|From the CEO's Desk
If Feb 09 automobile production figures are of some indication, one can
imply that not only auto but also steel industry is on recovery track.
Is this logic correct? Are we on recovery track?
I would beg to
differ from the above logic. First of all, the increase in Feb auto
production can be attributed to ‘year end heat’ phenomenon and it may
not sustain after the financial year end on 31st March. Secondly, one
sector in isolation can not flourish when rest of the economy is going
down. This seems against the principles of economics. Having said all
this, I would still say that even a slightest increase in steel
consumption is a welcome sign and would certainly help to boost the mood
of the industry. Further, inflation is going down in many countries.
Though this is a good sign up to certain extent, when it is near zero,
there is a great danger of deflation. Indian inflation rate has gone
below 1 % and this is surely a great worry for the policy makers. Many
analysts even view general elections as a great economy booster but I am
unable to form any opinion on this.
If one takes the
world view, the situation still looks bleak, especially in the western
world. The bailout packages are not enough for the economy to recover
and move forward. Many steel mills are virtually closed and remaining
are operating on minimal capacity utilization. The situation in Asian
region is somewhat better. In gulf region, though the demand has shrunk
considerably, the industry is still moving forward and mills are
working, may be with reduced production. India is also in the same boat
and is expected to do better after the financial year ends in March.
China and SE Asian region is also witnessing a slump but it seems the
situation has not gone out of control. This region is also expecting
recovery in the second half of current year. More or less I feel that
Asian region will be in a comparatively stable position by this year
Recession is a
great teacher. It teaches you to cut the extra cost, increase
efficiency, be more innovative, explore new markets and products and
what not. Now, the whole world is undergoing reorientation in terms of
its approach, business strategies, work culture and I am sure it will
soon become smart enough to beat the recession.
Editor & CEO
Evo Tech P. Ltd.
India Machine Tools
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Asian Metallurgy 2009
H & K Rolling Mill Engineers P. Ltd.
SAIL expansion and modernisation on track
State-run Steel Authority
of India's (SAIL) expansion and modernization programme is well on
track, despite of weak demand and falling prices of steel globally.
“Our modenization and expansion is on track as we believe
this is the right time to get prepared for the better time and I think
the sector will revive by 2010-11," SAIL director commercial Shoeb Ahmed
said. He added that the company would add 10 million tons (mt) by
2010-11. SAIL would be pouring Rs 54,000 crore in the expansion
programme to gear up its production capacity to 26.2 mt from the current
level 15 mt.
Ahmed said, "Global steel production in 2008 was down 1.2 percent to
1,327 mt but in December, steel production was down 23.4 percent to 84.4
mt, against of 105 mt as projected. Major producers even cut production
by 30 to 40 percent."
Domestic steel production by 2010-11 could reach 80 to 85 mt, from
around 60 mt, as demand from the domestic market would continue to grow
with the economy growing at 6 percent next year.
JSW Steel to negotiate lower coking coal price
To ease out input cost pressure, JSW Steel is
looking for a 66 percent lower rate for coking coal from global
suppliers at $ 100 per ton.
""Long-term coking coal contracts are under negotiations. We are
expecting (the deal at) close to $ 100 a ton, which is 66 percent lower
than the present contracted rates," said JSW Steel Vice-Chairman and MD
Sajjan Jindal. The company has already negotiated a 43 percent cheaper
rate for coking coal to be procured from Rio Tinto for the January-March
quarter at $175 a ton, against the contracted price of $305 a ton.
Jindal said long-term coking coal contracts for the next fiscal would
ease input cost pressures, which partially ate into its margins as it
reported a net loss of Rs 127.50 crore for the third quarter of 2008-09.
Selling at $96 a ton last year, coking coal prices had touched $300 a
ton under long-term contracts in the international market. Coking coal
is a vital raw material in steelmaking. After touching their peak during
the first-half of 2008, commodity prices - including that of coking coal
- fell over 60 percent in the spot market due to the global economic
However, bound under long-term contracts, companies like SAIL and JSW
Steel failed to reap the benefits of the price correction.
Tata Steel's consolidated net profit dips 44%
India's leading steel maker Tata Steel
announced a 44 percent fall in its net profit to Rs 732.21 crore on a
consolidation basis for the quarter ended December 2008, owing to high
raw material costs, inventory build-up and a foreign exchange loss of Rs
However, the company's net sales rose 4.05 percent to Rs 33,191 crore as
steel prices were higher in the third quarter to the corresponding
period last year. Tata Steel had cut production at its Anglo-Dutch
subsidiary Corus which also affected the revenue growth, while low
demand for steel from its main consumers- automotive and construction
sectors- has led to an inventory build-up worth Rs 2,352 crore. Low
demand and the subsequent fall in prices have also affected Tata Steel's
India business, where the company posted a fall of 3.5 percent. "These
are unprecedented times but still, we managed to register profits
because of our geographical spread, product mix, synergies with
international operations and also with ownership of raw materials. In
the future, we are looking at lower raw material contract prices as the
company is renegotiating with the suppliers," said B Muthuraman,
managing director, Tata Steel. Philippe Varin, chief executive of Corus,
said, "Until June 2009, Corus will continue its production cut that
began with the shutdown of three blast furnaces in Europe. The move is
due to the continuing lower demand in the international market. Corus
has sold off its aluminium as well as teesside cast businesses as part
of cost cutting."
Tata Steel has repaid $500 million (Rs 2,500 crore) debt raised for the
Corus acquisition in 2007. "The company has no repayment till December
2009. In 2010-11, we have to repay $798 million and $1.3 billion in
2011-12," said Koushik Chatterjee, group chief financial officer, Tata
Even as the steel major re-prioritised its capital expenditure for new
projects in view of the global economic slowdown, it said the expansion
of its Jamshedpur unit is on track. "The 3-million ton expansion plan at
Jamshedpur is on track and will be completed by 2010," Muthuraman said.
Tata Steel has undertaken brownfield expansion to enhance its production
capacity to 10.5 million tons from the present 6.8 million tons.
In the April- December period, Tata Steel has registered a 45.3 percent
rise in net profit at Rs 11,469 crore, while net sales for the
consolidated entity rose 26.63 percent to Rs 1,20,914 crore.
Indian steel long term fundamentals are intact - Ernst &
Predicting the outlook for Indian steel
industry in 2009, Ernst & Young said that the industry is squeezed but
The firm further stated that though the world steel scenario is grim,
India has the potential to grow at double digit rates and should target
a production of 125 million ton in the medium term. Drawing a parallel
with China, it goes on to say that during the 1998-03 period, when the
finished global steel production grew at a compounded annual growth rate
of 1.6 percent, the Chinese finished steel consumption doubled at a CAGR
of 18 percent. The key drivers of Chinese steel demand were massive
infrastructure development and high level of urbanization, escalating
demand from housing, automobile and white goods sectors.
Navin Vohra Partner & national Leader, metals and mining practice for
Earnest & Young said," The current Indian scenario is very similar to
that of China in 1998 and we expect significant investments here towards
large scale public infrastructure, urbanisation, auto and white goods.
Further, in the long term, capacity in the commodity industry has to
move to low cost centers and India is well placed with abundant high
quality iron ore, qualified manpower and competitive capital costs due
to low land and construction costs."
According to the report, while the near to medium term future of the
global steel industry is challenging, the outlook for India is also
encouraging because unlike the last bear phase during 1993-94 to 2001-02
when the domestic sector was reeling under a supply overhang the supply
demand scenario is more balanced this time.
The report added that the near term outlook for the industry is
challenging as the growth in key end user industries such as
construction, automobiles and manufacturing has taken a backseat. The
downturn has also led to a decline in the prices for raw materials such
as iron ore and coking coal, albeit at a lower rate than the dip in
steel prices. Further, prices are expected to decline in 2009 as
consumption levels are projected to continue plummeting.
As steel manufacturers have undertaken production cuts, this is likely
to result in a surplus of iron ore and resulting weakening of ore
prices. It is expected that the domestic steel companies will try to
drive hard bargains for iron ore, though the consolidated nature of the
raw material industry ensures that generally it is the input suppliers
who have better bargaining power than the steel manufacturers, thereby
impacting operating margins. Similarly, the coking coal market is also
expected to turn into a surplus on account of the production cuts in the
Ernst & Young said “The companies with captive mines will be in a better
position to combat the downturn. The key strategies which companies can
adopt in this scenario is to focus on value added products, rationalize
cost structure through better manpower planning, logistics and raw
material sourcing. The companies with a focus on the domestic market are
likely to be more favorably placed, given the relatively stronger demand
from the local users.”
The report estimates M&A activity to rebound when the credit crunch
eases and the economy picks up as domestic players will require iron ore
and coking coal reserves for enhancing their raw material security.
Further, there is a relatively high fragmentation in the industry in
India and therefore a need to attain economies of scale and improve
bargaining power with raw material producers. Increasing geographical
spread to enter high-value steel markets is another imperative.
Steel scenario unlikely to improve significantly
Steelmakers are likely to reduce prices by
about Rs 600 per ton, following the 2 percent cut in excise duties.
However, that's unlikely to result in a spurt in orders from the real
estate or automobile players, though players in the infrastructure space
may be willing to buy more.
Until there is a full-fledged revival in demand, companies will have to
survive with low realisations- prices have gone down 30 to 40 percent
since August and now range between Rs 32,000 and Rs 36,000 per ton. Only
because of this reason, JSW Steel (standalone) to report losses before
tax of Rs 139 crore in the December 2008 quarter. This figure does not
include foreign exchange losses. Of course, the company also sold a
smaller amount of steel--it had actually scaled down production by 20
percent and therefore revenues remained flat. Others too netted lower
realisations as a result of which sales at Tata Steel, for instance,
contracted 3.5 percent while SAIL's revenues were down 6 percent. High
raw materials continued to pressure operating profit margins (opm) at
JSW Steel--the opm was down about 1,400 basis points to 15.3 percent.
Tata Steel's margins also came off about 1,200 basis points, though they
were far higher, at 30 percent.
Analysts are also forecasting a fall in profits in the following year.
However, since JSW Steel is not as exposed to the overseas markets as
Tata Steel is, a revival in demand at home could mean better operational
profits in 2009-10. Nevertheless the company could continue to incur
foreign exchange losses and that could hurt the bottom line.
Steel prices to remain weak, output to grow by 6.5% in
Steel prices would remain weak domestically
in 2009 but production of alloys would increase by 6.5 percent during
the period, said Centre for Monitoring Indian Economy (CMIE).
"With a sharp reduction in input prices expected in the renewed
contracts of domestic companies and global steel prices remaining
subdued, we expect domestic steel prices to remain weak in 2009-10,"
CMIE said in its latest review. The average prices of hot rolled coil
declined by as much as 11.3 percent during January from the month ago
levels due to de-stocking by steel companies.
Distress sales also impacted the prices of cold rolled coils and
galvanised steels, which fell by 3.6 per cent and 9.1 per cent
respectively. TMT bar prices also reported a 3.5 per cent decline. "The
downward trend will continue with average steel prices expected to fall
by another 3-4 per cent till March 2009," CMIE said. It, however,
expected growth in steel output to pick up by 6.5 per cent in 2009-10
driven by a healthy demand from long steel products used in
"The Government's emphasis on infrastructure spending in order to
stimulate economic growth would keep demand for long products healthy,"
CMIE said .
Ennore Coke seeks lower coking coal prices
Ennore Coke Ltd, a domestic manufacturer of
metallurgical coke, is in talks with its global coking coal suppliers-
Rio Tinto and BHO Billiton- to fix an annual long -term contract at $140
to $150 per ton.
"At present, we are buying coking coal from our global suppliers at
around $160 per ton. We are looking for a lower purchase price for
coking coal as spot prices if the raw materials in the international
market have declined this year and steelmakers are also pressing for
lower prices," said Ennore Coke president and chief executive officer
Ganesan Natarajan. The company was seeking for long-term coking coal
contracts as its requirement for the raw material- which currently
available at about 7,20,000 tons per annum (tpa)- is set to go up
significantly in the next two years. The company would have a coking
coal requirement of 1.3 million tpa for its proposed 1-mtpa plant at
Dhamara port in Orissa, which is scheduled to be operational by the end
of 2010. It is also scaling up the capacity of its coke plant at Haldia
from 1.5 lakh tons to 3 lakh tpa.
Ennore Coke's plans to negotiate coking coal prices come close on the
heels of a similar move by the domestic steelmakers whose bottomline was
significantly hit by higher coking coal prices in 2008.
The average price of coking coal in the international market jumped from
$96 a ton in 2007 to around $300 per ton in 2008. Recent sales of coking
coal in China were in the range of $130 to $150 per ton. Macquarie Group
- a global provider of banking, financial and advisory services - has
forecasted a benchmark price of coking coal at $110 per ton for 2009.
Meanwhile, the steelmakers, both domestic as well as overseas, are also
negotiating with Ennore Coke for lower prices of metallurgical coke.
Ennore Coke is supplying foundry coke to the steel units at $420 per ton
and steelmakers are negotiating for a price of around $300 per ton,
according to Natarajan.
Ennore Coke exports nearly 45 percent of its total coke production to
countries like the US, Saudi Arabia and Iran. It aims to raise its
export share to 60 to 70 percent in the next few years.
GMDC may buy stake in 14 projects
Gujarat Mineral development Corporation (GMDC)
is planning to buy stakes in various projects slated in Gujarat. The
company is eying 26 percent stake each in 14 different projects to be
established by leading companies.
The mining major signed memorandum of understanding with 14 companies
during the Vibrant Gujarat Investors' Summit-2009. "GMDC is looking at
taking 26 percent stake in each of these projects. The company will get
stake in the project for supplying raw material to these projects and no
cash fund will be infused by the company in the 14 ventures," said a
senior government official.
Raw materials such as bauxite, silica sand, fluorspar and limestone will
be supplied by GMDC, which has inked agreements with various corporate
for projects involving an investment of Rs 8,733 crore.
The projects in which GMDC is eying stakes include integrated coke oven
plants by Mumbai-based Hindustan-Dorr Oliver Ltd, Saurashtra Fuels (P)
Ltd, Rachna Global LDA of Mozambique, BLA Coke Pvt Ltd and Sunflag Iron
& Steel Co Ltd. These companies will invest Rs 1,500 crore each for
their respective coke oven plants.
GMDC is also considering stakes in coal washery projects. Adani
Enterprise Ltd and Aryan Coal Benefication intend to infuse Rs 60 crore
each for setting up coal washeries in Gujarat. GMDC will supply raw
material for the projects.
CIL targets 6 mt imports next fiscal
The country's largest coal producer Coal India
Ltd (CIL) has set a target to import 6 million tons (mt) of coal in the
next financial year.
However, much will depend on how much the power ministry would require
and also on certain firm commitments from power utilities during the
Discussions are on ministerial level to draft estimates on the amount of
additional coal that would be required by power utilities and the price
of coal imports, if any, by CIL.
The coal supplier did not import any coal in the current year. "CIL was
asked to import by the power ministry to meet the shortage faced by
power utilities, but we did not get any commitment from either power
utilities or the power ministry. It is not possible to keep imported
coal and not use it," an official said. Even at reduced rates, prices of
imported coal are much higher than domestic prices. Imported coal costs
at about $80-90 per ton, whereas landed cost of domestic coal is almost
half--at around $ 40 per ton. Sources said the Power Ministry was to
import 20 million tons coal, but did not do so, leading to a shortage in
coal stocks. CIL has put a target to produce 405 million tons for this
year, an increase of 25.5 million tons over last year. In the period
April-January, CIL's production growth of 7.1 percent has been the
highest-ever. The absolute production during this period was 360.45
Slow demand hurts Sesa Goa
Sesa Goa, the country leading iron ore
manufacturer, is seeing a considerable slowdown in its revenues due to
weak demand from steel companies. For the first half of 2008-09, the
company's revenues grew by 138 percent, but in December 2008 quarter, it
managed to grow by just 12 percent to Rs 1,360 crore. This is despite a
37.4 per cent y-o-y growth in volumes as realisations came off by 17 per
cent on a y-o-y basis.
The demand for iron ore, the main input for making steel, has been
declining globally and most of players are facing pressure on revenues
front. Major iron ore producers such as Vale and Rio Tinto had already
slashed production by 10 percent during November and December 2008, and
said that they are watching market closely for developments. Sesa Goa
sells close to half of its iron ore on spot prices and the rest on
contracts and with annual contracts coming in for re-negotiation this
year, all players including Rio Tinto and Vale may have to settle for
Sesa Goa's realisations in the December 2008 quarter halved to Rs 2,296
per ton from Rs 4,666 per ton in the September 2008 quarter. China is
the biggest consumer of iron ore and smaller Chinese steel mills are
important customers of Indian exporters, but these mills cut production
in the second half of 2008 due to the economic crisis.
The Chinese government has announced a stimulus package of $585 billion
to increase spending on housing and railroads which could help revive
steel demand in the country though there is no impact yet. Chinese iron
ore imports were up one per cent y-o-y in December 2008 to 34.53 million
ton, but analysts say that's because of older agreements and does not
mark a revival as yet. Higher transportation costs resulted in the
operating profit margins falling sharply by 2,100 basis points y-o-y to
41.2 per cent in the December quarter.
Higher other income helped cushion the drop in net profit to just 7.3
per cent at Rs 471 crore, which includes a foreign exchange loss of Rs
65 crore during the December 2008 quarter.
Iron ore exports improve for Goa
The improvement is steel production in the
last two months has amended Goa's iron ore export industry, which was
badly hit due to global recession between September and December.
Goa Mineral Ore Exporters' Association president Shivanand Salgaoncar
said, "When the recession hit us, the scene was bad but in the last two
months or so, the situation has improved and there could be a marginal
drop in terms of volume. It is the decline in international prices of
the long-term contracts that is worrying us."
He also pointed out that Chinese market was a spot market; it was Japan
and Korea- traditional buyers of Goan ore- which were still under the
spell of recession. Goan iron ore mining could continue for another 20
years, taking 50 Fe as the cutoff base and over 80 percent of the ore
was low grade. "Goa's iron ore grade is 58 percent and below. Thanks to
the Chinese market, the ore of still lower grade has value and is
exported. The threshold value according to the Indian Bureau of Mines is
55 Fe but for us, iron ore with value of 52 Fe is a viable opportunity,"
Riding on a last quarter pick-up of iron ore volumes by Chinese steel
companies, Goan iron ore exporters are confident that they would end the
current financial year marginally below last year's ore exports but
continue to be upset over the low contract prices in the international
Salgaoncar said the recessionary trend - which continues to dog Japanese
steel mills, traditional importers of Goan ore through long-term
contracts - was troubling Goan exporters. In the worst scenario, imports
by Japan and Korea could be down nearly 50 percent of the usual intake.
Gross iron ore exports from Goa touched 40 million tons (mt) last year,
including 33 mt of Goan origin ore. The current year could end with
figures of 38 mt and 30 mt, respectively.
Explaining the economics of low grade ore, he said some of the Chinese
steel mills had been taking Goan low grade ore and using it to blend it
with high grade ore procured from Brazil. Considering the grip of world
recession on some of these mills, the annual 8 to 10 mt intake could be
down by at least 2 to 3 mt, according to Salgaoncar.
"What really worries us is the unpredictability of the world iron ore
trade at this juncture. We cannot be sure of what can happen in the next
couple of months; it is a month-to-month kind of fluctuating situation,"
Welspun Gujarat shuts down plate mill temporarily
Welson Gujarat Stahl Rohren Ltd (WGSRL) has
shutdown its plate mill at Anjar for 45 days to implement the 1.5
million ton Stackel coil mill which is a part of the backward
integration improve the company's internal flexibility to produce
in-house high gratde coils.
Moreover, the company has also commissioned its state-of-art pipe mill
at Little Rock in Arkansas, US. The $150 million facility can produce
300,000 tons of HSAW pipes from 24 to 60 inches as outer diameter; 6 mm
to 25 mm as wall thickness. It also has coating and double jointing
capabilities which were commissioned earlier.
GMR Energy buys Indonesian coal miner
GMR Energy has acquired Barasentosa Lestari
PT, an Indonesian coal mining company, for $80 million.
The move is expected to strengthen backend integration for its future
power projects as GMR aims to achieve fuel security for its power
projects in India. GMR has paid $40 million for the Indonesian company
while the balance will be paid in multiple tranches over the next two
years. The company has raised 80 percent debt and 20 percent through
equity to fund the first tranche of $40 million towards the acquisition.
GMR group chief finance Officer A. Subbarao said, "We have been working
on this transaction for six months. This deal will help us fast-track
power projects. If you have the right project, you can always raise
The Indonesian company, which holds a mining licence under the coal
contract of work issued by the government of Indonesia, has reserves
amounting to 100 million tons (mt) in south Sumatra. The licence
provides 30-year mining authorisation over two separate coal blocks. The
company has already begun identifying locations for setting up thermal
"We are looking at the west coast of India, which offers better
evacuation facilities and higher demand for power," said Subbarao.
Typically, a 1,000-MW plant will consume 5 mt of coal per year and the
Indonesian reserves will easily service GMR's power project plans over
the next decade or so. The company will use bulk of the reserves for
captive consumption. The company is looking at erecting power plants to
coincide with the date of operation of the coal mine.
Tata Metaliks identifies land in Karnataka for steel
Tata Metaliks, which plans
to establish an integrated steel plant in Karnataka, has identified land
for the project.
"We had appointed (consultancy firm) Mecon to find a suitable place for
us in Karnataka. It has identified the Bellary-Hospet iron belt," said
Harsh K. Jha, managing director of Tata Metaliks, a subsidiary of Tata
"Ten days ago, the Karnataka government gave its consent for 900 acres.
We haven't yet chalked out investment plans for the steel plant," Jha
"We are planning an integrated steel facility that will consist of
ductile iron pipe plant and a pig iron plant and may also have a billet
plant," he said.
The company has also applied for a licence to mine iron ore in the
region for the proposed steel project.
Earlier, Tata Metaliks had asked for land from the West Bengal
government in 2004-05 for constructing a 500,000-tonne per annum billet
plant and had even made an advance payment of Rs. 9.5 crore. "We wanted
500 acres adjacent to the Tata Metaliks plant in Kharagpur. But we
didn't hear anything from them," Jha said, adding that a few days ago,
the company had communicated to the state government that it was no
longer interested in constructing the plant in West Bengal. "They asked
us to reconsider our decision," Jha said, adding: "There is no end-point
to this bargaining." Tata Metaliks Kubota Pipes is a joint venture
between Tata Metaliks (51 percent), Kubota Corp of Japan (44 percent)
and Metal One Corp, also of Japan, (5 percent) and has been set up with
an investment of Rs.185 crore. The company is also looking at starting
work for the second phase of the plant to take up the capacity to 250
million tons annually from the present 110 million tons.
Egyptian steel makers cut prices to counter cheaper imports
Egyptian steel companies slashed their prices
by EGP 300-550 per ton in the wake of weak demand and continuous threat
of Turkish and Ukrainian imports.
According to a report, a leading steelmaker Al Ezz Steel cut their ex
factory price to EGP 3,050 per ton from EGP 3,400 per ton. Following the
action, Beshay Steel cut their ex factory price to EGP 3,000 per ton
from EGP 3,500 per ton. “Imports into Egypt are still a threat to
Egyptian producers. Ezz wants to counter the threat posed by the price
differential. He has no choice but to lower prices. We are having a
reactive response rather than a proactive one.” an analyst at investment
bank Beltone Financial said.
All this has cut into local producers' profits, inspiring some anger.
Two factories are now considering halting production in order to
pressure the state to put tariffs on Turkish steel imports, said the
But the analyst thinks it is unlikely that the government will impose
any new tariffs. He said that “You have to have a very strong dumping
case. Dumping by definition is when you sell in the export market for a
lower price than in your local market.
Gulf may see 35% drop in steel demand
The slowdown in the Gulf's construction
industry due the current global recession could decline steel demand by
as much as 35 percent.
The Dubai Multi Commodities Centre estimated that steel consumption in
the region could drop to 9 million tons this year down from about 14
million tons in 2008. John Short ED for steel at DMCC said that "It's
obvious to most that demand will come off with announced slowdowns less
on site consumption occurring per active project, stoppages of active
projects and less building project starts."
In the region, the construction industry is the biggest consumer of
steel and most of the projects either have been delayed or even
cancelled. According to a research report, USD 582 billion worth
projects in the UAE are now on hold. But this is not indicative of the
entire region as countries Abu Dhabi are continuing to see growth.
Short said that the construction industry accounted for more than 80% of
Gulf steel demand. Steel rebar prices are now below USD 500 a ton, down
from the peak of around USD 1200 a ton seen in the Q4 of 2008.
Turkish rebars makers target Egyptian markets
Due to falling demand from tradition Middle
East Region, Turkish rebar manufacturers have turned to Egyptian markets
for their products. Currently, Turkish rebars are being sold at USD 450
per ton to USD 460 per ton.
According to the industry, the prices may drop further. Ezz Steel has
its Rebar pricing settled at USD 606 per tonnes which is considerably
greater than that of Turkish origin. Ezz shall have to reduce its prices
in order to make them more competitive or loose market share.
Saudi Arabian scrap market in slump and prices stable
Demand for steel scrap products from
Saudi Arabia dropped into slump with declining transactions, but the
prices had not many changes within a month.
Transactions of domestic steel scrap seems more optimistic than that of
imported products. It is learned that price of HMS1&2 80:20 steel scrap
was at SAR 600 per ton equal to USD 160 per ton and the price in western
part was at SAR 500 per ton to SAR 550 per ton.
Purchasers from Saudi Arabia held that they have no plans to import
steel scrap yet. The current import is just to relax the contemporary
inventory shortage. As scrap export is forbidden in Saudi Arabia, the
import prices are hard to confirm.
Egyptian steel producers demand duties on rebar import
Egyptian iron and steel producing companies
have reduced, for the second time, the rebars prices as from March 2009.
Ezz Steel has announced cutting their prices down to EGP 3050 per tons
ex-works. This price is lower by EGP 350 than the level of prices of
February, which amounted to EGP 3400 per tons. The other producers in
Egypt reduced their prices at approximate levels.
This reduction is in response to the decline of the inputs of the iron
and steel industry worldwide, according to Ezz Steel, but it also occurs
as a result of the impact of the growing competition in the domestic
market the intensity of which has increased by the low prices of the
steel imported from a number of the exporting countries to the Egyptian
market headed by Turkey whose rebars prices to the Egyptian market
reached EGP 2900 per ton.
The Turkish exports to the Egyptian market account for about 35 percent
of the total Turkish exports to the countries of the Middle East and
North Africa during January 2009. The local producers are afraid of the
possibility that the continuation of exports in this way would cause a
real injury to the local mills due to their inability to match the low
prices of the imported products.
The increasing imports of rebars and their low prices led the local
producers to demand taking protective measures against the imported
steel. President of the Metallic Industries Association in Egypt
submitted an official memorandum two days ago to the Ministry of
Industry and Trade asking them to impose preventive duties on the
Harsco inks 10 year pact with Emirates Steel
Worldwide industrial services company Harsco
Corporation announced that its Harsco Metals group is expanding into the
United Arab Emirates under a new 10 year contract valued in excess of
USD 35 million over its term.
The contract with Abu Dhabi based Emirates Steel LLC installs Harsco as
the principal onsite service partner to a new electric arc furnace steel
plant entering production with capacity for up to 400,000 tons of steel
billets and 250,000 tons of gas based DRI production per year.
The release said that “Harsco was invited to take on responsibilities
for a broad range of high value onsite material handling and
environmental services, having worked successfully with the mill's
management team at other steelmaking operations.”
The mill is a subsidiary of Al Nasser Industrial Enterprises ANIE, one
of the leading manufacturing companies in the United Arab Emirates.
Harsco expects to begin work within the next 1-2 months.
Suez Steel closing billet mill
Suez Steel has announced that closure of its
billet producing mill since the first week of March 2009 because of the
losses incurred by the company.
According to the sources, the drop in imported billet prices from CIS
and the fall of the Turkish rebars prices in the Egyptian market are
cited as the reason. The company's management sent a memorandum to the
Egyptian Ministry of Industry and Trade informing it of putting the mill
out of production.
Suez Steel was established in the Industrial Zone in Suez Governorate in
1997 and started with production in 2000. Its production capacity is 600
thousand tonnes of steel billets, using scrap and iron pellets produced
by direct reduction. Egyptian National Steel Company bought the
government's share in Suez Steel amounting to 82% for EGP 1.1 billion in
Toyota and Suzuki may set up manufacturing centers in Aden
The Japanese Toyota and Suzuki Motor Companies
have showed keenness to set up centers for their manufactures in Aden
Free Zone for exporting them to African and other neighboring countries.
Dr Abdul Jalil al-Shuaibi deputy head of Free Zones General Authority,
head of AFZ said that the two Japanese companies have informed him their
desire to set up these centers as he met with them in sideline of his
participation in an investment promotion forum held last week in Japan.
Al Shuaibi pointed out that AFZ and the Investment General Authority
have reviewed in the forum the available investment opportunities and
investment Projects in Yemen as well as facilities which would be
provided to investors.
Malaysia's Perwaja Steel delays projects
Malaysian steel maker
Perwaja Steel has postponed expansion plans and is running at half its
capacity as the current recession hit the country, a top company
Managing Director Pheng Yin Huah said that the company has no plans to
restructure its borrowings or tap shareholders to raise fresh capital.
"Global steel prices will remain highly volatile this year. It would be
good enough if we can just break even this year," Pheng said.
The price of steel billets, a semi-finished form of long steel mainly
used in construction, has declined nearly one fifth over the past two
months to below $350 per ton.
"The goal is not to make money, but to make sure we can sail through the
crisis by carefully planning our purchasing and other cost saving
measures," he said. Malaysia's largest steel maker made a profit of $24
million for fiscal year 2008 ending December 31, the first year of its
listing, on revenue of 2.3 billion ringgit.
Perwaja has delayed two projects worth about $163 million to build a new
electric arc furnace and a new blast furnace given the uncertain
economic environment, said Pheng. "Everyone in the industry is taking a
defensive stance now, this is not a period to be offensive," said Pheng.
Inventory turnover has also slowed from the usual three-month period
after it set aside nearly 350 million ringgit in the second half of 2008
for inventory impairment as global steel prices collapsed, Pheng said.
Perwaja, which employs 3,000 people, is running at half of its capacity
now due to slumping demand as Malaysia, the third-most export dependent
country in Asia after Singapore and Hong Kong, heads for its steepest
slowdown since the Asian financial crisis. Pheng said Perwaja and
Kinsteel, another listed steel company that he controls, do not have
Gearing ratios of the two companies, ranging between 0.6 times to 1.2
times were well within the 1.75 times limit that banks imposed on the
steel industry, he said. "The group is financially stable. We don't see
the need to restructure our debts or make cash call because we still
have enough cash," said the executive.
Japanese heavy plate import down by 26.6% MoM
Japan imported 8,801
tons of heavy plate in January 2009, down 26.6 percent MoM, at an
average price JPY 100,750 ton CIF.
Korea ranked the first largest exporter to Japan at 3,714 tons, up by
31.5 percent YoY, China ranked the second at 2,729 tons, down by 24.3
percent YoY and Taiwan ranked the third at 2,340 tons, up by 68.5
In addition, Japan exported 264,299 tons of heavy plate in January 2009,
down by 24.5 percent MoM.
S Korea plans to spend 50 bln won to stockpile steel scrap
South Korea plans to
spend 50 billion won ($33.5 million) to stockpile around 150,000 tonnes
of steel scrap for the first time, as it seeks to stabilise prices, the
trade ministry said. The government and steel mills agree that adding
steel scrap to state reserves would help stabilise prices, which tend to
fluctuate sharply depending on seasonal demand. Steel scrap is a
feedstock used mainly by mini mills to produce construction steel, while
blast furnace operators use iron ore and coking coal to produce
high-quality crude steel which can be processed into auto sheets,
electronics goods and ship plates. South Korea plans to fund its
purchase from a supplementary budget worth around 30 trillion won ($20.2
billion) due to be introduced this month to prop up the slowing economy.
A purchase of 150,000 tonnes will be very small compared to the nearly
30 million tonnes of scrap South Korea consumes each year but would be
enough to feed a mini mill for about one month. Scrap prices fell 6
percent to 17,810 yen ($182.3) a tonne in March from 19,066 yen in
February, ending a steady rise since December after prices halved to
11,036 yen in November, when the global financial crisis slowed economic
growth, data from the Japan Ferrous Raw Materials Association showed.
Domestic scrap prices, however, remained firm as dealers refuse to
release their stockpiles, betting prices would rise as the government
plans to boost infrastructure spending to revive the economy. In South
Korea prices are quoted at around 350,000 won ($235.1) a tonne, after
jumping to nearly 700,000 won when steel prices peaked at record highs
early last year and then skidding to around 100,000 won late last year,
Posco hires banks for investor talks
Posco, Asia's third-largest
steelmaker, hired five banks to arrange meetings with investors that may
lead to a bond sale for working capital. These banks are Citigroup Inc.,
Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc and
Merrill Lynch & Co. A bond sale will follow “subject to market
conditions,” the note sent to investors said. Posco has a strong credit
profile, but is operating in the commodity sector and its product prices
are falling due to the global economic slowdown, so it would be
difficult to gauge how successful this transaction will be. Pohang,
South Korea-based Posco slashed production in December for the first
time in its 40-year history, joining moves by ArcelorMittal and Nippon
Steel Corp., the world's biggest steelmakers, as the global recession
cooled demand. The company may cut production by 6 percent this year
should the demand slump continue until June, Chief Executive Officer
Chung Joon Yang said recently. While Posco is considering bond sales at
home and overseas it hasn't yet made firm plans, spokesman Choi Doo Jin
said. The steelmaker is understood to sell as much as $700 million of
bonds. Posco's $300 million in 5.875 percent bonds maturing 2016 were
quoted at 631 basis points above U.S. Treasuries recently. Posco had a
net profit of 721 billion won ($485 million) in the fourth quarter ended
Dec. 31, compared with 713 billion won a year earlier.
S Korean HR and plate import prices on downward trend
The import prices of HRC
and plate in South Korea keeps declining recently. Now, export quotation
for HRC by Chinese second tier mills goes at USD 520 per ton FOB, down
by USD 30 to USD 50 per ton from early February. CSC also offers USD 520
per ton FOB, while the other mills only provide USD 500 to USD 510 per
As for plate producers, both Chinese second tier plants and Amur Steel
in Russia quote USD 570 per ton CFR for their plates. Nevertheless,
there is still little transactions despite the price drop dating back to
the depreciation of KRW versus US dollars. In that case, it is difficult
to forecast the price trend in the future, at the mean time, steel
demand remains to be weak and the stock is still piling up.
Industry insiders said that "Traders dare not to import although with
the price decrease for the uncertain exchange rate and price trend as it
will take more than two months from order placing to cargo warehousing."
Steel industry insiders consider it is hard to enlarge steel import
before the ending of the price negotiation for raw material.
Philippines to imports steel from Japan with zero tariff
Philippines is expected to
allow 175,000 tonnes steel imports from Japan with zero tariff.
Philippine Board of Investments said that government would allow 175,000
tons of hot rolled, cold rolled and tinplate products from Japan with
zero importing tax in 2009 according to the Economic Partnership
Agreement to be signed between the two countries recently.
Philippines' current import tax on HR and CR products stays at 7 percent
and about 90 percent domestic consumption of cold rolled sheets relies
There's only one supplier of cold rolled sheet in the country called
Global Steel Philippines Inc, whose capacity is far under the domestic
China to produce 460mt steel in 2009
China, the world's largest
steel producer and consumer, will produce 460 million tons (mt) steel in
2009, down by 8 percent from last year. This is against an output of 500
in 2008, of which more than 10 percent was exported.
According to a draft plan, China will also export only 8 percent of
this. SBB reported that the final plan would probably include the 500 mt
per annum (mtpa) production limit from 2011. The country is expected to
slash an additional 72 mtpa of outdated iron capacity and 25 mtpa of
steel capacity by 2011. Blast furnaces of under 400 cubic metres and
converters of under 30 tons capacity will be shut down.
The government will support consolidation and maintain the current 10 to
25 percent export taxes on low-value products such as pig iron, ferro
alloys, semis, ingot and wire rods and rebars. However, VAT rebates on
exports of high-value products are expected to increase.
Jinan Steel posts 60% drop in 2008 net profit
Jinan Iron and Steel
Company, China's largest shipbuilding plate manufacturer in the eastern
Shandong Province, registered a fall of 60.13 percent in its 2008 net
profit. Meanwhile, the company's net profit stood at more than $114.1
million in 2008, down 60.13 percent from a year earlier.
The company blamed the financial crisis for the drop in its profit,
saying the downturn had resulted in drastic contraction in both domestic
and overseas demand for steel in 2008.
Slacking demand led to an increase in stockpiling and thus steel prices
plunged, which eroded the company's profit. The whole steel industry
suffered from shrinking demand and steel prices dive last year.
According to the country's iron and steel association, the aggregate net
profit of 71 medium-sized and large steel producers fell 43 percent to
84.6 billion yuan in 2008 as weak demand drove down prices. And 15 steel
producers recorded full-year losses totaling 8.5 billion yuan.
The statement of Jinan Steel said the prospect for 2009 was not
optimistic in face of the sagging world economy and uncertainties about
the raw material prices. Luo Bingsheng, executive deputy director of the
country's iron and steel association, said in late February that
recovery for China's steel market was not yet in sight as declining
exports and excessive production capacity continued to haunt the
China mills demand 2007 iron ore prices
Shougang Iron and Steel, China's sixth-largest steel maker, said
Chinese steel mills would only accept global iron ore prices close to
the 2007 level, which would give both miners and steel firms reasonable
Global miners and Chinese steel mills are in talks to set term iron ore
prices. "I think, first of all, we can only go to discuss precise prices
on the basis of the 2007 price level," Shougang Group Chairman Zhu Jimin
said. That implies a 50 percent cut, since last year prices from top ore
suppliers BHP Billiton, Rio Tinto and Vale almost doubled. "The price
should give miners some profit room for their sustainable development,
and it should also be in a range the steel mills can bear. A price that
hurts the interest of one side will lead to disorder in the industry,"
China's steel sector, the world's biggest, has been hit hard by the
global slowdown because demand for ships, cars and building work has
fallen sharply. Beijing is encouraging the fragmented sector to coalesce
into a few regional champions, with upgraded plants in coastal regions
where they have better access to overseas markets.
Although it has not offered direct aid to steel mills, it is offering
indirect help through a 4 trillion yuan ($585 billion) stimulus package.
And it is also urging companies to invest abroad while commodity and
asset prices are low.
It bought about 40 percent of Australian miner Mount Gibson Iron Ore Ltd
in December through two of its Hong Kong-listed subsidiaries-Shougang
Concord International Enterprises Co Ltd and APAC Resources Ltd.
Zhu said his firm had no plans to buy more of Mount Gibson, but it does
plan to invest $700 million to $1 billion in its Peruvian iron ore
mining project, Shougang Hierro Peru.
Under the stimulus plan, Shougang recently won a contract to supply
310,000 tons of steel, part of a 500,000-tonne deal for oil and gas
pipeline construction, Zhu said. Steel firms will also benefit from
China's plans to expand its railway system and machinery industry, Zhu
Shougang, which produced almost 12.2 million tons of crude steel last
year, will soon launch operations at its Caofeidian joint venture plant,
a state-of-the-art mill on the coast of northern Hebei province near
Beijing. The mill is 49 percent owned by Tangshan Iron & Steel.
Caofeidian will start running in April at half capacity, 4.85 million
tons a year, and will reach its full capacity of 9.7 million tons of
high quality steel by the end of 2010, Zhu said. Shougang is also in
takeover talks with Shanxi-based Changzhi Iron & Steel and Guigang
Special Steel, Zhu said, adding the company was in the due diligence
stage. Changzhi Iron & Steel has an annual capacity of 4 million tons
and Guigang Special Steel has less than 1 million tons.
Commenting on the steel price trend, Zhu said a real price rebound would
not happen until the second half of the year, when he expected more of
the government's stimulus policies to take effect and the global economy
to start looking up. An uptick in steel prices and exports at the start
of this year cheered the gloomy commodity markets, with some traders
seeing the chance of a return of Chinese demand thanks to the economic
Wugang slashes April prices for strip
Wuhan Iron & Steel (WUgang)
will slash its hot rolled coil (HRC) ex-work prices for April by RMB 50
to 200 per ton ($7-29 per ton).
The company is also planning to slash its cold rolled coil and hot-dip
galvinised prices by RMB 300 per ton, said a report. Now, Wugang's Q235
5.5mm HRC price will be RMB 3,791 per ton ($558 per ton), its Q195 1.0mm
CRC price will be RMB 4,575 per ton and its 1.0mm HDG price will stand
at RMB 4,906 per ton, all including VAT.
The announcement comes days after Baosteel decreased its April ex-works
prices. These cuts bode well for the market in the short term, according
to traders. However, some traders also pointed out that Wugang's April
prices would remain higher than current market prices, in spite of the
Chinese mills may cut output
China Iron & Steel
Association held a meeting with the heads of China's top 20 steel majors
to discuss controlling capacity utilization and upgrading output cut
scale in response to the deep steel price falls since the Lunar New Year
The authority unveiled that Chinese steel market, which had shown sign
of looking up, collapsed again since Feb and beaten most steel mills'
expectations. The authority added that "Participants are mainly
discussing the current market conditions and the future trend, for any
pre-judges can help save losses." Officials of the China's steel
industry body said current steel prices are still determined by market
fundamentals, and it will be difficult for it to put forward the idea of
joint production cutback. According to the report, most steel mills are
in same dire condition at the moment, and they should control output in
tandem with self conditions. A host of medium-and-small scaled steel
mills have again idled their furnaces in light of the deep steel price
corrections since February.
Zhang Xiaogang, president of Angang Group told the newspaper during the
annual parliament session that "The price fall came as no surprise due
to the severe excess capacity.” Zhang added that "The pressure will be
tougher in future since capacity for some big projects have yet to be
fully released. Angang idles two of its furnaces at the moment and its
Caifeidian new plant, which had previously planned to start operation in
March will certainly be postponed..
Maanshan signs 0.2 mt deals with 9 auto makers
Maanshan Iron & Steel Co
Ltd bagged 9 deals, equal to over 0.2 million tons of steel products,
which totally out values CNY 1 billion, from 9 auto and auto parts
makers like Chery, JAC Motors and Changhe Auto.
As per report, the big deals were signed on February 25th in the auto
steel supply and demand meeting jointly held by five financial branches
of Anhui Province. The meeting convoked nearly one hundred car-related
enterprises in the province; calling for a priority given to Maanshan
Steel made products.
As the largest industrial enterprise in Anhui, Maanshan Steel is thought
as the first one who is able to top CNY 100 billion of sales revenue.
Thus, local Govs places a highlight on the steel maker's sales
performance. It's learned that there is about 0.9 million tons steel
demands in local auto industry.
U.S. Steel to cut production in Serbia
U.S. Steel Corp. may cut
production and working hours at a smeltering operation in Serbia as it's
continues steps to cut costs in the wake of the global financial crisis.
The Pittsburgh-based steelmaker will complete a shutdown of its smelter
in the city of Smederevo by April, and will keep the facility shuttered
until 2010, said a report.
U.S. Steel's Serbian unit already has cut the work for a week at the
plant from 40 to 32 hours, the report said. It did not say how many
workers the plant employs.
Spokeswoman Erin DiPIetro was not available for comment.
The company already has announced a number of cost-cutting steps both in
the U.S. and abroad in recent months, including on Feb. 27 a plan to
idle three of the 12 coke oven batteries at its Clairton Works. The
company did not disclose how many of the plant's 1,254 workers would be
ArcelorMittal idling Cleveland plant
A decline market for steel
has forced ArcelorMittal, the world's largest steel producer, to suspend
operations at its Cleveland site in May, cutting off 950 employees for
About 250 employees will remain at the plant for maintenance of the mill
and finishing plant in the city's Flats area, said a company
spokesperson. The site employed about 1,440 members of United
Steelworkers of America.
Local 979 President Mark Granakis says he expected some job cuts but had
not expected them to be so severe. The company says workers will return
to work “as soon as it is warranted by market conditions.
Severstal steel output 2008 dips 7% in Russia
Severstal reported a near
50 percent cut in crude steel production in Russia in the fourth quarter
to 1.7 million tons, compared to the third quarter.
Saleable rolled products production in that country has fallen 41
percent quarters-on-quarters to 1.4 mt while sealable semi-finished
products dropped 20 percent around 200,000 tons, said the SBB report.
As a result, Severstal's Russian crude steel production for the complete
year declined 7 percent from 2007, at 11.1 mt. Rolled products output in
Russia stood at 87 mt last year. Long products came down the most, 11
percent year-on-year to 1.8 mt. Severstal's saleable output of iron ore
pellets was 7 percent lower in 2008, at 9.3 mt, compared to 2007.
However, saleable production of iron ore concentrate rose 1 percent in
2008 to 4.7 mt.
JP Morgan lowers ArcelorMittal earnings
ArcelorMittal, the world's
biggest steelmaker, will report earnings at least 10 percent less than
previously forecast for 2009 and 2010 as the outlook for profit at
European producers worsens, JPMorgan Securities Ltd. said. JPMorgan cut
its estimate for earnings before interest, tax, depreciation and
amortization this year to $8.5 billion, from $9.7 billion previously,
Jeffrey Largey, an analyst in London, wrote in a note recently. The bank
reduced its 2010 prediction to $12 billion, from $13.4 billion, and its
price estimate for the company's stock by 9 percent. “Investors should
remain cautious on the European steel sector as the probability of
meaningful earnings recovery in 2009 appears to be diminishing,” the
report said. Global crude steel output fell 24 percent in January from a
year earlier, the World Steel Association said February 20. The price of
European hot-rolled coil, a benchmark steel product used in cars and
construction, has declined 54 percent to 375 euros a metric ton since
reaching a high of 815 euros a ton on June 18, 2008. Luxembourg-based
ArcelorMittal posted an unexpected fourth- quarter loss of $2.63 billion
on February 11 after one-off charges of $4.4 billion including
writedowns on inventories and raw- material contracts. It has lowered
output more than 30 percent and may cut as many as 9,000 jobs, or 3
percent of its staff.
Global steel demand down 20%
Global demand for steel is
down around 20 percent at the moment, but with destocking nearing an
end, the industry is likely to see some signs of recovery by the end of
the year, a top industry official said. Stocks are very low and
destocking is coming to an end, he added. By the end of this year, some
steel companies will say 2010 is looking much better than. Steel demand
and prices have collapsed since mid-2008 after consumption from the
major steel-consuming sectors such as automotive and construction came
down sharply, forcing producers across the globe to slash output
sharply. Christmas said the capacity usage across the sector was around
50 to 60 percent currently, with global production down 24 percent in
January. Production will be off 20 percent in the first half. According
to a study global crude steel production is expected to fall by 9
percent to 1.210 billion tonnes this year, which will be the first drop
in output since 1998. The industry is eagerly awaiting, Chinese industry
to come back for resumption in steel demand. China is the world's top
steel producer with its some 500 million tonnes of annual output, which
grew by 2.6 percent while the global output was down by 1.2 percent. But
recovery in Western Europe is likely to take some more time, but
sentiment is rather upbeat about the outlook for the United States.
Belgian steel maker's profit up
Belgian steel cord and wire
manufacturer Bekaert reported a rise in 2008 profit boosted by growth in
emerging markets, raised its dividend, but remained vague on the
prospects for this year. Bekaert, whose products are used to reinforce
tyres and concrete, said that recurring earnings before interest and tax
(REBIT) rose 58 percent to 294.2 million euros ($375.9 million), above
the average forecast of 279 million euros in a Reuters poll of five
analysts. Net profit increased by 18.7 percent to 191.8 million euros.
Analysts had expected a net profit of 197 million euros. Last month,
Bekaert reported consolidated sales of 2.66 billion euros for 2008, up
22.6 percent from 2007. The group also said it managed to pass on raw
material price increases and saw a particularly strong first half of the
year. Bekaert said at the time that short-term visibility on market
developments was extremely limited, but that it did not expect the
current activity slowdown to last across the group's different markets.
Analysts fear the group faces a tough 2009, given the state of the auto
sector. The company said it would propose paying a dividend of 2.80
euros per share, compared with a gross dividend of 2.76 euros for 2007.
Outokumpu doesn't expect stainless steel recovery yet
Outokumpu Oyj, the world's
fourth- biggest stainless-steel maker, said it doesn't expect a recovery
in demand yet. Steel demand in U.S., Europe and Japan has dropped as the
global recession crimped demand from automakers and builders, forcing
Outokumpu and rivals to cut output. Chinese demand may have started to
recover amid increased government spending, Shanxi Taigang Stainless
Steel Co. said. Most stainless steel makers have cut production already.
Whether or not more would be needed will depend on demand, a company
executive said. The Espoo, Finland-based company last month reported a
fourth-quarter loss and had also said the stainless-steel market will
remain 'very weak' in the current quarter. China is spending 4 trillion
yuan ($585 billion) on a stimulus package, which will include building
infrastructure, to help it reach an economic growth target of 8 percent
this year. Taigang, the country's largest stainless steelmaker,
yesterday said demand for its products is recovering.
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