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Dear Readers,

The steel industry in Asian countries is growing for last few years. The emphasis on infrastructure in this region has helped the entrepreneurs to plan for capacity expansion as well as new Greenfield projects. The other customer industries like auto, white goods, engineering have also contributed to this positive sentiment. The regions rich in minerals like iron ore, coal etc. and the ones having a growing customer industry have been flooded with steel projects. Take examples of states like Orissa, Chhatisgarh, Karnataka etc. in India or countries like UAE, Saudi Arabia, major part of SE Asia. Everything seems to be right and bright for the iron & steel industry.
How long will this boom last ? As we all know, steel industry is cyclic by nature and after every 3 to 4 years, it goes through a bad patch of 1 or 2 years. The steel prices have climbed as never before. The user industries like construction, auto, white goods are finding difficulties in attracting buyers. Analysts are keeping tight lips on the future growth of Chinese steel industry post Olympic games. Indian GDP growth rate has declined in last few months indicating a slow down in various industry segments. And above all, the oil and energy costs have gone to a level which is going to cause serious problems to the bottomline of many industries. With this bundle of problems, it is logical to say that the manufacturing sector progress will be arrested soon. The process is more visible and evident in developed economies like US, EU, Canada etc. and is now moving towards Asian region. Knowing fully well that steel demand totally lies outside the steel industry, do you think that this industry can continue to do well in isolation ? It will be foolish to believe so !!
Now, what are the options left with us ? I feel that the period of over optimism is over and now one should realistically relook into the investments he has planned in steel industry. Putting everything to halt will be a hasty decision but adopting phasewise approach and constantly reviewing the situation would be a safer proposition. As such, the bad patch has not officially started but it will be wiser to assume that the things would not be as simple and positive in coming months. A cautious approach like this will surely help the industry to prepare itself for the unknown future.

 D.A.Chandekar
Editor & CEO

 

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Mining industry to cross Rs 1.27 lakh cr in four years   

The country's mining industry is projected to cross over $30 billion (about Rs 1,27,662 crore) accounting for about 2.5 per cent of the GDP in the next four years, a latest report said. "Considering India's mineral resources, we believe there is strong potential for further development and scaling up of the country's mining industry. "We believe the mining industry could grow to $30 billion-plus by FY12 and reach 2.5 per cent of the GDP if India develops a conducive regulatory framework and attracts significant investment in exploration, mine development and infrastructure," a report by financial services firm Edelweiss stated. The report on metals and mining pointed out that India has immense natural resources and is ranked among the top-10 nations for deposits in iron ore at 25.2 billion tonnes (bt), coal 257.4 bt and bauxite 3.3 bt. These constitute 3 per cent, 10 per cent, and 4 per cent of the world's resources. The country also holds leading positions in mica (No. 1), barytes (No. 2), chromite (No. 4), kaolin (No. 4), and manganese (No. 7), the report said. Also the proposed National Mineral Policy and the allotment of captive coal blocks (in effect opening up the nationalised coal sector) are the key triggers for future development of mining in India. The ongoing bull run in minerals has created enormous wealth for investors. Market cap of the leading global mining companies has increased at a Compound Annual Growth Rate of 39 per cent per annum from calender year 2001 to 2007, while the corresponding figure for top Indian miners is a whopping 139 per cent per annum. "As the Indian mining industry scales further, we see both new and existing mining players offering significant wealth creation opportunities to investors," it said. Major companies in the mining space in the country are Sesa Goa, Adhunik Metaliks, Tata Steel (which is mainly a end-user), McNally Bharat (MHE) and JSW Steel. In September 2005, the Hoda Committee under the chairmanship of Anwarul Hoda was constituted to review the National Mineral Policy, 1993, with an aim to improve the investment climate for mining in the country. Some highlights of the Hoda Committee report are - prioritising critical infrastructure needs of the mining sector, review existing procedures for granting reconnaissance permits, prospecting license, mining lease, identifying ways of augmenting state revenues among others, it added.

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Ispat eyes stakes in Global Steel mines 

Ispat Industries, the steel company controlled by brothers Pramod and Vinod Mittal, will buy a 40 per cent stake each in three overseas mines of Global Steel Holdings, another company owned by the brothers of billionaire Lakshmi Mittal, to help boost iron ore and coal availability to their Indian plants, sources said. Global Steel owns 70 per cent stakes in iron ore mine in Brazil and two coal mines in Columbia and Mozambique. The company is setting up three special purpose vehicles for isolating financial and regulatory risks. Ispat will purchase the stakes in these SPVs, which are held by Global Steel. The iron ore mine has an estimated reserve of 500 million tonne while the coal mines hold reserves of 120 million tonne. The stake buy will help the Indian company meet its requirements of the raw materials in India, especially when rising prices cut its margins. Earlier, when Global entered into multiple lease agreements with the respective governments for mining, the group's plan was to sell the raw materials in the international market. Now, Ispat feels that their expansion plans would be delayed if it could not reach raw materials for the projects, said sources. Ispat Industries officials declined comment on the development. "Despite soaring freight cost, which accounts 60 per cent of the landed cost of iron ore and coal, Ispat decided to bring the raw materials from its overseas mines to India. This shows the urgency in accessing raw material for their expansion plans," said an industry analyst. Ispat, which produces 3.6 million tonne steel a year, is planning to raise its capacity to 10 million tonne by 2014. The company had already announced its plans to take its capacity to five million tonne in the next two years. The overseas mines are expected to take two to three years to begin production. Until then Ispat will continue buying iron ore from National Mineral Development Corporation (NMDC) for their plants in India. Ispat, which scouts for coal mines in India, has bought five million tonne iron ore last year from NMDC. Currently in the spot market, the iron ore prices are ruling at $200 a tonne, while coal prices are about $400 a tonne. According to industry estimates, the long term contract prices of iron ore are expected to jump 70 per cent this year. As per the thump rule, for the production of one tonne steel requires 1.7 tonne iron ore and 1.4 tonne coal.

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Tata Steel plans to shift titanium project to AP 

Tata Steel is considering the option of shifting its Rs 2,500-crore titanium dioxide projects to Andhra Pradesh or Orissa as it has failed to initiate the process of land acquisition in Tamil Nadu even as a year has gone by since the announcement of the project, according to S Asokan, head of the project. "We will talk to the Tamil Nadu government first before taking a decision," he said. The mining project, which was announced in June 2007, needs an estimated 10,000 acres of land. However, the state government has failed to help the company in the land acquisition process, said Asokan. Tata Steel officials are planning to meet shortly to decide on the future as the cost of excavating ore may negate the benefits of a captive mine. Asokan declined to give details on the cost increase in the project. Initially, sections of the local population, particularly those with strong political leanings, accused Tata Steel of attempting to acquire agricultural land for mining. The steel maker is now facing trouble in acquiring land since small pieces of land aggregating to its needs are scattered among several hundred owners. "We need a proper title and are finding it difficult to approach each individual owner," said the Tata Steel executive. He also said that since the project hit its first road block at the local level with demand for unreasonable prices for land, today more land owners are willing to sell but they do not aggregate to the size (9,829 acres) Tata Steel wants. "If we buy 100 acres, some other land owners might increase their prices. We cannot afford to take that risk. Since the last one year, the project cost, too, has already gone up due to delays," he said. He, however, could not specify the exact escalation in the project cost that was announced at an investment of Rs 2,500 crore a year back. The project, within Tata Steel, is considered vital for its foray into non-ferrous metals. The project was conceived in part for making up the opportunity lost by Tata Steel by not branching into other metals like copper and aluminium when the opportunity came along. Titanium dioxide extracted from red sand found in this region, has a wide range of applications, from aerospace, roofing, paints to food colouring.

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Jindal Steel plans Rs 5k cr power plant in Orissa 

Naveen Jindal-promoted Jindal Steel and Power (JSPL) plans to build a Rs 5,000-crore thermal power plant in Orissa, a company official said. The company plans to build a 1,080-mw, coal-fired captive power plant to fuel its 6-million tonne (mt), proposed Orissa steel plant, Sushil Maroo, wholetime director, JSPL, said. About 70-80 per cent equity worth over Rs 4,000 crore will be raised through debt and the company has already approached a consortium of banks, said an executive of JSPL. The project is slated to take off simultaneously with the first phase of the Rs 13,500-crore steel plant by February 2011. "Now, we have 330 mw of capacity up and running for our steel plants. In the near future, we will set up 550 mw for the upcoming steel plant in Chhattisgarh and 1080 mw in Orissa for captive usage," Maroo said. The power plant will comprise eight 135-mw units. The first unit is slated for commissioning by 2009. Orders for the 135-mw units have been placed with Shanghai Electric Company of China. The project capacity may be raised to as much as 1,410 mw, with six 135-mw and two 300-mw units. Efforts are on to firm up suppliers for the two 300-mw units, said another executive of the company. Land acquisition is on and the ministry of environment has cleared the power project. A few weeks ago, JSPL had written to the ministry of coal to allocate long-term coal linkages for 4 mt of steel. The ministry has already given coal linkages for 2 mt of steel capacity by allocating coal blocks in Utkal, said government sources. As announced earlier, the Rs 5,400-crore JSPL is also setting up a 6-mtpa steel plant and captive power plant in Patratu in the Hazaribagh district of Jharkhand. Jindal Power, a subsidiary of JSPL, is also setting up a 1,000-mw OP Jindal Super Thermal Power Plant near Tamnar in Raigarh district, Chhattisgarh. It has commissioned 500 mw of the project and the rest is expected to take off soon. JSPL also has plans to set up two power plants with a total production capacity of over 2,500-mw in Jharkhand.

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Sujana Metal buys three steel units   

Sujana Metal Products (SMPL), a part of the Hyderabad-based diversified Rs 3,000-crore Sujana group, has acquired three steel companies at a cost of Rs 180 crore. The company intends to invest an additional Rs 100 crore in modernisation and expansion of these units located in Visakhapatnam, Hyderabad and Chennai. With the latest acquisitions, SMPL's takeover tally has increased to five in the past one year. It had earlier acquired Kamini Steels and Handum Industries at a cost of Rs 90 crore. SMPL manufactures a range of construction steel products, including thermo-mechanically treated (TMT) steel bars. "The acquisitions are in tune with the company's strategy to enhance its capacity to 1 million tonnes per annum (mtpa) by 2010 through acquisitions and expansion plans," Sujana Group Chairman Y S Chowdary told mediapersons recently. With the takeover of the three steel plants, he said, an additional capacity of 300,000 mtpa had been added, taking the total capacity of the company to 728,000 mtpa. This apart, Sujana Metal is planning to acquire a sponge iron company near Suryapet in Nalagonda district of Andhra Pradesh. According to Chowdary, SMPL has embarked upon a Rs 800-crore expansion programme, which includes establishing a greenfield sponge iron unit and a billet manufacturing unit in Hyderabad and Chennai at a cost of Rs 300 crore. The expansion project is being funded through term loans of Rs 470 crore, promoters' contribution of Rs 200 crore and internal accruals of Rs 130 crore. The promoters have already contributed their money through purchase of company's warrants recently. Stating that the company intended to go in for complete backward integration, Chowdary said SMPL was also in the process of acquiring an exploration licence for iron ore mining. "We are hopeful of getting the licence in six months," he said. In the financial year ending June 2008, SMPL expects to post a turnover of Rs 1,400 crore and a net profit of Rs 50 crore. During the nine-month period ending March 2008, the company posted a turnover of Rs 1,150 crore. Its target is to achieve a turnover of Rs 3,100 crore and a net profit of Rs 300 crore by 2010.

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Govt mulls curbs on export    

The government is considering measures to control iron ore exports, Steel Secretary RS Pandey said. "The issue is being considered, as there has been such a demand from steel producers, Pandey said when asked if ore export restrictions were being considered. He, however, ruled out an outright ban on iron ore exports, as being demanded by steel producers like Tata Steel."There is no proposal to consider banning iron ore," Pandey said on the sidelines of the "blowing-in" ceremony of a blast furnace at Tata Steel's Jamshedpur plant. With the commissioning of the blast furnace, Tata Steel Jamshedpur plant's annual capacity has gone up by 1.8 mt to 7 mt tonne. Asked whether government is considering removing the recently-imposed duty on steel exports, Pandey evaded a direct reply and said: "These (export duty on some steel products) are short-term measures." To up local supplies and ease inflationary pressure, on May 12, the government had notified 15% export duty on products like pig iron, ferrous waste of iron and steel, iron ingots, semi-finished iron or non-alloy steel products. Speaking at the same event on the price trend, Pandey said while domestic prices of steel have started softening in recent times following steps to control prices, global rates are still on the rise. "While steel prices in our country are showing a declining trend, globally, they are going up," Pandey said. Earlier this month, bowing to pressure from the government, steel companies had agreed to cut prices by up to 4,000 rupees per 1 tn. They had also agreed to hold the price line for a couple of months. India may notify rollback of export duty on some steel products next week, a senior government official said today."The rollback is likely to include flat as well as high-value steel products," the official said. The government is also "seriously considering" imposing 15 per cent ad valorem duty on export of iron ore as a measure to mop-up revenues in lieu of fiscal concessions announced to curb inflation, the official said. In Jamshedpur at a Tata Steel event, Steel Secretary RS Pandey said. “The imposition of export duty on steel products was only a "temporary measure". An export cess of 10 per cent on flat rolled products of iron or non-alloy steel, bars and rods, hot-rolled coils of iron and non-alloy steel was also imposed. Flat-rolled products of iron or non-alloy steel, plated or coated with zinc will attract an export duty of 5%, the notification had said.

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India now a net importer of steel   

For the first time India has turned into a net importer of steel and the situation will worsen in the years to come. Steel Secretary R S Pandey said that exports in 2007-08 were at 5 million tonnes, while imports stood at 7 million tonnes. "Exports have declined 6 per cent whereas imports have increased 46 per cent," he said. Pandey pointed out that till 2006-07, India was a net exporter of steel. "In two-three years, the situation will worsen," he said while addressing the blow-in ceremony of Tata Steel's 'H' blast furnace, the largest in India, which would take its capacity to 7 million tonnes from a current level of 5 million tonnes. According to Tata Steel Managing Director B Muthuraman, in the next five years imports would be to the tune of 25 million tonnes and would again double in the following five years. The problem as pointed out by both Pandey and Muthuraman was that consumption was growing at 12-13 per cent but the growth in production was less than 6 per cent. "Consumption will increase by 8-10 million tonnes a year for the next several years." The solution was faster land acquisition, rehabilitation, mineral allocation and a curb on mindless exports of iron ore said Muthuraman. Tata Steel was facing delay in all its greenfield projects, as almost all other companies that had lined up greenfield projects. "In Orissa, we hope to start construction soon. There are good signs in Chhattisgarh and we hope to have a second plant in Jharkhand as well," said Muthuraman. Tata Steel is looking to add 23 million tonnes greenfield capacity. India has set a target of 124 million tonnes by 2011-12. Pandey also admitted that one of the reasons behind the turbulence in pricing over the last three months could be attributed to the demand-supply mismatch. Ironically even as exports were on the decline, the government has imposed an export duty on steel. When asked, Pandey said, "It is a one-time measure and hopefully it will be short-term." In a bid to control inflation, the government has imposed a 5-15 per cent duty on steel products. Pandey also said that hike in export duty of iron ore, which is now at 2 per cent, was also under the government's consideration.

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UAE cement makers surge on construction boom

UAE shares advanced, led by cement companies on speculation increasing demand for properties will boost their profits.Ras Al Khaimah Company for White Cement & Construction Materials rose to its highest in more than two years. Umm Al Quwain Cement Industries Company and Gulf Cement Company also gained. Union Properties advanced for a third day.The Abu Dhabi Securities Exchange General Index added 0.8% to 5,037.85, while the Dubai Financial Market General Index rose by 0.2%, gaining for a third day.
Mr Mohamed Salem a trader at Al Futtaim HC Securities said that "Cement companies are extremely attractive because of soaring demand for properties and the shortage of cement makers.'According to data compiled by Bloomberg, ADX Construction Index, a measure of 10 construction companies, trades at an average of 12 times trailing earnings. That compares with a multiple of 15 for ADX General Index.

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Emaar MGF to invest USD 3 billion in India       

Real estate firm Emaar MGF Land, Indian JV of Dubai's Emaar Properties, said that it plans to spend USD 3 billion in developing properties in south India over the next few years. Besides a residential property in Hyderabad with an outlay of USD 1.4 billion, Emaar MGF will invest in commercial and retail properties and hotels spread over 31 million square feet in 10 south Indian locations. Emaar MGF in February 2008 called off a USD 1.6 billion initial public offering because of tepid investor interest. Masdar to invest up to USD 2 billions in photovoltaic solar energy Abu Dhabi based Masdar has announced that Masdar PV will embark on a multi billion dollar investment in thin film photovoltaic solar technology, as part of its drive to become a world leader in alternative energy. The total investment of approximately USD 2 billion represents one of the largest investments ever made in solar and will fund a 3 phased manufacturing and expansion strategy to produce the latest generation of thin film photovoltaic modules.
Out of the total planned investment, phase one of the project involves an investment of USD 600 million, which will fund the development of two manufacturing facilities. The first, in Erfurt in Germany will be operational by Q3 2009 and a second facility in Abu Dhabi which will begin initial production by Q2 2010. The combined annual production capacity of these two sites will be 210 MW, which is committed to major PV system installers in Europe and for Masdar's own energy generation needs. Masdar chose Germany as the site for its first plant because Germany is currently the center of the global PV industry. This German plant will act as a reference plant for technology and knowledge transfer to the larger Abu Dhabi plant by a joint German Abu Dhabi team.
Dr Sultan Al Jaber CEO of Masdar said that "Thin film PV is a key part of our build deploy develop strategy to actively build a strong position in alternative energy. The investment in photovoltaic solar energy will compliment Abu Dhabi's existing energy market. Abu Dhabi is a global energy leader, so it makes sense to engage these new energy technologies to maintain leadership and become a global energy hub.

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ArcelorMittal and Borusan Turkish mill JV cleared by EU      

The European Commission has cleared steel group ArcelorMittal and Turkish peer Borusan's proposed 50:50 JV which will see a USD 500 million investment in the construction of a new hot strip mill at Gemlik in Turkey.The mill which will be located next to ArcelorMittal and Borusan's jointly operated Borcelik plant on the Marmara Sea coast, is planned to operate in first half of 2010 with a capacity of 4.8 million tonnes. The transaction was reviewed under the EU's 'simplified' merger review procedure for cases which the commission believes do not pose competition concern.

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Steel price caps and cement export bans effective in Egypt       

Mr Hisham Talaat Moustafa chairman of General Section of Real Estate Investment has lauded Egypt government's recent decisions taken to cool rapidly spiraling prices. Mr Moustafa said that "I believe the government introduced effective procedures to contain the relentless leaps in prices of construction material including the cement export ban and steel price caps." He pointed out that after the government banned cement exports, prices slid back to around EGP 500 per tonne as compared to the previous EGP 700 to EGP 800 per tonne. He added that "The same is true for steel, placing price limits on wholesalers and retailer has helped push prices down.”
It may be noted that, since the beginning of the year, a series of upsurges raised construction costs in Egypt some 30% pressured by continued spikes in input costs such as iron ore, scrap metal, billets and coal. Record high price leaps brought steel prices to roughly EGP 7,800 per tonne and cement to nearly EGP 800 per tonne. Hikes in production prices have prompted the ministry of trade & industry to ban cement exports in late March 2008. The government also amended last April customs duties and lifted tariffs on cement and steel.
Mr Moustafa said that GSREI would not overlook escalating prices in steel and cement that will eventually affect not only the building and construction industries, but also domestic economy and society in general. He particularly named Al Ezz Steel Rebars prices as being cheaper than international ones despite angry accusations the heads of the two companies exchanged in April over their respective annual financial result.

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L&T may bid for new Muscat airport project

Larsen & Toubro Limited is planning to bid for building a new airport in Muscat. Mr KV Rangaswamy president of L&T's construction division said that "The government of Oman is in the process of inviting bids and we will be submitting bids. The contract could be worth up to INR 30 billion. We will look for foreign airport modernization contracts and Greenfield airports as and when they come up.”
L&T, which has built two new airports in India, is also involved in modernizing the Delhi and Mumbai airports. Muscat's current international airport can handle 4.2 million passengers, while the new one planned 15 kilometers away would have a capacity for 12 million passengers that would eventually go up to 48 million.

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Kuwait to launch tender for USD 2.5 billion power plant

Kuwait is planning to launch tenders for power expansion worth more than USD 2.5 billion to meet rapid growth in power demand through 2015. Mr Khaled Al Wasmi assistant under secretary at the ministry of electricity & water said that record oil export revenues are fuelling economic growth throughout the Gulf. He added that "The main reason for the new plants is housing plans. Kuwait has short listed 6 firms for a tender to build combined cycle gas turbine units for a northern power plant with a capacity of 2,000 MW.”
Mr Al Wasmi said that Kuwait will launch a second tender by early 2009 to build another power plant in North Al Zour, with a capacity of 4,700 MW. He declined to give a precise estimate for the cost of the plant, but said it was expected to cost more than EUR 1 billion. He said the plant will be built in four phases, to be completed in 2011. Two of the phases will have capacity of 1,500 MW, one of 900 MW and another of 800 MW. He added that the pre qualified companies for the new northern plant are US General Electric, Japan's Mitsui and Marubeni Corporation, Siemens, Spain's Iberdrola Ingenieria Y Construccion and Canada's SNC Lavalin.

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Arabtec wins major construction contract from Nakheel       

Arabtec Construction has won an AED 3 billion contract to build the first 1,500 homes at Nakheel's Al Furjan development in Dubai. The win by Arabtec follows an AED 1 billion contract awarded to Khansaheb Civil Engineering in May 2008 to undertake all infrastructure work at the development. Arabtec will start construction of the first homes on the project in August 2008, with completion expected in the third quarter of 2010. The project will include 4,000 villas and terraced houses across four communities. It is located on a 5.4 million square meter site behind Discovery Gardens and close to Jebel Ali Village, which Nakheel is redeveloping as part of the Dubai government's strategic plan to address the need for affordable housing in the emirate.
Mr Aaron Richardson media relations manager at Nakheel said that "Part of our remit is to provide housing for a complete range of socio-economic groups from selling islands on The World to top individual investors, to targeting family home buyers." Mr Riad Kamal chairman of Arabtec said that the latest contract win will take the company's value of work under construction in the UAE to AED 34 billion. He added that "All of our contracts have a price escalation clause to cover price rises of steel and cement. We also now fix the price of steel at the start of a job. Clients have very understood as no developer wants a contractor to go bust halfway through a project." Contracts for the second phase of construction are yet to be awarded, but the entire project has been earmarked for completion in 2011. US based Turner Construction is the project manager on the development.

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Nippon Steel, Vale, JFE, Posco to Boost Australian Coal Output

Nippon Steel Corp., JFE Holdings Inc. and Posco, Asia's three largest steelmakers, will join Brazil's Cia. Vale do Rio Doce to expand production at jointly owned coal mines in Australia. The companies will invest A$400 million ($379 million) in the Car borough Downs and Glennies Creek mines to increase output, JFE said at a press briefing in Tokyo. Vale, based in Rio de Janeiro, is the world's biggest iron-ore producer and owns stakes in the Australian coal mines.

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Krakatau to build integrated steel plant in S Kalimantan 

State steel maker PT Krakatau Steel plans to build an integrated steel plant in South Kalimantan at a total cost of US$600 million to meet demand for ingot steel. “In the first phase of the project we will build a billet plant in South Kalimantan,” PT Krakatau Steel President Director Fazwar Bujang said.
The presence of such billet plant was badly needed to make maximum use of the production capacity of the domestic ingot steel industry which currently reached less than 60 percent, he said. Indonesia still has to import semi-finished billets at higher prices to meet much of the country's demand for the commodity, he said. Therefore, before the company build an integrated steel industry in South Kalimantan it would focus on developing a billet plant with a production capacity of around 1 million tons per year, he said. “We have set ourselves a target of completing a feasibility study on the construction of an integrated steel industry in South Kaliamantan in 2009 and in the next 30 months the construction of the plant will be completed”.

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Indonesia to reduce import duty on HRC to zero percent 

The government will reduce its import duty on hot roll coil (HRC) to zero percent in a bid to encourage the growth of the country's downstream steel industry, a minister said. “Import duty on HRC will be eliminated,” Industry Minister Fahmi Idris said after a ceremony marking the start of construction of a factory of PT BlueScope Steel Indonesia in Cilegon, Banten,. He said the government would lower the import duty on HRC from currently five percent to zero percent to increase the competitiveness of the country's steel industry. “The higher costs in the upstream steel industry will lower the competitiveness of downstream steel products while at the same time we want to penetrate the global market,” he said.
Indonesia is still dependent on imported HRC as its largest steel maker, PT Krakatau Steel (KS), cannot yet fully meet domestic demand. “We still import a large volume of HRC to meet domestic demand,” Fahmi said. He said he did not believe the lowering of import duty on HRC to zero percent would have a negative impact on PT KS's performance because HRC was only one of its various products. “This is dilemmatic, but we have to make a choice which one is the most strategic,” he added. During the past four years, steel imports had tended to increase following increased domestic demand. The volume of the country's steel imports is expected to reach 1.5 million tons per year and that of domestic demand for steel six million tons.

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Korea expects to be world's No. 5 shipping power by 2010   

Korea expects to become the fifth-largest shipping power in the world by 2010 as specialized funds and tax benefits help local companies expand their fleets, the government said. The Ministry of Land, Transport and Maritime Affairs said as of 2007 Korea ranked sixth with 36.80 million deadweight tons (DWT) of registered ships. Greece topped the list with 175.70 million DTWs of registered ships, followed by Japan, Germany, China and Norway. DWT is the main measure of a ship's carrying capacity.
“As of May, local shipping companies have ordered 22.00 million DWTs of ships that will be delivered in the coming years, which should be sufficient to push up Korea's overall ranking by at least one notch,” said a government official. He said there has been a 20 percent annual gain in ships in recent years. The expert said the move by local shipping companies to pay tonnage taxes instead of corporate income taxes starting in 2004-2005 helped increase the size of vessels operated. This move has helped companies cut ship operation taxes by up to 60 percent. Companies have also started to make use of shipping funds that allow companies to purchase vessels using money collected by investors. The investors are given set tax breaks for their investments. The ministry said efforts are currently underway to help shipping companies expand business areas that are vital for sustained growth. It said shipping companies are to receive assistance in such areas as taking over foreign terminals and logistics companies. Seoul also wants to bolster local development of dedicated vessel support companies that can help reduce operational costs.

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Kinsteel gets licence for mini-blast furnace 

Kinsteel Bhd has obtained a licence from the Government to build a RM400mil mini-blast furnace plant, the second such plant in Malaysia. An industry source said the licence obtained would enable Kinsteel to eventually produce about 600,000 to 800,000 tonnes of hot metal or “pure liquid iron” annually. The new plant is slated to be commissioned within two years. Ann Joo Resources Bhd is currently constructing a RM600mil mini-blast furnace plant in Prai, targeted to start production by year-end with an annual capacity of about 500,000 tonnes.
The source said Kinsteel had well placed its long-term growth strategy upon securing the licence to build the furnace plant. The plant will help the group produce more high-grade niche products, save cost up to about 30%, or RM50mil, annually and also reduce the consumption of scrap iron by 35%. It was reported that about RM130mil of the expected total RM230mil proceeds from the listing of Kinsteel subsidiary Perwaja Steel Sdn Bhd on Bursa Malaysia by July would help finance the construction of the plant. SJ Securities in its latest report had an “overweight” rating on Kinsteel with a 12-month target price of RM2.15 based on its price earnings ratio of 12 times, which is at a premium to the industry average.

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Thailand's G Steel orders two furnaces for HRC expansion 

Thai hot rolled coil producer G Steel will install reheating and tunnel furnaces to boost HRC capacity from its existing 1.8m tonnes/year to 3.4m t/y, company sources tell. The expanded capacity will come on stream at the end of 2009. Tenova Loi Italimpianti has been awarded the contract to supply and install the two furnaces as part of the revamping of G Steel's hot strip mill at Rayong on Thailand's eastern seaboard. The Italian supplier will combine a new roller hearth furnace and new walking beam furnace with G Steel's existing line that has a medium (80~100mm) thick slab caster. G Steel will also be installing a re-rolling line, down-coiler and two more finishing facilities (skin pass and P&O) as part of its expansion.
A company official tells that once the new equipment is in place G Steel will be importing slab as feed to bridge the upstream shortfall. The company's current EAF operations have a maximum effective capacity of 1.5m t/y. G Steel sold 1.13m t of steel last year and its 2008 sales target is 1.25m t. “Demand is better this year,” the official tells SBB, explaining the higher target sales figure. The Thai domestic market accounts for 78% of total sales. Together with its 49.6%-owned Nakornthai Strip Mill (NSM), G Steel supplies an estimated 32% of Thai HRC demand. Imports fulfil approximately 48%, and Sahaviriya Steel Industries the remaining 20%. Last year, NSM produced approximately 1.1m t out of its effective capacity of 1.2m t/y (and 1.5m t/y design capacity).

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Bluescope's Thai coating line exceeds capacity 

Bluescope's Steel's metallic coating line in Rayong, Thailand, has been producing above capacity to meet rising demand in Thailand, company officials told MB. The plant is producing at less than a third above 400,000 tpy capacity, said coated manufacturing manager Greg Harris, although he would not say if the plant was due for an expansion.
A Bluescope spokesman told MB that there are no plans to expand the plant, which last increased its metallic coating and cold rolling capacity two or three years ago. “After the coup, demand in Thailand has increased and we've been able to increase our production to meet that demand,” he said.

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Siam Yamato to boost sections capacity in mid-2009 

Construction of the project to expand Siam Yamato Steel's capacity for wide-flange beams and structurals by 400,000 tonnes/year is proceeding according to plan, Bangkok-based company sources tell. Construction commenced in the last quarter of 2007. The new operation, also scrap-based, is situated on a different site 5km from the company's existing complex in Rayong, eastern Thailand, It is scheduled to start operating commercially in middle of 2009.
The company, which currently produces 650,000- 700,000 t/y of rolled medium and large sections, is established by Japan's Yamato Kogyo and Thailand's Siam Cement Group. Export allocations for this year have fallen from the previous 50% of total output to 45% because of strong demand from the domestic market in Thailand. “Our expansion will allow us to cope with the growth of our existing markets and also allow us to enter into new markets,” a company official says. “Our priority lies with our existing customers in Asia, Australia and the Middle East,” he adds. There has not been any decision on where the company plans to develop new export markets. The most recent export bookings of H-beams for May delivery were concluded at around $1,250/tonne cfr. Despite the rising prices for beams, margins are being squeezed because of the increasing costs of inputs including scrap. “Conversion costs have been rising,” the official notes. The Thai mill will continue to base its prices on steel raw materials and other costs.

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VSC to commission 500,000 tpy billet mill in 2010 

Vietnam Steel Corp (VSC) expects to commission a 500,000 tpy billet mill in the northern province of Cao Lao by end-2010, an official told MB. There are plans to add a rolling mill in 2012 to produce bar and “maybe some wire rod”, he said. Construction has started on the small blast furnacebased billet mill at VSC's Quy Xa iron ore mine site. The original plan was the commission a 500,000 tpy billet and bar mill in 2009. “This is not a delay; we have a change of plans,” he said, declining to explain further.
The mine and mill project is a joint venture with VSC, China's Kunming Iron & Steel each holding 45% and Lao Cao Mineral Co, which owns the rights to the mine, holding the remaining 10% Quy Xa is Vietnam's second largest mine after Thach Khe, which has reserves of 120 million tonnes of iron ore. However, Quy Xa produces ore of about 50% Fe while Thach Khe produces ore of more than 62% Fe. There are no change to plans for Quy Xa, which is expected to produce 1.5 million tpy of ore when the first stage is completed in 2008 and ramp up to 3 million tpy around 2010, said the VSC official. Ore from Quy Xa will also be supplied to Honghe Iron & Steel, Kunming Steel's 1 million tpy long product subsidiary Lao Cao borders the southern Chinese province of Yunnan and is just 300km by rail from Kunming Steel's site.

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PT Krakatau to modernize its hot strip mill 

SMS Demag announced that Indonesia's PTKS has placed an order for the modernization of its hot strip mill at Cilegon in West Java. SMS Demag said that through the modernization PTKS will be able to increase the production of its hot strip mill by approx. 20 % and at the same time improve the product quality and extend the product range. The modernization comprises the revamp of the edger including commissioning of an Automatic Width Control system to improve strip width tolerances and to minimize crop losses. Furthermore, new work roll cooling systems in the finishing mill, as well as anti peeling and interstand cooling systems will be installed. The use of CVC plus® systems and work roll bending in mill stands F1 to F3, along with a new Profile, Contour and Flatness Control will further improve the product quality. Upon completion of this order all finishing mill stands will possess CVC plus® technology. The new laminar cooling system will enable PTKS to improve its cooling strategies.

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Kinsteel gets licence for mini-blast furnace  

Kinsteel Bhd has obtained a licence from the Government to build a RM400mil mini-blast furnace plant, the second such plant in Malaysia. An industry source said the licence obtained this week would enable Kinsteel to eventually produce about 600,000 to 800,000 tonnes of hot metal or “pure liquid iron” annually. The new plant is slated to be commissioned within two years. Ann Joo Resources Bhd is currently constructing a RM600mil mini-blast furnace plant in Prai, targeted to start production by year-end with an annual capacity of about 500,000 tonnes. The source said Kinsteel had well placed its long-term growth strategy upon securing the licence to build the furnace plant.
The plant will help the group produce more high-grade niche products, save cost up to about 30%, or RM50mil, annually and also reduce the consumption of scrap iron by 35%. It was reported that about RM130mil of the expected total RM230mil proceeds from the listing of Kinsteel subsidiary Perwaja Steel Sdn Bhd on Bursa Malaysia by July would help finance the construction of the plant. SJ Securities in its latest report had an “overweight” rating on Kinsteel with a 12-month target price of RM2.15 based on its price earnings ratio of 12 times, which is at a premium to the industry average.

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Chinese plate export offers a bit slow last week 

It is reported that Chinese plate export market seems to be a bit slowed down recently since transactions have softened. Export offers do not see further increase and exporters started to become cautious on market situation.Export offers for commercial plate by tier two producers are at around USD 1130 per tonne FOB to USD 1150 per tonne FOB, but transactions are reported to be a little difficult.
By comparison, a tier one steel producer in East China was offering 12mm to 40mm commodity grade plate at USD 1170 per tonne to USD 1180 per ton FOB as base. It indicates that contracts for shipments to South East Asia have dropped sharply and those for Middle East are getting better. Exports to the EU remain common.

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Price inversion between HDG and CRC  

It is reported that there has been price inversion between hot galvanized coil and cold rolled coils in China since August 2007 as price for HDG is lower than that of CRC. The oversupply and dependence on exports are believed to be the major reasons behind the lower HDG price.In recent years, HDG capacity and production have witnessed great increase. Annual HDG output has been growing at a level higher than 40% since 2004. However, the growth rate started to drop since the second half of 2007. Subsequently, lots of HDG flow to international market and the proportion of exports to total output is also on the increase. In 2006, total Chinese HDG exports reached 2.87million tonnes accounting for 23% of domestic production. But the export tonnage began to drop remarkably following the rebate cut in 2007.
Most of Chinese HDG exports go to the EU and USA and the export volume is highly dependent on the demand of western countries. USA, Belgium, Italy, Spain and Britain are top five destinations for Chinese HDG exports and the tonnage for above mentioned countries account for 52% and 43% respectively of total exports in 2006 and 2007. However, the export rebate cut, the continuous CNY appreciation and slower economy growth in the EU and USA has led to less Chinese HDG exports. The tonnages for Q1 2008 dropped to 520,000 tonne up by 38% YoY. Further he proportion to output went down to 13%.
By comparison, there are net imports of CRC and the import volume is 100% higher than that of exports. The exports only account for 10% of total production and there is no dependence on international market. The decrease in export volume and continues increase in HDG capacity have brought pressure on price. However, the small premium over CRC or price inversion would also restrain the release of new capacity. Thus it is noticeable to pay much attention to export market and situation of supply.

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China would need 50 million Tonnes steel for reconstruction    

It is reported that reconstruction of the quake hit areas involving 15 million people to be settled down is becoming a focus nowadays with the rescue and relief work gradually winds up. It is estimated that the overall reconstruction will need about 50 million tonnes steel products in next 5 to 10 years.Industry insider said that the reconstruction will also witness a process of urbanization. If per capita steel consumption is 0.33 tonnes per year the reconstruction work will require at least 5 million tonnes each year adding up to 50 million tonnes in ten years.
Mr Zhou Xizeng an analyst with CITIC Securities contended that considering the proximity factor, the steelmakers to directly benefit from this quake will include Chongqing Steel, Pangang Steel & Vanadium Co, Valin Pipe & Wire, Maanshan Steel and Anyang Steel etc.He however warned that "But a strong market does not mean fat profits. Steel prices in the disaster affected areas are intervened.

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Small and medium steel mills cut production due to Olympic    

According to Mr Sun, owner of a private steelmaker, small and medium scale steel makers in Qian'an have generally cut production by 30% to meet the environmental standard."As Qian'an is close to Qinhuangdao, one site of the 2008 Olympic football game and adjacent to Beijing-Shenyang superhighway, many small and medium scale steel mills in the town have had to reduce steel output since early May.
Facing the pressure of environmental protection, Mr Sun's mill has cut down production from 5000 tons to 3500 tonnes per day which is up to the standard for pollution discharge. Moreover, the company will invest more in environmental conservation equipments, which normally account for 10% of the total fixed assets.Numbers of steel mills alike present fairly high initiative in acquiring such equipment In order to survive. Meanwhile, large state owned steel mills like Tangshan Steel and Shougang have not been seriously impacted from the output control factors.

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CISA joins NDRC in steel price limits   

It is reported that China Iron & Steel Association has advised its members to stop increasing prices of steel products destined for reconstruction and relief operation in quake hit areas. CISA has forwarded the top planning body's directive to all its members and urged them not to increase the price of hot rolled coil, color coated coil and structural tube above levels prior to the devastating earthquake. The mills have been told that any price rises already implemented would be rescinded. The move has come after the price limit order issued by National Development & Reform Commission. According to NDRC's CISA members are also required to supply materials directly to the quake stricken areas and prevent any price bidding in the circulating process.

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Reconstruction boosts demand for HDG and PPGI in China    

It is reported that recently Chinese HDG and PPGI price have been surging despite slow domestic steel market. Supply is reported to be quite short and prices are continuously on the rise.As per report the price increase is across the board and there has been an average increase of CNY 200 per tonne for HDG and PPGI since late May.
On Shanghai market 1.0mm HDG by Wuhan steel is being quoted at CNY 7100 per tonne. 0.5mm HDG at CNY 7500 per tonne,1.0mm HDG by Anshan steel goes at CNY 7050 per tonne to CNY 7100 per tonne, 0.5mm PPGI by Baosteel is at CNY 8600 per tonne, Guangzhou market has witnessed a substantial rise of CNY 500 per tonne to CNY 600 per tonne. The major reason for the price surge is the reconstruction in earthquake hit Sichuan province. The constructions for 1.5 million temporary houses require at least 700,000 tonne of PPGI. Such a great demand has put great pressure on steel makers and most steel makers have to set aside capacity for PPGI production. This has really led to tension in supply and price surge.

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Tianjin Pipe commission Pipe expander    

It is reported that Tianjin Pipe Group has commissioned its 720 project, which is China's first oblique rolling expansion unit with the world's largest caliber and annual output of large caliber seamless steel tubes.As per report the 720 project began to be constructed on March 7th 2007. The completion of the project has important role on further expanding industry chain, to optimize the product structure, realize product series, high end, high quality and enhance the enterprise's core competitiveness.It mainly produces large caliber high pressure boiler pipe, mechanical tube, structure pipe, oil pipeline pipe, the specification is 325mm to 720 mm ×15.5mm to 55mm. It is expected to yield 45,000 tonnes products this year.

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Chinese coke makers surging due to tight coking coal prices    

Chinese coke producers have hiked prices for June due to soaring coking coal prices, adding pressure to steel mills already struggling with surging iron ore prices. Traders and local media said many producers in Shanxi, China's top coal and coke producing province, raised coke prices by CNY 300 per tonne. Price of first grade metallurgic coke reached around CNY 2,700 per tonne in the province. Shanxi based trader said "From coke production to transportation, every link is problematic. Many small and medium sized coke producers are cutting production, as there is not enough coking coal feed into their coke ovens and the increasingly tougher environmental regulations are putting pressure on them.”
Traders said prices in the province for coking coal have reached CNY 1,600 per tonne to CNY 1,700 per tonne up from less than CNY 1,000 in January. He added that "Transportation problem is worsening now, as the government wants to ensure thermal coal supply and is shifting focus to transportation of thermal coal." Macquarie research note quoted Mr David Fang of China Coal Transportation and Sales Association as saying that "Given the predominance of small mine production, coking coal supply is arguably even less stable than thermal.

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China to launch Hebei Steel as new industry leader     

It is reported that Hebei Steel Group will be officially launched to create a new industry leader and would improve the sector's efficiency and productivity.China Securities Journal reported that Hebei's provincial government has agreed to merge Tangshan Steel Group and Handan Steel Group to create the new Hebei Steel Group which will become China's No 1 steel maker overtaking Shanghai based Baosteel Group.The newspaper, citing unidentified sources familiar with the situation said that the new Hebei Steel Group will have annual productivity of nearly 32 million tonnes of iron and steel, more than that of Baosteel Group.The newspaper without giving a timeframe said that "According to the long term strategic plan by the Hebei province government, the new group will have annual productivity of 50 million tonnes of iron and steel, making it a world class iron and steel enterprise. It added that without the merger, Hebei cannot compete against domestic rivals and expand out of China." The merger and the creation of Hebei Steel Group is a first step towards helping Henan province solidifies its position as China's top province by steel productivity. Mr Wang Yifang general manager of Tangshan Steel Group is the chief of the government led team in charge of the creation of Hebei Steel Group and Mr Liu Rujun chairman of smaller Handan Steel Group. It added that the top management of the new Hebei Steel Group will be announced soon.

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Sinosteel boosts stake in Midwest 

Sinosteel, the Chinese state-owned steelmaker, has strengthened its hand in the battle for Midwest Corporation by lifting its stake in the junior Australian iron ore group to 28.4 per cent. The Chinese steelmaker increased its stake from 19.9 per cent after a number of shareholders accepted its A$6.38 cash offer. Sinosteel was left stunned last week after its recommended bid was trumped by an A$1.5 billion "all-share" deal with Murchison Metals, a Western Australia compatriot of Midwest. Midwest said at the time that it backed the Murchison offer, which would be engineered via a "reverse takeover", leaving Midwest as the quoted entity. However, analysts have suggested the Murchison deal could yet play to Sinosteel's advantage. The Chinese group already has clearance from Australia's Foreign Investment Review Board (FIRB) to buy 100 per cent of Midwest, and the Chinese group may feel that approval remains in place even if the group becomes much enlarged after joining with Murchison. FIRB has delayed a number of Chinese groups from buying into Australia's resources sector as it considers "national interest" implications. The concentrated nature of China's planned investment in Australian resource groups, especially iron ore miners and explorers, in recent months has led to particular concerns in Canberra. Midwest and Murchison are both attempting to develop iron ore mines on adjacent tenements in the Mid West province of Western Australia and could generate significant synergies by sharing infrastructure costs, including rail and port requirements. Sinosteel is also considering making a complaint to Australia's Takeovers Panel over a potential link between Murchison and Harbinger Capital, the US fund. Harbinger, which owns just under 20 per cent of Murchison, was asked whether it supported the reverse takeover in advance of it being announced because the US fund had the potential to block the deal once it was put to a shareholder vote. On the same day the reverse takeover was announced, Murchison increased its stake in Midwest to 9.9 per cent. Sinosteel has expressed concerns that Harbinger and Murchison could be classified as "associates" under Australia's Corporations Act and may seek a ruling from the panel. Midwest shares closed down nearly 1 per cent at A$6.73 yesterday, while Murchison was one cent firmer at A$4.11. Midwest and Murchison have held on-off talks for close to two years. The Mid West region is directly below the Pilbara, Australia's richest source of iron ore that is dominated by BHP Billiton and Rio Tinto, with Fortescue Metals beginning to ramp up production.

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Nisshin Steel loses certification after failing to test pipe  

Nisshin Steel Co., Japan's third- biggest stainless steelmaker, lost its Japanese Industrial Standards certification for four types of stainless steel pipes after failing to apply water pressure tests as required. About half the stainless steel pipes made at the Tokyo-based company's Amagasaki mill in central-western Japan are affected by the loss of certification, the company said in a statement. Products from the mill make up less than 10 percent of the company's total sales. Nisshin, which made about 6.8 million of the pipes in the past five years, is the third Japanese steelmaker since last month to report incomplete pipe testing. Nippon Steel Corp. and JFE Holdings Inc., the nation's two biggest mills, in May said they failed to apply similar tests to pipes made by affiliates. Both said customers had not reported problems. Nisshin said it didn't know how the loss of certification would affect its earnings. The company rose 1.5 percent to close at 400 yen on the Tokyo Stock Exchange, matching the 1.5 percent gain in the Topix Iron & Steel sub-index.

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Varshavsky pays more than 50 million pounds for Alphasteel    

Vadim Varshavsky, the steel investor and Russian legislator, paid more than 50 million pounds ($97 million) for Alphasteel, the administrator for the U.K. steel mill said. The mini-mill, based in Newport, south Wales, was bought by Libala Ltd., a company affiliated to MirInvest, a Moscow-based investment firm owned by its management and Varshavsky, London- based Begbies Traynor said in an e-mailed press release. Alphasteel went into administration on Dec. 20, according to a note on the company's Web site. “We are unable to give an exact price, but can confirm it was in excess of 50 million pounds,'' Katie Hunt, a spokeswoman for Begbies Traynor, said. The company is keen to restart production as soon as possible and has a three-year production target of 1 million tons. Varshavsky is also a co-owner of Estar Holding, Russia's biggest producer of stainless-steel bars and cutlery.

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Hyundai Steel to raise iron bar price 8.5% on higher costs  

  Hyundai Steel Co., South Korea's second-largest steelmaker, will raise the price of iron bars, used in construction, by 8.5 percent as raw material costs increased. The price will rise by 80,000 won per metric ton to 1.02 million won ($997) effective June 9, Chang Young Sik, a spokesman for the Incheon, South Korea-based company, said.

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Mitsubishi Heavy will increase forklift prices on higher costs 

Mitsubishi Heavy Industries Ltd., Japan's largest maker of heavy machinery, said it will increase forklift prices by 6 percent to absorb higher steel costs. Local prices for forklifts that can haul 3.5 tons to almost 16 tons of goods will be increased starting July 1, Tokyo-based Mitsubishi Heavy said. The cost of materials such as steel has exceeded the level that can be absorbed, the company said. Mitsubishi Heavy's unit that builds small and mid-size engines, forklifts and car turbochargers had sales of 472.5 billion yen ($4.5 billion) for the year ended March 31, accounting for 15 percent of total revenue. The company also makes products ranging from ships and aircraft components to gas turbines and air conditioners.

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Baoshan Steel to keep third-quarter prices unchanged on quake 

plans to charge customers more in the third after the government ordered domestic mills to hold prices at the same level as before the May 12 earthquake. “We will keep prices for all grades unchanged at the second-quarter level,'' Chen Zudong, a sales official at Baoshan, said. The steelmaker had planned to raise prices for the three months starting July 1 to keep pace with global levels, Xu Lejiang, the chairman of Baoshan's parent company, said. The China Iron and Steel Association this week ordered members to hold prices at levels prevailing before the quake and ensure sufficient supplies of products such as color-coated sheets.
Meanwhile, Baoshan and three other state-owned companies raised production of color-coated sheets by 16 percent to meet surging demand for temporary housing following last month's earthquake in Sichuan. Baosteel, Anshan Iron & Steel Group, Wuhan Iron & Steel Group and Panzhihua Iron & Steel Group increased production of color- coated sheets to 95,000 metric tons a month from 82,000 tons, the State-owned Assets Supervision and Administration Commission said in a statement. The government ordered steel producers not to raise prices following the May 12 earthquake, which left 15 million people homeless. The mills will sell color-coated sheets at 8,582 yuan ($1,235) a metric ton, compared with spot prices in Sichuan that have exceeded 11,000 yuan a ton, according to the statement.

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Iron-ore shipping rates may decline when Rio, China end dispute  

The cost of shipping iron ore by sea may decline once a dispute over the price of the raw material is resolved between Chinese steelmakers and Rio Tinto Group, the second-largest producer, Standard Chartered Bank said. The China Iron & Steel Association last month urged the nation's steelmakers to spurn efforts by Rio Tinto to sell ore at market rates rather than prices set at annual negotiations. The disagreement increases demand for vessels to ship ore from Rio's rivals, Helen Henton, London-based head of commodity research, said. Rio Tinto wants higher prices for its Australian iron ore, to reflect the shorter distance to China compared with competing sources, such as Cia. Vale do Rio Doce's mines in Brazil. Steelmakers are buying more ore from Brazil, according to Jeremy Penn, chief executive officer of London-based Baltic Exchange Ltd., which sets ship rates. Longer voyages have cut carriers available for hire and pushed rates to a record. ``Freight rates should reduce from these levels when the dispute is resolved,'' Henton wrote. Port congestion and a shortage of ships means prices will still be ``supported at high levels,'' she added. China is the world's biggest consumer of the steelmaking ingredient. The Baltic Dry Index, a gauge of commodity shipping costs, climbed to a record 11,793 points on May 20, according to the Baltic Exchange. Yesterday it rose 0.4 percent to 11,503 points. A so-called capesize vessel, used to haul about 170,000 metric tons of iron ore, costs $227,689 a day to hire, according to the exchange. That's 2.85 times more than a panamax ship of about half the size that's used for other cargo, such as grains. Capesize rates have averaged $139,871 since the start of 2007, about 2.4 times more than a panamax, exchange data show.

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