
Consequently, several other steel producers increased prices to EGP 3,925
per tonne, while traders expected market prices to rise to EGP 4,000 per
tonne and further intensify within days. In the meantime, El Ezz Steel
officials justified domestic upsurges in the sector to leaps in the
international market, which directly reflect on the domestic market. It
said that international indicators point towards hikes in the price of raw
billet, predicting it will exceed 40% this year, equivalent to USD 700 per
Several experts accused El Ezz Group, which controls more than 60% of the
market of monopolizing the sector and unjustifiably hiking prices. They
also pointed to Mr Ahmed Ezz minister of trade's political influence,
claiming that being a member of the national democratic party enables him
to raise prices to maximize profitability.
Cement and Steel Prices Set For an Upsurge in UAE
Cement and steel price surge in the UAE are
expected to reach the 20% mark this January, according to some experts.
Cement and steel make up 30% of construction costs, which means a loss of
millions of dollars for all projects. Rising costs may force investors to
look to other Middle-Eastern regions for business opportunities. By the
end of January, steel prices are expected to reach US $816 (AED3000) per
tonne and cement could touch $95 per meter cube.
Last month, ArcelorMittal, said that it would raise the price of its long
steel products in the Middle East by $30 per tonne from first week of Jan
2008. It said the price rise would be applied in the region around the
Black Sea and the Mediterranean Sea, the Middle East and Turkey. The
company had said in November 2007, that it was raising its prices in the
US, Canada, Mexico and in Europe, because of a rise in the cost of raw
materials and unusually strong demand.
Ani Ray, Country Director, Simplex Infrastructure, said that the situation
would particularly affect Dubai. “At least in Abu Dhabi, the contracts
carry a price variation clause which makes it better for the contractors,
but in Dubai most of the contracts are lump sum,” he said. “We could
expect to see many of the smaller companies folding up this year due to
these escalating costs. Cement could go up to $95 per meter cube by the
end of January while steel could touch $816. This is going to directly
affect construction here and contractors are going to burn their fingers
due to their contract types and many projects will be delayed. Something
needs to be done about it because as of now, it's the developers alone who
will see an increase in profits.
Chris Lobel, General Manager (Ready Mix Concrete), Conmix, feels that the
situation could also force investors to look at other less expensive
markets like Kuwait and Saudi Arabia. “If the price of cement goes up, we
go up immediately as well. It's going to affect the contractors. They need
to ask for an escalation clause. This is due to the high demand all over
the world at the moment,” he said. He further said, “Adding an escalation
clause is the best thing for all parties including the developer and I
don't understand why no-one sees that. Contractors are adding huge margins
into the contracts. Sometimes, they add a 30% escalation estimate when it
is actually a 10% one. The developer can avoid this by just paying the
real difference instead of agreeing to an overestimated lump sum.”
Another danger is that investment will slow down. If cement factories jack
up their prices here then obviously people will start looking towards
other places like Kuwait and Saudi Arabia. The main people investing here
are the Saudis, Kuwaitis and Iranians. If this goes on they'd just start
looking at alternative markets.
Turkish steel growth in 2007 surpass expectations
Turkey's iron and steel sector exceeded
expectations in 2007 to finish the year with growth of 10% YoY over 2006.
The year end figures for steel production are expected to be announced
later this month at 26 million tonnes and exports are expected to hit 14
mt worth around USD 8.5 bn. With the latest 2007 figures for November
Turkey ranked 11th in the world steel production and ranked third in
Europe. Over the next two years, Turkey aims to climb up one spot in both
the European and world rankings. For 2008, the sector is estimated to
continue its growth at around 12% YoY as compared to 2007 figures, while
annual production is predicted to hit around 29 mt.
Mr. Yusuf Aslan, President of Turkish Iron and Steel Producers
Association, said that although 2007 targets had been met, the sector was
still facing problems. He said that, “The latest hikes in electricity
rates by 10% for industrial usage has increased the cost of steel
production USD 6 to USD 7 per tonne.” He further said that considering the
appreciation of the Turkish lira, the energy costs increased around 40% in
He said that, “After the recent hikes, our competitiveness will be
negatively affected. Turkey is the only country in Europe where electric
power prices for both industrial and home usage were nearly equal.”
Meanwhile, steel production in the first 11 months of 2007 was 23.6 mt,
while it was around 23.3 mt in the same period of 2006.
Malaysian Steel Sector likely to Recover in 2008
Steel sector in
Malaysia did not arouse much investor interest largely because it is seen
as requiring huge capital outlays and marred by debt and intense
competition, but things may be about to change. The sector also mirrors
the broad economy which is expected to grow by at least 6%. Most of
Malaysia's steelmakers are heavily dependent on local sales which are
expected to climb on the back of a recovering construction sector which
actually contracted between 2003 and 2006.
According to government estimates, the sector is expected to grow by 4.8%
this year and rise to 6% in 2008. The construction spike is mostly driven
by public investment works. Over CNY 22 billion worth of projects have
been awarded under the Ninth Malaysia Plan and a further CNY 114 billion
waiting in the wings. Meanwhile, the manufacturing sector, which uses flat
steel products, is expected to grow around 4%.
Adding to the feel good factor is an expectation that international steel
prices will stabilize. The key factor there for producers is the steadily
increasing prices of iron ore a key raw material which jumped over 70% in
2006. Next year, however, analysts expect the price of iron ore to rise
only slightly. In that context, analysts are also heartened by China's
recent moves to check its steel oversupply, a measure that would also
Meanwhile, certain steel products mainly billet and steel bars have their
prices controlled by Malaysia's Ministry of International Trade and
Industry. The cap has also given rise to optimism over steel stocks as the
local industry is currently lobbying the government for an automatic
pricing mechanism that allows producers to pass on raw materials' price
increases on to customers.
Vietnam Government to Review Domestic Steel Prices
Mr. Hoang Trung
Hai, Deputy Prime Minister, Viet Nam, in a dispatch to the Ministry of
Industry &Trade and the Ministry of Finance, said that domestic steel
prices need to be stabilised. In the dispatch, he ordered to ministries to
examine possible measures to get a handle on steel prices and submit a
proposal to the government before mid-January.
The dispatch followed recent reports that steel prices were spiking and
the market was facing a steel shortage. In December 2007 alone, steel
prices rose three times, with no sign of abating. In early December 2007,
steel prices on the HCM City market were around VND 14.5 million per
tonne. This had risen to VND 16.5 million per tonne by January 2008. Viet
Nam Steel Corporation, by comparison, currently has prices set at VND 13
Mr. Ha Van An, Deputy Head of the Marketing Department, Viet Nam Steel
Corporation, said that their steel came to the market through their
branches which frequently sold to wholesalers. Mr. Pham Chi Cuong,
Chairman, Viet Nam Steel Association believed that steel prices would
continue to rise in 2008 as China has increased the export tax on pig iron
from 15% to 25%, making a basic raw material for the nation's steel
industry more expensive.
Hyundai Steel Paying USD 435 for Scrap Purchase
South Korean Hyundai
Steel purchased 27,000 tonnes of H1 scrap from American Schnitzer at C&F
USD 434.5 per tonne for February 2008 delivery. Among them, 10,000 tonnes
is shredded scrap, and the other is H1 and H2 mixed scrap. In addition,
Hyundai Steel also purchased 30,000 tonnes to 35,000 tonnes of scrap from
Australian Sims Group with C&F USD 435 per tonne.
South Korea Eying Resources in Africa and South America
South Korea is
aiming to expand its raw material exploration and development in African
and South American countries. The Korea Resources Corp said the plan calls
for greater allocation of funds for overseas projects that can diversify
foreign sources of key materials. It said the funds for natural resource
projects this year will reach KRW 270 billion compared to KRW 160 billion
A spokesman for the corporation said that "Through aggressive development
and exploration, the plan is to raise self sufficiency in key resources to
23% this year from 18.2% in 2007.” He added that efforts are underway to
boost the size of the corporation's capital holdings from the current KRW
600 billion to around KRW 2 trillion which he said would allow the
organization to invest more on promising projects. The Korea Resources
Corp also said further efforts are to be made to develop zinc, molybdenum
and gold from local mines.
Territory Resources Ramps up production
group Territory Resources has exported 340,000 tonnes of high grade iron
ore via 5 shipments from the Port of Darwin to China, following the
sailing of its first shipment in September last year.
Mr. Michael Kiernan, Chairman of Territory Resources, said that the
company's operations were operating consistently and on schedule. He added
that, “Territory's shipping program has gathered steam, as we continue to
ramp up production at Frances Creek and capitalize on the robust iron ore
market. The current mine plan is scheduled to produce at an annualised
mining rate of 2 million tonnes per annum by June 2008 and is targeting 3
million tonnes per annum by December 2008. We are continuing to lift rail
and port capacity to drive further production increases, and deliver value
to shareholders.” Territory is working to expand capacity and loading
efficiency at port, in consultation with the Darwin Port Corporation and
the Northern Territory Government.
Dongkuk Steel Raises Prices by 7.5%
South Korea's Dongkuk Steel Mill Co, has raised prices of its
products used in construction by as much as 7.5% because of higher raw
material costs. Mr. Kim Sun Hong, spokesman of Dongkuk Steel, said that
the price for H beam steel used for building has rose by KRW 50,000 to KRW
720,000 per tonne with effect from second week of January 2008.
It has also raised the price of iron bar by 7% to KRW 632,000 with effect
from January 7th 2008. It kept the price of steel plates used in
shipbuilding unchanged. He added that iron bars and beam products accounts
for almost half the company's sales. Asian steelmakers including Nippon
Steel Corporation and South Korea's Hyundai Steel Co have boosted prices
to offset higher raw material costs, including iron ore and coal.
Singapoe Remains World's Busiest Container Port
Mr. Raymond Lim,
Minister for Transport of Singapore, said that, “2007 saw Singapore
maintain its leading position for bunker sales and total vessel calls.”
Mr. Tay Lim Heng, CEO, Maritime & Port Authority, said, “The good results
reinforce our status as a global hub port. They also reflect the
successful partnership between the MPA and the industry, as Singapore
develops further as an international maritime centre.” He added that 2007
amounted Singapore's last year a top due to narrowly edged Shanghai place
second in container throughput with the Chinese port with 26.15mn TEUs.
Total cargo throughput at Singapore in 2007 was up 7.8% from 2006, to hit
483.4 mt - 80 mt short of Shanghai's 560 mt for the same period.
Steel Supply Shortage Could Cripple Malaysian Construction Industry
The shortage of supply
and rising steel and cement prices could cripple the Malaysia construction
industry and delay the implementation of the 9th Malaysia Plan if there
was no intervention from the authorities.
In a recent statement, the Building Industry Presidents' Council (BIPC)
said that local builders were being forced to buy steel bars at
artificially inflated prices that were way above the Government control
price but this also did not guarantee the availability of steel bars. The
council said that supply is uncertain and there is shortage in several
sizes of steel bars especially those below 10mm range. This would lead to
slow down in construction works. The Building Industry Presidents' Council
said, there was uncertainty in the supply of both materials despite
producers charging higher prices than that of the officially approved
prices. The industry body said the supply shortage and volatile prices of
steel and cement may slow growth in the construction sector, which
includes property development and delay implementation of projects. It
added that price controls on steel bars and cement should be removed and
imports of steel and cement should be allowed.
The automated pricing mechanism (APM), which took effect on January 1st
2008, pushed prices higher and given that APM was a cost plus mechanism
encouraging profiteering to certain parties. The council recommends the
removal of price control on steel bars and cement, as well as a temporary
stoppage on export of steel bars and billets.
Mechel Steel Production Steady
Russian coal and steel producer, increased coal production by 25 percent
to 21.2 million metric tons last year, while metal output was little
changed. Production of thermal coal jumped 47 percent to 10.8 million
tons, Moscow-based Mechel said in an e-mailed statement. Steel output
advanced 2 percent to 6.1 million tons, while rolled-steel products jumped
9 percent to 5.1 million tons.
Magnitogorsk Steel Production Grow 6.5% in 2007
Iron & Steel, Russia's third-largest steelmaker, boosted output of the
alloy 6.5 percent in 2007 and increased its focus on domestic sales to
take advantage of rising demand and prices. Production of crude steel
climbed to 13.3 million metric tons, from 12.5 million tons a year before,
the Magnitogorsk, Urals-based Company said in a statement. Magnitogorsk
also raised output of finished products such as so-called flat hot-rolled
and long steel by 7.6 percent to a record 12.2 million tons. Prices rose
21 percent for the hot- rolled products and 37 percent for long products,
used in construction, it said.
The company is seeking to boost Russian sales as the economy enters a
tenth year of growth and consumes more steel for pipelines and automobile
plants. It sold 60 percent of output locally last year, up from 50 percent
in 2006. Toyota Motor Corp., General Motors Corp. and Nissan Motor Co. are
opening assembly lines in Russia on prospects sales will increase about 30
percent to 3.5 million cars by 2015. Pig-iron production in the year fell
2.6 percent to 9.48 million tons, from 9.73 million tons in 2006.
Fourth-quarter crude-steel production grew to 3.33 million tons from 3.27
million tons a year earlier, the company said. Magnitogorsk increased
output of finished products 3.7 percent to 3.1 million in the period,
while pig-iron production fell 0.9 percent to 2.29 million tons.
Nucor Boosts Steel Prices as Supplies Dwindle
Nucor Corp., the
second-largest U.S based steelmaker, plans to boost steel prices by as
much as $80 a ton next month to recoup higher raw-material costs and take
advantage of reduced supplies from overseas. February contract prices for
sheet steel will be boosted by $80 a ton, beams by $65 and plate and bar
by $60, Dan DiMicco, chief executive officer of Charlotte, North
Carolina-based Nucor, said.
Steelmakers are increasing prices to recoup rising costs for scrap metal
and energy and take advantage of a dwindling supply of steel from overseas
after the dollar weakened. Steel inventories fell to the lowest in a
decade in November, and U.S. imports declined 33 percent as lower prices
and higher costs prompted steelmakers to sell to other regions. DiMicco
declined to comment on prices after the February increases. U.S.
steel-sheet prices rose to a seven-month high in December, a report said.
Prices rose 2.3 percent to an average $544 a ton, from $532 in November,
the report added.
ChTPZ Groups Sales up
pipe maker ChTPZ Group said on Wednesday it boosted sales by 10 percent to
1.90 million tonnes last year after securing more orders from major oil
and gas companies. It said in a statement that its largest plant,
Chelyabinsk Pipe Rolling Plant, sold 1.05 million tonnes of pipe last
year, up 9 percent. This included 593,400 tonnes of large-diameter pipes.
The group's other plant, Pervouralsk Novotrubny, made up the balance of
845,600 tonnes, 11 percent more than it sold in 2006. ChTPZ, which has
annual turnover of more than $3 billion, attributed the sales growth to
its participation in large pipeline products and increased sales to
regular customers including Gazprom and pipeline monopoly Transneft.
Laiwu steel's Profit may Rise More than 50%
Corp., a Chinese steelmaker, said its net income probably rose more than
50 percent in 2007 on higher prices. Laiwu's net income in 2006 was 746
million yuan ($103 million), or 0.809 yuan a share, the company said in a
statement. China's listed companies are required to make an announcement
if they expect earnings to rise or fall more than 50 percent in a
Rio Iron Ore Output Rises to Record on Strong Demand
Rio Tinto Group,
fighting a hostile $119 billion takeover offer from BHP Billiton Ltd.,
said fourth- quarter iron ore output gained to a record amid rising demand
for the steelmaking raw material from China. Iron ore production increased
11 percent to 38.96 million metric tons in the three months ended Dec. 31
last year, said the London-based company in a statement. Aluminum output
rose to a record after the purchase of Alcan Inc. The outlook for
commodities is strong and Rio's output of iron ore and aluminum are set to
accelerate this year, Chief Executive Officer Tom Albanese said.
BHP, which reports quarterly production has (until Feb. 6) to make a
formal offer under a deadline imposed by the U.K.'s Takeover Panel. “It is
good news and Rio is looking very robust,” Albert Landman, who helps
manage the equivalent of A$85 million ($75 million) at Tricom Equities
Ltd., said in Melbourne. He added that, “The synergies from Alcan seem to
be in line with what Rio said, perhaps even better than that.”
Rio fell A$3.74 cents, or 3 percent, to A$122.96 and BHP fell 3.1 percent.
Australia's S&P/ASX 200 Index fell for an eighth day in its longest
selloff in more than seven years on concern the U.S. may be headed for a
recession. “It is really a bad day to be looking at prices because it is
just not reflected at all,” Lucinda Chan, Head of Asian Business at
Macquarie Equities Ltd. in Sydney, said “Given a better day we probably
would have seen a more positive reaction.”
Evraz group's Full Year Pig Iron Production fell 1.4%
Laiwu Steel Corp., a
Chinese steelmaker, said its net income probably rose more than 50 percent
in 2007 on higher prices. Laiwu's net income in 2006 was 746 million yuan
($103 million), or 0.809 yuan a share, the company said in a statement.
China's listed companies are required to make an announcement if they
expect earnings to rise or fall more than 50 percent in a reporting
Thyssen Krupp's Profit may decline despite High Demand
Germany's largest steelmaker, may say first-quarter profit fell 25 percent
after demand for stainless steel slowed in Europe. Net income probably
dropped to 482.5 million euros ($718.3 million) in the three months to
Dec. 31 last year, from 641 million euros a year earlier. “Stainless steel
was very profitable for them at the start of last year, but demand
collapsed in the last three months of 2007,” said Peter Metzger, an
analyst at Oppenheim Research GmbH in Frankfurt. “However, demand began to
recover in November, so we may begin to see growth in new orders.” He
rates the stock “buy.”
Distributors of stainless steel, which is used in construction because of
its corrosion-resistant qualities, reduced purchases and used inventories
after price increases earlier in the year. Stainless-steel prices jumped
after nickel, an ingredient, rose to a record in May in London.
“Volatility in the nickel price also caused problems for steel producers,”
said Andrew Keen, an analyst at Sandford C. Bernstein & Co. He rates the
stock “market perform.”
European Union steel demand will grow 2.8 percent this year, compared with
an estimated expansion of 5.3 percent in 2007, according to lobby group
European Confederation of Iron and Steel Industries, also known as Eurofer.
Sales in the 27- member bloc account for 67 percent of ThyssenKrupp's
revenue. Sales probably rose 0.8 percent to 12.4 billion euros, the survey
also showed. Spokesman Klaus Pepperhoff declined to comment on the
estimates. ThyssenKrupp declined 5.6 percent in Frankfurt on Dec. 4 last
year, the most in more than 15 months, after saying sales in fiscal 2008
will rise 2.5 percent to 53 billion euros, compared with an increase of
9.8 percent in 2007. The company, which employs 190,000 people, is
investing $4.6 billion to expand production at operations in Brazil to
benefit from growing demand there and a cheaper supply of iron ore. It's
building a steel mill in the country that will begin operating in 2009
with the capacity to produce 5 million metric tons of steel a year for
export to the U.S and Europe.
Abu Dhabi Basic, Daniel in Talks on Steel Plant Expansion Deal
Abu Dhabi Basic
Industries Corp. is in exclusive negotiations on awarding Danieli & Co SpA
a contract to expand a steel plant in Mussafah. Abu Dhabi Basic will award
$1 billion of construction contracts in the first half of this year. The
largest contract, valued at more than $500,000, will probably be awarded
to Danieli in the first quarter. The company, which also makes metals and
plastics, will call for bids on smaller contracts in the second half.
Jinduicheng Moly to sell 20% stake in Shanghai IPO
Co., Asia's largest producer of the metal used to harden steel, plans to
sell as much as 20 percent of itself in a Shanghai initial public
offering, according to regulatory documents. The China Securities
Regulatory Commission's listing committee met on Jan. 18 to review
Jinduicheng's plan to sell as many as 538 million yuan-denominated shares.
The Xi'an, western China-based Company plans to spend 7.65 billion yuan
($1 billion) of the share sale proceeds to upgrade its production plants,
sustain mining operations and make acquisitions, it said in a draft share
sale document. The company's production in 2006 accounted for 7 percent of
the global output of the silvery-white metal also used to soften tungsten
alloy, the share sale document said.
BOC International (Holdings) Ltd. and China International Capital Corp.
are arranging Jinduicheng's Shanghai offering. Jinduicheng previously
hired ABN Amro Rothschild, BOCI, Deutsche Bank AG and Merrill Lynch & Co.
to arrange a $1 billion Hong Kong IPO in the second half of 2007, bankers
said last year. The Chinese government has urged companies to sell shares
domestically, resulting in a record 472.6 billion yuan of stock offerings
in Shanghai and Shenzhen last year.
BlueScope Steel Profit estimates rose
Ltd., Australia's largest steelmaker, had its full-year profit forecast
raised 10 percent by JPMorgan Chase & Co. because of rising prices in
Asia. Net income may be A$526 million ($472 million) for the 12 months
ending June 30 for Melbourne-based BlueScope, JPMorgan analysts led by
Mark Greenwood said in a report. This compares with an earlier estimate of
A$477 million and last year's profit of A$686 million.
Asian steelmakers including Nippon Steel Corp., Japan's largest producer,
and South Korea's Hyundai Steel Co. are boosting prices to offset higher
raw-material costs and meet demand. JPMorgan raised its full-year forecast
for export prices of benchmark Japanese hot-rolled coil by 3 percent.
“Asian hot-rolled coil prices have been firming into the June 2008 half
and appear likely to increase significantly into the June quarter,” the
Sydney-based analysts said. “Compared to global peers, BlueScope appears
reasonably fair valued.”
First-half profit will be 'weak' at A$270 million, the report said. “Our
earnings forecast are heavily skewed” to the second half, it said. The
broker's sector preference was OneSteel Ltd. Global steel demand will rise
to 1.46 billion tons in 2011, led by China and Russia, U.K. consulting
company MEPS (International) Ltd. said last month.
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