June, 07 2005
VSP firm on existing prices
Even as some of the steel majors in the country have reduced prices of their steel products by Rs 2000 per tonne, Visakhapatnam Steel Plant (VSP) is determined on maintaining the existing prices of its steel products. This despite decline in sales during last month reported a leading business daily.
It may be recalled that steel majors including Sail, Essar Steel, Jindal Vijaynagar Steel and Ispat Industries reduced prices of some of their steel products by Rs 2000 per tonne recently due to the reduction in steel prices in the international market.
Accordingly, steel traders who have been selling VSPs products expected a similar slash in VSP steel prices too. But, the steel plant, which produces about 35 lakh tonnes of steel annually, has decided to stick to the existing prices of its steel products.
Due to high prices, we witnessed a significant drop in steel lifting during May, which was actually a good month for selling steel. Keeping this in mind, other steel plants reduced their prices considerably. We expected a significant reduction in VSPs prices too. However, VSP reduced the prices only by Rs 300-Rs 350 per tonne, Krishna Rao, director of Vizag Profiles, a leading steel trading company, told Business Standard.
VSP hiked its products prices by Rs 1500- Rs 2000 per tonne from April 1, and by Rs 300-Rs 400 per tonne from May 1. Owing to this high steel prices, sales dropped significantly in May.
Generally, we used to sell about 6,000 tonnes of steel a month. Though we expected our sales to touch 8000-9000 tonnes in May, we could sell only 3000 tonnes in the last month, Rao said.
On an average, we sell 3,500 tonnes of steel every month. We expected our steel sales to touch 4,500 tonnes in May. But because of abnormal prices, our sales came down to 2500 tonnes in the last month, A Nagesh, managing partner of A S Steel Traders, told Business Standard.
VSP, on an average, sells around 2.75 lakh tonnes of steel every month. `Due to the recession, products lifting from VSP dropped by about 15.20 per cent in May. VSP has been selling majority of its products through LTC (long term contracts). It has already signed MOUs to sell its current year products at existing prices. So, there is not much need to reduce the prices to sell our products, VSP sources told Business Standard.
Moreover, other steel players reduced prices on flat products. But most of our products are only long products, which have great demand in the market, they added.
FDI in captive coal mining may be allowed for steel, cement cos
IN order to increase coal production, the Government plans to to permit up to 100 per cent foreign direct investment (FDI) in captive coal mining in steel, cement and sponge iron sectors where captive coal mining is already permitted.
Last fiscal, the country produced around 370 million tonnes (mt) of coal, out of which 325 mt were produced by Coal India Ltd (CIL). This fiscal, according to CIL estimates, the country will face a shortage of around 12 mt.
The move will have a dual impact, Government sources said. "On one hand it would reduce pressure on Coal India while on the other hand it will bring down the production cost for these companies who would save on coal cost," officials said.
The move will also pave the way for international steel manufacturers such as Posco and Arcelor, who have announced plans to set up steel plants in India, to have their own captive coal mines to meet their coal requirements.
Domestic steel, cement and sponge iron manufacturers too would be permitted to bring in FDI for captive coal mining through the joint venture route where the Indian partner may hold a nominal stake.
As of now, FDI in coal mining for captive use is allowed only in the power sector.
Government sources told Business Line: "Since there is an urgent need to increase coal production, this is only an extension of what has been done to the power sector. The Finance Minister has already indicated that the Government would undertake comprehensive reforms in the coal sector."
However, for domestic steel manufacturers taking the joint venture route for captive coal mining, certain tax-related issues need to be sorted out before formalization of the policy, sources said.
The tax-related issue is the transfer of coal mined by the joint venture company to the Indian steel manufacturer. Sources said that when the joint venture between Indian steel manufacturer and foreign investor mines coal for captive use by the Indian partner's steel plant, the transfer might require some clarifications.
"The Companies Act does not permit one company to just give away some assets, in this case coal, to another company. If it is shown as sale, the issue of sales tax or value-added tax comes in," sources said, adding the move would require some amendments to existing rules.
The Government is planning to introduce certain changes in coal-related mining legislations in the monsoon session, sources added.
Mittal team sets vision of Rs 40000 cr
Steel tycoon Laxmi Niwas Mittal is moving fast on his first proposed Indian investment, which is now estimated at over Rs 40,000 crore, in a plant in Jharkhand with a capacity of 10 million tonnes.
Mittals XI, a team of executives from his worldwide steel empire, arrived here today, to push forward preliminary talks last month with the Jharkhand government.
S.K. Satpathy, industry secretary, said: It appears that they are interested in investing over Rs 40,000 crore in the state. They want to set up a 10-million tonne steel plant and carry out iron ore mining.
During its week-long stay, the team nine from abroad and two from India will prepare a feasibility report after consulting state officials and identifying iron ore reserves Mittal Steel would tap.
Three-four more persons are likely to join us soon. We will be staying here for a week or so and will submit our reports within 10 days, said Mittal Steel mining director M.P. Singh in an interview to The Telegraph.
Soon after reaching here, the team members held an internal meeting in their hotel, and then headed to Nepal House for discussions with the secretaries of industry and mines and geology departments. Late this evening, they were scheduled to meet chief secretary P.P. Sharma.
They informed us about the style of functioning of their company and sought information related to mining and industries. We have already constituted a team comprising officials of key departments, who will coordinate their meetings with the state machinery. If they want to visit the spots, we will make the necessary arrangements, said A.K. Singh, mines and geology secretary.
Satpathy said the Mittal officials have shortlisted the places where they intend to set up the plant and will be visiting the sites.
In this team, we have two steel-making experts from the USA and two from the UK, two mining experts from Australia and one from Kazakhstan, costing and logistics experts from Romania and legal, financial and infrastructure development consultants from India, Singh said.
The experts will prepare several reports on iron ore mining, steel-making, financial requirements and infrastructure.
Steeling the thunder
Mahindra Ugine Steel Company (Musco) is set to turn in another good performance in the current year. A manufacturer of alloy steel and automotive stampings, Musco is expecting to grow its volumes by a strong 30-35 per cent, according to K V Rajarathnam, managing director, who says the demand, from all sectors being catered to, is buoyant.
Musco's steel division, which accounts for 94 per cent of revenues, caters mainly for bearings, forgings and engineering industries, which in turn are suppliers to the automobile sector.
Iron Ore rush : Govt forms panel to draw guidelines for mining
As Korean majors Posco, Tata Steel and NMDC battle for Orissas iron ore reserves, the Union steel ministry has decided to step in. The ministry has put in place a committee headed by former secretary RK Dang to formulate clear guidelines for allocating mining lease for iron ore, manganese and chrome ore.
In Orissa, Korean major Posco has identified three iron ore blocks of Mankarancha, Gandhmardhan and Malangtoli while Tata Steel is gunning for Mankarancha and Malangtoli. As for NMDC, it is keen to get its hands on the Gandhmardhan block, which is now with Orissa Mining Corporation.
While Posco and Tata Steel are planning to set up mega projects in the state, NMDC is looking at mining ore. Posco plans to set up a 12 million tonne project at Paradeep and Tata Steel is looking at six million tonne capacity at Duburi.
Earlier in May 2005, steel ministry joint secretary Ajoy Kumar had invited suggestions from various stakeholders in the industry on the issue. The committee would be looking at formulating guidelines on criteria for grant of licence and lease. These guidelines would be fomed under section 11(5) of MMDR Act.
It is learnt that the committee which has been set up by the steel ministry to resolve the issue on rights on iron ore, manganese opre and chrome ore met in late May for the first time.
The country is facing a virtual iron ore rush with the iron ore rich stets of Orissa, Jharkhand and Chattisgarh peparing to make the most of the global steel uptrend, never mind the recent softening of prices.
The fate of these three blocks becomes critical as Posco said it needs one billion tonnes of ore as a pre condition for setting up the plant which led to political opposition and the company later scaled down its demand to 600 million tonnes and has agreed to buy another 400 million tonnes of ore for exports from NMDC on a long term 30 yeas contract basis.
If Posco gets the three blocks, Tata Steel will be left out in the cold, or will have to transport ore from distant blocks. Steel majors like Ispat and Bhushan Steel are also interested in setting up steel plants in Orissa. Even Sterlite has expressed its desire to invest in steel. Tata Steel had recently announced its plan to invest in another 2.5 million tonne steel plant in Bastar.
