November, 14 2005
Indian steel mills July September performance
The July September quarter of 2005 has been on a downside for almost all steel companies in the world due to major dip in steel prices and higher cost of raw materials. Some of the global majors have been able to compensate due to their product mix but the largest steel company Mittal steel has reported a 65% dip in the profit in spite of 12% increase in sales
In comparison SAIL posted a declined by 26% in net profits with 5% growth in net sales. TATA Steel however has managed to post 12.5% growth in profit and 4% growth in sales. Essars net sales increase by 10% while profit jumped by 47%. JSWs net sales increased by 3% while the profit was down by 21%. Ispat Industries fared the worst among the large players with net sales down by 20% and with a loss of Rs 233 crore for the quarter.
The promised recovery in steel prices is still some way away. With steel prices likely to remain stable at current levels and raw material prices likely to increase further, margins will be under pressure. Almost every player has been hit on operating margins.
Indian steel mills more competitive than Chinese MD TATA Steel
In the context of spelling out what needs to be done to develop the steel sector, Mr B. Muthuraman, MD of TATA Steel said that Indian steel mills can produce steel more competitively than China. "China has no business making steel. We can beat the hell out of the Chinese," he said, in his speech at the silver jubilee celebrations of the Madras Metallurgical Society. India can make steel and supply to China, he added.
Mr B Muthuraman said that the Indian steel industry was expected to grow at 7-8% in tune with the GDP growth over the next few years and was expected to reach a capacity level of 300-400 million tonnes in the next 3-4 decades as against the present 35-40 million tonnes. Today, India produces 36 million tonnes of steel compared with China's 300 million tonnes. However, India's per capita consumption of steel is just 30 kg, against 220 kg of China. Consumption (and therefore production) in India would only increase, when steel would get more into areas like building construction.
Mr Muthuraman however added that these goals could be reached if only certain enabling measures were taken.
First, he said, infrastructure had to be improved. He illustrated this saying that it was cheaper to transport steel from Jamshedpur to Chicago than to Mumbai. He said that a production capacity of, say, 300 million tonnes meant some 20-30 large integrated steel plants on perhaps 5,000 acres of land each, with a lot of attendant facilities such as roads, power plants and water sources. He said he did not see all these happening with the present infrastructure.
Second, Mr Muthuraman said India would need a large fleet of engineers who could design steel plants. Again comparing with China, he said the country had about 20,000 metallurgists in metallurgy design institutes, while India had perhaps about a hundred. Every time an Indian company needed to put up a steel plant, it would have to go to a foreign company for design of blast furnace. "You can't depend upon external agencies to help you out in every bit of technology," he said.
Third, he said that India needed vast human resources in the field of metals. Because of the "need to attract young minds".
POSCOs feasibility report delay to postpone agreement signing
POSCO chairman Mr KT Lee, after meeting Orissa Chief Minister Mr Naveen Patnaik told newsmen that the final agreement will be signed only after we get the feasibility report for the project. He added that that the feasibility report would be ready by mid-December. This is at least two weeks behind the schedule mentioned in the MoU signed between the company and the state government on June 22 this year.
The MoU had stated that the feasibility study had been commissioned and the detailed project report would be available by November. Now with the feasibility report expected only in mid-December, it would take some more time for the agreement to be signed.
"This will push the date of signing of the agreement to early next year," pointed out an official in the state industry department. At the same time, Lee said things were moving as per schedule.
Assocham reports raw material price pressure on Indian Steel mills
The Indian steel industry is facing pressure from an increase in the raw material cost which went up by an average of 8.56% YOY in the second quarter of this fiscal, an Assocham Eco Pulse (AEP) study said on Sunday. The study on the steel industry has said that this pressure was being felt more by integrated steel majors like Tata Steel, SAIL and Essar Steel, which through their sheer size of operation were more prone to price disturbances in the market.
Raw material cost rose by 8.56% to Rs 6,326.73 crore in Q2, FY06, from Rs 5,827.72 crore in Q2, FY05. The costs of gas, iron ore and iron ore fines went up and the price of indigenous as well as imported coal also soared.
According to the study, soaring prices of coking coal and iron ore, coupled with gas and iron ore fines had a direct hit on the bottom line of the top 10 steel companies which saw an average net profit decline of 22.12%. While net sales of steel companies increased by a mere 1.64%, net profit decreased by 22.12%, it said. The revenue was impacted by lower sales realization as well.
KIOCLs mine closure deadline nearing
The state owned Kudremukh Iron Ore Company Limited (KIOCL) is hopeful of a suitable solution following a recent announcement by water resources and transport minister Mr Mallikarjuna Kharge that the Cabinet has taken a decision to allot mines at Bellary. Karnataka chief minister Mr N Dharam Singh has also mentioned that the government was ready to take care of KIOCL workers interests when the mines are closed by the end of December
According to KIOCL sources, the request with the government to start mining in Hospet by KIOCL is still pending because of litigation. The government had permitted National Mineral Development Corporation NMDC to start operations in Hospet along with some others. The NMDC had already started work on building the infrastructure there. Than government permitted private parties also to mine the iron ore there though earlier it was reserved only for government agencies. The NMDC has moved the court and if it wins KIOCL will have chances of shifting its operations to Hospet.
Government can also think of merging KIOCL with NMDC or importing ore from NMDC to run the pellet plant. Or else the only option would be to give a golden handshake to its 1,916 employees, the sources added.
Supreme Court had ordered KIOCL to stop mining at Kudremukh by December 2005. KIOCL is a 100% export oriented company.
ISA demands slashing excise duty & increasing import duty
Maintaining that high excise duty is choking the growth of the Indian steel industry, the Indian Steel Alliance ISA has demanded that it should be slashed to 8% to allow the industry a fair return on their investment.
Advocating for lowering of import duties, Mr Raza ISA Chief, pointed out that the present excise structure put Indian steel industry on an unequal plank.
Steel is a value-added item which has the highest forward and backward linkages including the potential to generate high employment. So if we are asking the government to ensure safeguards surely it is not without purpose, he argued. He said it was imperative to augment steel consumption and to do so it was imperative to lay adequate thrust on infrastructure.
Mr Moosa Raza added The Indian steel industry is unfortunately among the least protected industries in the world and is exposed to cheaper imports from competing nations. Till September, exports from countries like Russia, Germany and Egypt had increased by nearly 50% which is why there is an express need for rationalizing import duties as is done in the developed nations
Explosion in steel plant in Himachal kills one
One person was killed and two other injured in an explosion in a steel factory at Barotiwala Industrial Estate in Solan district of Himachal Pradesh today, according to police. The explosion, which occurred at 0730 hrs in the Jawala Steel Mills, was reported in a liquid stray of steel after it was pulled out by the labourers from the furnace, as per police
The exact cause of the explosion was not yet known, the police officer said adding that the blast may have occurred due to a vehicle shocker that could be a part of the scrap imported from outside the state for making steel. He added that the explosion appeared to be a minor one and added that experts would be visiting the plant tomorrow to find the exact cause of the blast.
Jharkhand government looking for profit sharing
It is reported in a daily that the Jharkhand Government is in final stages of preparation of a resettlement and rehabilitation policy for the state where it would be mandatory for all industries to make their employees partners in profit accruing to the company.
Jharkhand chief minister Mr Arjun Munda is reported to have said that the policy would be announced soon but refused to give further details.
As per the policy blueprint, all companies making investment in the state would have to commit an identified portion of their profit in favor of employees. Such commitment would be sought by the state much before companies break even and start to make profit.
Moreover, under the new R&R policy companies would also be told to submit a specific rehabilitation and resettlement plan for families displaced by their projects. This plan would also include provision of suitable dwelling units, job guarantee to at least one member of the displaced family and provision of vocational training to others to make them employable.
The proposed move may impact Mittal Steel, Jindal Steel and Power Ltd, JSW Steel, Essar Steel and other companies intending to invest in Jharkhand.
CII to send corrugated roofing sheets to earth quake hit Kashmir
The Confederation of Indian Industry is in the process of sending about 100 tonnes of CGI sheets for immediate rehabilitation.
Till date, CII had been able to provide CGI sheets catering to the needs of more than 2000 people in the villages of Sultan Deki, Sarai, Busgraan and Sherpora Kandi in Uri. These CGI sheets would subsequently be reused when rebuilding of permanent homes commenced once the snows melt in March, CII Northern Region Chairman Mr AS Shriram said in a statement.
CII continued to work very closely with the state administration, the Army and Air Force as well as its NGO partner and the Human Aid Society for relief operations, it added.
Furthering its stake and commitment in the rehabilitation process as well as rebuilding the homes and confidence of the people of Kashmir, CII planed to invest in social infrastructure by focusing on a couple of schools and providing all necessary help in ensuring quality infrastructure as well as education to the children for a brighter and more secure future, the release stated.
Merrill Lynch positive on steel price in 2006
Merrill Lynch is positive on global steel prices in 2006, predicting higher steel prices than this year.
"Clear evidence of a complete turnaround in steel prices may have to wait until 2Q 2006, given the turbulence in China at present, and the approaching seasonally soft period for steel prices and equities 1Q each year." says recent sell-off an overreaction to guidance from them on BlueScope
Taiwan's China Steel to follow Baosteel on steel prices
Taiwan's leading steelmaker China Steel Corp is likely to cut its domestic wholesale prices for the first quarter next year if Baosteel reduces steel prices as per a report in local daily which cited China Steel's VP Mr TH Chen. China Steel is due to decide on first-quarter domestic wholesale price on Nov 24.
The Taiwanese steelmaker in August reduced domestic wholesale prices for the fourth quarter of 2005 by an average of 9%
There is market speculation that Baosteel next week will cut its prices for the first quarter of next year amid oversupply in the China market, the daily added.
Management visionary Dr Peter Drucker dies at 95
Dr Peter F Drucker, who was regarded as the greatest management visionary of the modern age and coined such terms as management by objective'' and knowledge workers'' died on Friday at the age of 95.
The Austrian born journalist and intellectual taught, wrote and advised companies on management techniques for seven decades, completing his 35th book at age 94. Dr Drucker was renowned for his clear thinking and analysis, rather than any single theory or research.
Singapore's OMH eyes Manganese expansion
Singapore's OM Holdings Ltd plans to accelerate expansion of its Bootu Creek manganese project in Australia's Northern Territory after agreeing to buy out minority partners for US$15.3 million. OMH said Friday it has secured 100% of Bootu Creek after reaching agreement with Groote Eylandt Mining Pty Ltd, or GEMCO, to buy its minority stake in the project. GEMCO, owned 60% by BHP and 40% Anglo American plc, operates one of the world's biggest manganese mines at Groote Eylandt, off the coast of the Northern Territory.
Mr Paul Chapman MD of its Australian operations, said that OMH's purchase of the remaining 25% in Bootu Creek clears the way for an upgraded exploration program that could eventually double planned shipments to Chinese ferroalloy smelters. "It is a fairly cheap incremental expansion. You can just about double your production with an A$10 million capital spend," he said.
Stage One of the A$45 million Bootu Creek project is due to begin production in either March or April, building up to an annual rate of 550,000 to 600,000 tons of upgraded manganese ore.
OMH, which up to now has focused on trading and smelting operations, hopes to supply around 20% of China's total demand for manganese, a steel-hardening ingredient. Around one-quarter of Bootu Creek's production will be shipped to OMH's Qinzhou smelter located in southwest China, with the remainder sold to other Chinese smelters. "In our view manganese imports into China are going to increase," Mr Chapman said.
A former WMC executive, Mr Chapman joined OMH last month after his previous role as MD of junior nickel miner Reliance Mining. Reliance was taken over by Consolidated Minerals earlier this year in a friendly A$90 million-plus takeover.
Massey Energy settles shareholder lawsuit
Richmond based Massey Energy Co., the USs fourth largest coal producer, has agreed to several governance changes as part of a shareholder lawsuit settlement. The deal calls for Massey to propose changes making it easier to amend company bylaws, add directors and lower its mandatory retirement age for board members, according to the agreement. In return Massey would be released from all other claims.
The suit, filed as a derivative lawsuit, sued Massey board members and other executives in August 2002 for allegations of "breach of fiduciary duty, misappropriation of information and corporate waste." In shareholder derivative lawsuits, shareholders sue on behalf of the company. The suit was brought by Lerach Coughlin, a prominent securities litigation firm. The lawsuit alleged that Massey had twice filed false financial statements in 2001 that artificially inflated the company's share price and allowed company insiders to obtain about $5 million before the stock plummeted from $22 per share to $7. The plaintiffs also alleged that Massey officials' "flagrant lawlessness" regarding state and federal environmental laws cost the company millions of dollars.
Massey denied the allegations. The company's attorneys added that since many of the purported actions took place between the 1970s and October 2000, they could not have affected shareholders since Massey did not go public until November 2000.
As part of the agreement, disclosed Wednesday in a regulatory filing, Massey would: recommend a reduction in the shareholder vote percentage needed to amend the company's bylaws from 80% to 67%, approval of the change will still require an 80% vote, expand the number of board members from eight to as many as 12 and lower the mandatory retirement age for new directors from 78 to 74, with one allowable exemption.
Daewoo Shipbuilder profits for Q3 down by 54%
Seoul based Daewoo Shipbuilding & Marine Engineering Co, the worlds second-largest shipbuilder, said Q3 net income fell 54% because of the rising cost of steel. Daewoo Shipbuildings net income declined to 19 billion won or US$18 million from 41 billion won a year earlier, the company said. Sales fell to 1.05 trillion won from 1.14 trillion won while operating profit declined 11 per cent to 24 billion won.
Daewoo Shipbuilding and other South Korean shipbuilders are completing orders received when vessels were at decade low prices. The fourth-quarter earnings should be better, said Ms Ahn Wook Hyeon, a spokesman for Daewoo Shipbuilding. We are nearly finished with the orders won in 2003 when prices were low.
The company expects to have an operating loss this year of 80 billion won and will have an operating profit of 100 billion won in 2006. For 2007, the company forecasts an operating profit of 500 billion won. Sales this year should be 4.5 trillion won, rising to 5 trillion won in 2006 and 6 trillion won in 2007. Daewoo Shipbuilding has received orders valued at about US$7 billion as of October 27, exceeding the US$6.6 billion it won last year.
Shenhua Group aims to become world's largest coal dealer in 2010
Shenhua group aims to become the world's largest coal dealer in 2010 with coal output of 200 million tons, said its DGM Mr Zhang Yuzhuo at the ongoing Euro-Asia Economic Forum in Xi'an
Shenhua, a young corporation focusing on coal industry, is engaged in comprehensive development of coal, electricity and oil and transportation, realizing integrated management of production, transportation and sales, Zhang said. Over the past six years, it has witnessed six times increase in coal output and sales volume, he said. Shenhua's installed capacity of electricity generation reaches 10 million kilowatts, with annual power output about 15.4 billion kWh, according to Zhang.
