February, 10 2006
New mining policy in three months
A new mining policy to streamline exports and meet the needs of the local industries would be launched within three months, Minister of State for Mines T Subbirami Reddy said today.
Expressing concern over the inability to properly exploit the natural resources that was available in the country, he said the existing mining policy needed amendments to benefit the country as a whole by making proper use of resources like bauxite, iron ore, diamond, gold and alumina.
Talking to newspersons here, Mr Reddy said the country stood fifth in the world in terms of mines resources, but was placed 100 in terms of generating revenue from the mines.
He said though priority would be given to Indian companies, Multinational companies would also be invited to explore the mines in our country, especially in Andhra Pradesh.
The Minister stressed the need to adapt modern technologies that are being used in Australia, UK, Russia, USA and Germany.
He said the objective of the new policy would be to explore maximum mine resources in the country and preference would be given to local industries in the utilisation of the resources.
NRB Bearings sees profit as sales surge
NRB Bearings Ltd., India's third-largest bearing firm, forecast on Thursday profit growth exceeding expectations on the back of strong exports and growing demand from the auto and two-wheeler sectors.
The Mumbai-based auto components supplier sees its research and development costs rising in the medium term to 5 percent of sales from the current 3 percent as it pushes into mature European markets, President Harshbeena Zaveri told Reuters on Thursday.
NRB Bearings, whose net sales grew 20 percent annually over the past 5 years, posted a profit of 272.9 million rupees in the year to March 2005, on net sales of 2.15 billion rupees.
"We want profit growth to be 30 percent plus," Zaveri said. "We definitely expect to maintain that topline growth and both these estimates are conservative." Zaveri's forecasts were ahead of analysts' estimates of NRB's financial performance in the fiscal year to March and for the next year.
NRB, which in November bought back for $13 million the entire 26 percent stake held by Timken France SAS, is forecast to post a 30 percent growth in 2005/06 profit to 355 million rupees on net sales of 2.55 billion, an 18.6 percent growth, according to Reuters Estimates.
Similarly profit for 2006/07 is expected to grow 28.5 percent to 456 million on net sales of 3.02 billion rupees, up 18.4 percent.
NRB, whose largest customer is top commercial vehicle maker Tata Motors Ltd., is already growing at twice the rate of a 25 billion rupee bearing industry expanding at 10 percent a year. Two wheeler firms Bajaj Auto Ltd. and Hero Honda Motors Ltd. account for 14 percent of sales. Exports to companies such as Renault and Volvo account for nearly 8 percent of the turnover.
Zaveri said, adding overseas sales were growing at an average of 40 percent a year.
Tata Motors Q3 net up 46%
Mr Ravi Kant, Managing Director, said that the price of steel had eased in the spot market but would take time to reflect in the company's long-term contracts.
TATA Motors Ltd on Thursday reported a 45.54-per cent rise in profit after tax for the quarter ended December 31, 2005, at Rs 460.23 crore from the previous corresponding Rs 316.21 crore. Net sales/ income from operations moved up 16.31 per cent to Rs 5,074.55 crore (Rs 4,362.82 crore).
Operating profit increased 7.22 per cent to Rs 623.06 crore (Rs 581.12 crore). Courtesy rising interest rates and ongoing capital expenditure, both net interest and depreciation were higher for the quarter.
While profitability was helped by continued cost reduction measures and overall vehicle sales for the quarter up 12.74 per cent to 1,11,228 units (98,662 units), other expenditure - including a foreign exchange loss of Rs 38.63 crore (gain of Rs 62.08 crore) - rose 37.69 per cent to Rs 745.09 crore (Rs 541.13 crore).
Total expenditure increased 17.71 per cent to Rs 4,451.49 crore (Rs 3,781.70 crore). Compensating was a 582.72 per cent gain in other income to Rs 168.36 crore (Rs 24.66 crore), which included Rs 164.30 crore profit on the sale of shares at Telcon. Subsidiaries' performance: The company's subsidiaries also did well, Mr Praveen Kadle, Executive Director, said at a press briefing.
Tata Motors is doing great abroad
Revving up business abroad is Tata Daewoo and Tata Hispano, where Tata Motors has a 21% stake, with the option to buy it out completely. Last July, Tata Hispano had bagged a contract to supply 800 urban buses to Casablancas urban transport operator.
We are now looking at a contract to change the entire transportation system of Morocco, managing director Ravi Kant said. There are plans to export buses to North Africa and Europe. Tata Daewoo is already exporting trucks to South Africa, Middle East and south Asia.
In India, we are looking at buses for different segments. We are looking at how we can utilise our capacities in India, Korea and Spain, he said. As for product development, it is currently underway at six locations - Pune, Jamshedpur, Lucknow, Korea, Spain and UK - to develop passenger cars and commercial vehicles.
Also, it plans to leverage the distribution network of its allied partner Italian car major Fiat. With 42 Fiat distributors, Rajeev Dubey, executive director, said, that some would sell both Tata and Fiat vehicles, others would represent just one company.
Global Slowdown corrects local steel prices
The tremor of global slow down in steel demand, coupled with falling steel prices has broken down the long rally witnessed by the Indian steel industry. Steel prices in the domestic as well as international market corrected almost 25% from their peak levels in April 2005.
At current market levels, the BSE Sensex has moved up by almost 54.28% in the last one year, whereas the BSE Metal index has gone up merely by 13.79% and the share price of steel major such as SAIL and Tata Steel have under performed by a negative 10.8% and positive 2.25% at Rs 57.65 and Rs 408 in last one year.
For the quarter ended December 2005, steel companies have surprised the market. The cumulative net sales of the top twenty steel companies have come down by almost 7% compared to the corresponding period last year. The declining sales turnover has further hit the net profit of these companies. During the same period, overall net profit has drastically fallen down by about 33.61%.
Steel majors such as SAIL, Tisco, JSW Steel have shown decline in net sales by 19%, 1.35% and 11.48% at Rs 6334.53 crore, 3680.80 crore, and 1518 crore, respectively. Whereas, the net profits of these companies have fallen down by 54.78%, 15.35% and 38.16% at Rs 684.59 crore, 753.74 crore and 139.2 crore, respectively.
The decline in sales coupled with the falling steel prices has resulted in companies witnessing shrinking margins. For the quarter ended December 2005, The EBIDT margin of steel majors such as SAIL, Tata Steel and JSW Steel has come down at 23.38%, 38.13% and 27.82% as compared 40.54%, 42.96% and 33.54% in the corresponding period last year. "Due to falling realisations and rising input costs the overall margins of the steel industry have come down in Q3FY06," says Deepak Jasani, head of retail research, HDFC Securities. Analyst also believes that margins may remain under pressure or remain flat.
On account of supply pressure from global markets, steel prices throughout the quarter have remained sluggish, the net realisation has fallen significantly in the quarter ended December 2005. Impact of large-scale production cut taken by European and American producers were negated by high growth in Chinese production, resulting in softening steel prices in the global market. Considering the slump in international demand and build-up of inventory, there was a cut announced by companies in the across the products in the range of Rs 1500- 2500 per tonne.
Industry analysts attribute that China has become net exporter as there is excess capacities building up and the infrastructure projects are on the verge of completion. Indian steel industry is in tough time and trend may continue in future.
India to be hotbed of mining
Liberalisation had thrown open vast opportunities and global players in the mining sector are looking forward to the states of India, particularly Orissa, Jharkhand, Chhattisgarh, but the developments at the ground-level have not taken place as yet, said Mr DK Sahni, president of the Federation of Indian Mineral Industries (FIMI) here today.
Welcoming delegations to the two-day Indian Mining Summit being organised by the FIMI and Orissa government, Mr Sahni stressed on the importance of mining industry in the countrys income growth. He also elaborated the purpose and importance of these summits, which bring together all the stake holders in the mining industry to a common platform for succeeding in their common goal of accelerating the mineral sector growth.
Inaugurating the summit, steel and mines minister Mr Padmanabha Behera, spoke on how Orissa depended on the mineral sector. He pleaded strongly for value-addition in the mining sector for improving the per capita income of the people of Orissa.
The minister said the government will soon formulate a transparent and investment-friendly mineral policy for achieving sustainable development. Significantly, the chief secretary, Dr Subhash Pani, felt that the mineral policy to be India-specific considering its specific conditions. Dr Pani suggested that the NPV (net present value) collected while giving permission to use the forest land for mining should be given to the concerned state so that the state can use that for forestation and environmental protection.
Labor rigidity in India keeps firms on edge
A recent strike at the Indian unit of Toyota Motor is officially over, but the carmaker's problems with labor are still simmering behind the scenes, providing a cautionary tale to the wave of foreign companies setting up shop in one of Asia's fastest-growing economies.
A two-week strike at the 2,350-employee plant here in January cost Toyota 900 Corolla and Innova cars. The carmaker is now trying to make up for lost time by running double shifts. An ensuing court battle could last two years, and some employees this week began taking turns fasting at the factory gates in protest.
Toyota's problems have underscored the difficulty of liberalizing the economy in India, where political parties are tugging the coalition government in different directions over the issue of labor market freedom. The result has been gridlock.
The strike has also led to doubts about the country's allure as a destination for foreign manufacturers. Foreign direct investment in India rose to $6 billion in 2005 from $5.3 billion in 2004. Many experts say India, already attractive for its cheap labor and its engineering skills, could bring in even more foreign companies if it could free its labor market of red tape.
"India can be a manufacturing force to reckon with," said Ravi Uppal, managing director of the Indian unit of the Swedish manufacturing giant ABB, "if only the government can bring about improvements such as upgrading infrastructure and changing archaic labor laws."
India's labor laws date to a time when socialistic ideas dominated and the government ran its own factories. Labor market changes have not kept pace with the country's economic liberalization program begun in 1991.
A labor lawyer and consultant, Atul Joshi, said: "Ever since the present government came into power with the support of the Communists, labor unions try to dictate terms to management. Laws tend to be protective of workers, and unions tend to use it to their advantage."
Current laws still say that any company employing more than 100 workers cannot fire people without government permission, and the labor commissioner in the government has to be notified of every single person working on the night shift. In addition, no worker can be made to work beyond 75 hours of overtime a quarter.
Chinese steelmakers boost output to avoid closure
Four of Chinese steelmakers boosted their annual capacity beyond 10m tonnes last year, while a fifth is on course to exceed that level this year surpassing an unofficial benchmark that should ensure steel companies survival as strategic producers, according to last years national steel plan.
The steel groups that either have or will soon reach the 10m tonne benchmark are Jinan Steel, Tangshan Steel, Laiwu Steel, the Shanggang Group and Maanshan Steel. Mr Yang Deze, director of a metals industry rsearch institute in Beijing said that these five plants have made themselves too big for government interference in their operations. He also added that producers under the 1.5m tones would probably not survive.
Arcelor SA extends deadline for Dofasco takeover bid
Citing the need for regulatory approvals, Arcelor SA is extending the deadline on its $71-a-share offer to Dofasco Inc shareholders until Feb 20. The takeover bid had been set to expire Thursday this week.
Luxembourg-based Arcelor, the world's second-biggest steelmaker, said the extension is being made "in order to allow for sufficient time to obtain the required regulatory approvals." The deal requires support from stockholders holding at least two-thirds of Dofasco's shares.
Arcelor's $71-a-share offer was the result of a frenzied bidding war for Hamilton-based Dofasco. Germany's ThyssenKrupp dropped out of the running at $68 a share in the last week of January. While Arcelor SAs takeover by Mittal is also on the cards, Arcelor CEO Guy Dolle has launched a major campaign against the offer and, in the meantime, still intends to incorporate Dofasco into Arcelor if that deal goes through.
Privatization Of Nikopol Steel Factory barred
In January, a court ruled that the 2003 sale to Viktor Pinchuk, the son-in-law of former President Leonid Kuchma was illegal. Ukraine's parliament today barred the privatization of the Nikopol steel factory.
A majority of lawmakers voted to include the Nikopol factory on a list of enterprises that could not be privatized. Last month, the Supreme Court ruled that the 2003 sale of Nikopol to Viktor Pinchuk, the son-in-law of former President Leonid Kuchma, was illegal and returned it to the state.
The Economics Ministry accused lawmakers of violating the law with their vote, saying it was up to the government to bar the privatization of specific enterprises.
The ministry also called the move premature because the process of returning Nikopol shares to the state was still underway.
Pinchuk's Interpipe Corp. bought an initial, 25-percent stake in the Nikopol factory in 2003 and won the right of first offer to buy another 25-percent-plus-one-share stake in a later auction that no other bidders were allowed to participate in. The stakes were sold for a total of 410.5 million hryvna (US$81 million.
CVRD sells its stake in NES Brazil to JFE
Brazilian iron ore miner CVRD has agreed to sell for US$14mn its 49% stake in
ferrosilicon producer Nova Era Silicon (NES) to Japanese steel company JFE Steel. Ferrosilicon is an alloy of iron and silicon and can be used in steelmaking and foundries.
JFE has increased its stake in NES from 25.5% to 74.5%, while Mitsubishi owns the balance.
The iron-ore minister said that, the NES divestiture is aligned with CVRD's policy for the manganese business, which focuses on manganese ore and manganese alloy production through majority owned subsidiaries.
However, CVRD will continue to supply iron ore and logistics services to NES.
Mittal faces tough fight over Arcelor
Arcelor, formed in 2002 by combining steel giants in France, Spain, Belgium and Luxembourg, is fearful of the globalization that a Mittal takeover would represent.
Jean Arthuis, chairman of the French Senate Finance Committee and a member of the liberal UDF party said that, some of the reactions they're seeing are old-fashioned, out of date. It's time that the French people, came to understand the globalization of the economy.
Luxembourg's prime minister, Jean-Claude Juncker, said the bid was "not compatible" with the way Europeans see globalization. He also added that on the question of governance, they saw notable differences between Mittal's practices and those of Arcelor.
Guido Ferrarini, vice-chairman of the independent European Corporate Governance Institute, agreed that Mittal's corporate structure was "not ideal." But he added that French criticism of the deal was probably exaggerated.
Severstal Wants to Control Suppliers
Steelmaker Severstal said Wednesday that it planned to take control of a number of its raw material suppliers owned by its chairman and key shareholder, Alexei Mordashov, in a bid to improve transparency.
The move, which will be handled through an issue of new shares, could add as much as $4.3 billion to Severstals market value, sparking speculation that the steelmaker may be considering a listing abroad or an acquisition in the medium term. Moscow-listed Severstals market capitalization stands currently at just over $7 billion.
Mordashov said that consolidation is an important step in the development as a national steel and raw minerals producer that can compete in Russia and widen its global market presence.
Accusations of transfer pricing, the practice of setting prices unrelated to market levels for internal transactions, have dogged Russian metals producers as they seek to bring their business practices in line with Western standards. Mordashov said the deal would help Severstal avoid accusations of transfer pricing.
Mordashov owns 84 percent of Severstal. Under the deal, Severstal will issue 395.7 million new shares, 84 percent of which will go to Mordashov, in line with his holding in Severstal. In return, Mordashov will hand over control of six iron ore and coal suppliers, currently held through the Cyprus-registered firm Frontdeal. Minority shareholders in Severstal will also receive new shares in proportion to their existing holding in the company.
Moscows brokerages welcomed the deal, saying it pointed to plans for a flotation abroad or an acquisition.
Department of Justice to probe Mittal Bid
The antitrust division of the U.S. Department of Justice, has apparently initiated an investigation of Mittal Steel's $23 billion hostile bid for Luxembourg-based Arcelor.
Alberto Gonzales' DoJ will likely focus on assets Arcelor would acquire as a result of its pending deal to buy Canada's Dofasco. Is it all a token gesture? On Wednesday, the U.S. Federal Trade Commission, which also casts its eye over deals on antitrust grounds, approved plans by Arcelor to acquire Dofasco, and took no regulatory action.
Despite the proposed deal not involving substantial U.S. assets, it is not inconceivable that the DoJ should investigate Mittal's bid, since the U.S. often claims jurisdiction over deals that involve large shipments into the country.
Maverick Tube Earnings Beats Estimates
Maverick Tube, a manufacturer of steel products for the energy industry, reported a 64.1% rise in fourth-quarter earnings, aided by growth in revenues. The company earned $63.2 million, or $1.54 a share, in the quarter, compared with $38.5 million, or 90 cents a share, a year ago.
Fourth-quarter revenue rose 34.2% from a year ago to $484.7 million. Analysts were expecting revenue of $500.1 million. Compared to the third quarter, revenue from energy product business rose 2.5% to $409.7 million, while sales of electrical products declined 16.3% to $75 million.
The company said that they were pleased with Maverick's fourth quarter performance. Activity levels continue to be strong in all of their energy markets, and looking forward, they expected drilling and work over activity in 2006 to continue to increase in the markets they served.
AK Steel to increase prices
AK Steel said Wednesday that it will increase transaction prices for all hot-rolled stainless steel sheet, strip, tubular-quality and continuous mill plate products by
approximately 6%, effective with shipments on February 19, 2006.
The increase will be accomplished through a two point reduction in the functional discount rate. The price increase is in response to significant increases in manufacturing, energy and transportation costs, and to support capital investments.
Robinson Steel workers to rally today
Workers represented by United Steelworkers of America Local 1899 plan to rally this afternoon to protest what they say is Robinson Steel Co.'s contention that contract negotiations are going nowhere. The rally is scheduled for 2:45 p.m. outside the Robinson Steel offices at 2325 North Street Extension.
Local President Russ Saltsgaver said workers have been issued a last and best proposal and have been given until midnight Sunday to approve it. But he said negotiations are nowhere near an impasse. Steel fabrication plant representatives could not be reached for comment Wednesday.
The local represents 64 of Robinson Steel's 110 workers. Both sides have been in contract negotiations since September. The workers' contract expired Jan. 1 without any agreement.
Mittal garners German support for Arcelor bid-paper
Indian-born steel magnate Lakshmi Mittal claims to have won the backing of German-based investors of Arcelor for his unsolicited bid for the world's number two steelmaker, despite a refusal to sweeten the offer price, a German newspaper reported on Thursday.
"The majority of investors are for the transaction, they see the value that we can create through it," the Financial Times Deutschland daily quoted Mittal, the founder of global number one Mittal Steel as saying after a closed-door meeting with Arcelor shareholders in Frankfurt.
However, It was not immediately clear how much of Arcelor German investors hold. The report said Mittal had once again ruled out raising his bid for Arcelor. "That is my last word," the paper quoted him as saying in an article to be published on Friday.
Mittal Steel's bid for Arcelor, valued at about $24 billion, has been rejected by Arcelor and criticised by some European politicians worried about possible job losses.
SSAB Q4 profit dips below consensus
Swedish steel producer, Svenskt Staal AB (SSAB) said its fourth quarter profit after financials fell slightly to 1.198 bln skr from 1.280 bln a year earlier, hit by a 66 mln skr write-off of goodwill at its affiliated company, Cogent Power, as well as lower volumes at its steel operations, and increased prices for coal and iron ore.
The result was slightly below analysts forecasts for a profit of 1.264 bln skr, as recorded by SMe Direkt. SSAB said the price of coal was 30 pct higher in Swedish kronor in 2005 than in 2004, while the price of iron ore was up by 70 pct.
The company proposed a full year dividend of 9 skr per share, versus 7.50 skr per share in the previous year. It also said it is proposing a buy back worth around 2.20 bln skr, and a 1:3 share split, where 1 share owned will now become three shares.
BlueScope Steel profits dip
Australia's largest steel maker, said Wednesday that its profit would fall as much as 53 percent because a glut in China caused prices to fall. The company's shares had their biggest slump in three months.
Earnings per share will be 65 Australian cents to 75 Australian cents in the year ending June 30, the company said, down from a record 1.374 Australian dollars, or $1.01, last year.
China, which produces a third of the world's steel, became a net exporter for the first time last year, forcing companies like Mittal Steel and Posco to cut prices and output. BlueScope said prices this quarter fell as much as 20 percent from the first half and the "weaker pricing environment could continue."
Shares of BlueScope Steel fell 90 cents, or 12 percent, to close at 6.56 dollars on Wednesday, the lowest since June 25, 2004. Other steel makers in Asia also fell. Shares of Posco fell 2.7 percent to 217,500 won, or $228.20, and shares of Nippon Steel fell 3 percent to 425, or $3.58.
Chinese steel production may increase 10 percent this year, the China Iron and Steel Association said last month, after jumping 25 percent in 2005. "Given how high the market is, if there's anyone missing their targets, they're really going to be hammered in a big way," said James Holt, a fund manager at Zurich Financial Services in Sydney.
Posco, one of the world's largest steel makers, last month said its fourth-quarter profit fell 68 percent as benchmark Asian prices declined because of overproduction in China. Posco forecast sales would drop as much as 12 percent this year, reflecting increased competition from China. Posco cut its sales estimate twice last year.
BlueScope and its rivals are being squeezed by falling prices for their products and high raw materials costs. The prices of iron ore and coking coal, used in steel making, jumped to record levels last year as Chinese steel makers compete for the supply.
Mittal to retain control of 'hire and fire' at merged group
Steel tycoon Lakshmi Mittal will control all appointments at a merged Arcelor-Mittal Steel Group if his bid to take over the European consortium goes through, even though he removes his family's special voting rights, raising fresh questions about boardroom independence.
The news will strengthen Arcelor's defence against Mittal's hostile 23 billion dollar bid. Both Guy Dolle, the Arcelor chief executive, and European politicians have urged share holders to reject the offer as it will hand "absolute control" to Mittal.
According to a report in The Daily Telegraph today, a Mittal spokesman said: "as the articles stand, that is absolutely correct and it is fully disclosed in all our filings. But it's too early to say what the precise corporate governance arrangement will be at the enlarged group."
Mittal Steel's articles state: "the general meeting may dismiss each of the members of the board. "Such resolution to be approved by a majority of at least two-thirds. However, if the resolution is proposed by the B share-holders an ordinary majority suffices."
The Mittal spokesman dismissed the issue as a technicality: "Mittal has said it will considerably expand the board to reflect its international nature, which means more independent directors."
New plate mill in Inner Mongolia, 10 Asian mills in implementation phase
Siemens Industrial Solutions and Services Group has an ordervalued at some 11 million ($13.2 million as of Feb. 8)for a new plate mill under construction by Baotou Iron & Steel Co. (BSC). The order includes an automation system and parts of the rolling mills power and drive systems, with commissioning scheduled for early 2008. BSCs current hot-rolling millequipped by Siemenstogether with a tandem cold mill and pickling line began operation a few months ago.
Situated in Baotousome 700 km northwest of Beijing in the autonomous province of Nei Monggol (Inner Mongolia)BSC operates an integrated iron-and-steel plant producing both long products and flat steel, the latter via a compact hot strip mill. The new plate mill has a design of approximately 1.4-million metric tons annually; and BSC intends to expand its range to include plates from 5-100 mm thick and widths up to 3,800 mm, as required for gas and oil pipelines, pressure vessels, and bridges. The rolling mills first expansion phase comprises a reheating furnace, two plate rolling stands, a rapid cooling facility, and a hot plate leveler.
Siemens is making control systems and coordinating the engineering work and installation of the electrical equipment for the entire rolling mill. This also includes integration of automation packages for the heating furnaces, rapid cooling facility, and levelers, which will be provided by other suppliers. All components and systems used are part of Siroll PM, Siemens integrated solution for plate mills. Moreover, Siemens is responsible for commissioning and operator training. BSC will providefrom local sourcesthe majority of the motors and converters, the power distribution system and transformers, as well as the electrical infrastructure, reheating furnaces, and the finishing shop.
Currently, including this project, there are a further 10 Siemens-equipped plate mills that are in the implementation phase: eight in China, and two in India.
