October, 22 2006
Indian corporate world welcomes TATAs move on Corus
Mr Kamal Nath union commerce minister is reported to be very happy about the deal. He told media "Indian corporate have finally arrived on the global stage. I think big ticket acquisitions are already happening in the pharma space and going forward I see more such outward acquisitions happening across sectors like auto components, steel.
Mr Buddhadeb Bhattacharjee chief minister of West Bengal said that the event proved the strength of Indian industry. He told reporters "It is a very important development which has proved the capabilities of the TATA Group and the strength of Indian industry in world market.
Mr Sajjan Jindal vice chairman & MD of JSW Steel in an exclusive interview with Ms Shilpa Shree of FE said that The deal builds confidence in our minds to go and acquire companies abroad. But, I don't see the deal having any serious impact on the Indian steel industry because the acquisition has happened in the UK. Mr Sajjan Jindal however clarified that Like the global steel industry, the Indian steel sector is also highly fragmented. There is a need for consolidation here, but I cannot see any consolidation happening in India in the near future, because all the consolidation that has happened has already happened. Moreover, domestic steel companies are run by families and they are closely held.
Mr J Mehra director of Essar Group during a CNBC-TV18 inter view said My first thoughts on this deal is that it is in trend with the recent moves in the last 2 to 3 years in the steel sector the world over to consolidate. So, consolidation is the name of the game apparently in the steel sector today. I think it is in line and I think it is essential for the steel industry to consolidate. Having said that, its impact on the Indian steel industry being too much. It is a Europe based group and therefore it would not have any impact on the Indian steel industry.
Mr Deepakh Parekh chairman of HDFC said I think its a great move. It shows that Indian Industry is maturing. The top Indian corporate are getting bigger."
Mr R Seshasayee president of CII said "The TATA Steel-Corus agreement is a sign of a confident India Inc being recognized as a very significant global economic player. The internationalization of the Indian corporate sector has reached a new high with this landmark deal."
Mr Rajiv Kaul past president of CII & chairman of CII International Council said that the deal is reflective of the consolidation of the Indian industry in the global economy.
Mr Anil K Agarwal president of ASSOCHAM congratulated the TATA Steel board and said that the takeover will indeed enhance image and prestige of Indian corporate overseas, particularly the manner and grace with which the deal has been struck.
ISDAG to campaign for increasing per capita consumption
Representatives of all concerned in the steel sector are of the view that the present usage of steel in the country is very limited and needs to be expanded. The Institute for Steel Development and Growth, being jointly promoted by the steel industry and Government, will take the lead in imparting the right education to the people involved in this sector. It will also act as the nodal point for the proposed mass awareness campaign on steel.
In a meeting, presided over by Mr RS Pandey secretary steel it was decided to set up a steering committee to formulate and coordinate various aspects of this campaign. The meeting felt that a sustained campaign for creating awareness at different levels of steel users is needed. Engineers, architects, town planners and real estate developers have to be educated on the innovative applications of steel. The public also needs to be made aware of the cost effective and durable solutions which steel can produce for various common day to day usages.
The campaign will adopt various short term and long term strategies to create a sustained demand for steel in the country and oversee the implementation of the awareness campaign. The meeting also proposed to organize a World Steel Summit in New Delhi and meetings at state levels covering small towns and villages to create public awareness to substitute steel for wood, plastic and concrete.
The present per capita consumption of steel in the country is 30 kilograms per annum against the world average of 150 kilograms, 400 kilograms in developed countries and 1000 kilograms in some countries. The lowest consumption of steel in India is in the rural sector amounting to meager 2 kilograms per capita per annum.
Orissa government to give priority to POSCO India for iron ore
FE citing government sources has reported that the Orissa government has decided to recommend granting of prospecting license for Khandadhar mines in Keonjhar district, with an estimated reserve of 200 million tonnes of high grade iron ore, on priority basis to POSCO India. The report mentions that POSCOs application for the outer Malangtoli iron ore mines is also under active consideration.
It is reported that 132 applications were filed by other companies for Khandadhar mines, but state government has decided to give overriding priority to POSCO India. The grounds for such a move are not known.
However the report mentions that apprehending legal problems, the state has decided to file a caveat in the Orissa High Court on recommendation of the prospecting license.
Prospecting license would subsequently strengthen the claims of POSCO India in getting the mining lease at a later date.
CRISIL puts TATA Steel ratings on negative watch
CRISIL has placed its ratings on TATA Steels outstanding long term and fixed deposit program (AAA/FAAA/Stable) on Rating Watch with Negative Implications. The short term rating of P1+ has been reaffirmed.
The rating action follows TATA Steels offer to buy 100% of the equity of Corus for an overall consideration of over Rs.300 billion, which is significantly larger than TATA Steels current consolidated net worth of about Rs.102 billion.
As per the release, CRISIL is in discussions with the management of TATA Steel to understand the funding pattern of the acquisition. CRISIL will review its outstanding ratings after studying the implications of the acquisition and its funding.
Mr Ratan Tata would like to retire Report
Mr Ratan N Tata chairman of TATA Group during an interview with New York Times in London shared that he plans to retire but has not identified his successor yet.
Mr Ratan Tata said Id like to retire when I can still walk and play golf and fly and do all the things that I like to do.
Mr Ratan Tata is just 68 year old and has been chairman of TATA group since 1991.
Nickel supply and demand gap set to widen
Mr Steve Barnett president of Nickel Institute during the 2006 Paydirt Australian Nickel Conference in Perth said that a primary nickel supply gap globally is set to emerge over the next decade as the phenomenal demand for stainless steel outpaces production from new and existing mines.
Mr Barnett said that "The global nickel shortfall last year was 70,000 tonnes and it is already 60,000 tonnes this year so we are heading for a larger deficit in 2006 than last year. China currently needs 200,000 tonnes a year and though self sufficient in nickel until six years ago, will need 400,000 tonnes per year within a few years. But this is still less than the European Union's projected demand of 450,000 tonnes per year by 2015.
Mr Barnett added "Against this, some 380,000 tonnes per year of new nickel production is due to come on between now and the end of the decade compared to current annual production of around 1.4 million tonnes. However, to achieve that requires every known major project to be commissioned as planned, including Australia's Ravensthorpe mine."
Mr Barnett noted that with lead times of 7 years to 10 years for a new nickel mine and these $1 billion to 2 billion projects only generating 50,000 tonnes per year, the shortfall gap was likely to remain wide as stainless steel demand was running at 6% globally and around 22% for China alone. He said "New production will increasingly have to come from lower grade nickel laterite projects with higher development costs and producers will need to get around $5-6/pound to generate a return. This is double the return estimate of just 5 years ago.
Corus investors hoping for a rival bid
Corus shares continued to trade above the TATA Steels offer price of 455 pence closing at 473 pence suggesting that investors think a rival bid is likely. The speculation was fuelled by comments from Standard Life, which is the biggest shareholder of Corus with about 8% stocks that The offer by Tata for Corus is lower than we would have expected the board of Corus to agree to and recommend.
As per reports, some other institutional investors have agreed to SLI.
Mr HervMangin manager of Axas European Opportunities fund, figuring in top 10 investors in Corus with 2.9% stake, told The Independent "I think that Tata's bid is too low and that some other players like Severstal and CSN could react. Corus is the only sizeable asset in Western Europe that can be bought.
As per reports, Brazilian steel group CSN has appointed Lazards to advise on its options for gate crashing Tata Steels agreed 5.1 billion takeover of Corus. ThyssenKrupp could also be considering a move. On the other hand Severstal is in talks to appoint Sir Richard Sykes, rector of Imperial College and former CEO of Glaxo Smith Kline as its chairman. Sir Sykes led Glaxo through landmark mergers with Wellcome and Smith Kline Beecham.
But any rival will face a tough obstacle in the shape of Coruss pension trustees which have assets and future liabilities of 13 billion, more than twice the value of the company, have backed TATAs bid. The size of the liabilities means the pensions regulator could stop any takeover unless the bidder guaranteed the future of the funds, or had trustee backing.
A new bidder would also have to stump up a 1% break fee that has been agreed as part of the Tata Corus tie up.
Tata's offer will now be placed before a shareholders meeting at an as yet unspecified date, with the board's recommendation that the offer be accepted. So far Standard Life and Axa have not said that they would vote against the offer.
POSCO & Nippon to increase ties and crossholdings
POSCO's board of directors have approved plans to bolster ties with Nippon Steel following the heightened merger activity in the world and amid growing competition from the Chinese steel makers.
POSCO and Nippon agreed to supply steel slabs for each other when they repair furnaces between 2007 and 2011 and increase cross shareholding. Nippon will buy a 2% stake in POSCO in addition to the 3.32% it already owns while POSCO plans to acquire Nippon's shares of the same value. They also agreed on technological cooperation to build facilities for recycling ferruginous by products.
Shanxi based coal companies to raise $12.6 billion in 5 years
Interfax citing Mr Yu Youjun the governor of the Shanxi province has reported that 3 to 5 coal companies in Shanxi Province will be listed overseas every year during the next 5 years for setting up a capital platform for the development of Shanxi's energy industry.
Mr Jiang of Shanxis listing office told Interfax that according to the provincial 2006-2010 plan Shanxis coal companies would try to raise RMB 100 billion (12.66 billion) through foreign stock markets and would mainly choose the Hong Kong market for listing. Mr Jiang said that the listing plan would be launched in 2007
Mr Jiang revealed that the coal companies involved in the listing plan would include Datong Coalmine, Jincheng Anthracite, Lu'an Mining, Yangquan Coal Industry, Shanxi Lanhua and Shanxi Coking Coal. He added that Datong Coalmine may become Shanxi's first company to go public in Hong Kong.
Inco posts record profit for July to September
Inco Limited, while preparing to be overtaken by CVRD, has reported the highest ever quarter earnings during July to September 2006 in the company's 104 year history. Incos quarterly profit soared to $701 million up from $64 million in July to September 2005.
Inco said it produced 125 million pounds of finished nickel in the third quarter up by almost 13% from last year, most due to the commencement of nickel concentrate production at Voisey's Bay in Labrador and additional production in Manitoba.
In the third quarter, the London Metal Exchange's benchmark cash nickel price rose to a record quarterly average of $29,178 a tonne, up from a year ago $14,567 per tonne.
Mr Scott Hand chairman & CEO of Inco said in a release that "Our record quarterly earnings reflect the unprecedented sustained strength we've seen in the nickel market, combined with strong production from our operations.
Inco's board of directors, meanwhile, has deferred a decision as to whether to declare a quarterly dividend for the third quarter of 2006 until after the expiry of the CVRD offer on Monday.
Chinese steel giants mute in global M&A activity
In the feverish M&A competition among global steel magnates, Chinese producers seem standing stock still seeing the fellow makers growing bigger. Comprising of numerous small components and featured by irrational layout, extensive mode for growth and weak technical innovation capability etc China's steel sector appears feeble among world competition.
It only takes half a year for Mittal Steel to take Arcelor and shape the largest titan that more than doubles the second largest in terms of output in steel circle worldwide. However, there is much more room for further combining activities as proved by TATA Steel's offer to buy Corus. Severstal is remembered by the world despite being unable to absorb Arcelor at last.
Meanwhile, China's Number One Baosteel is mute on the global battlefield although it has already arrived at Chinese market and penetrated into the domestic plants selectively.
Systematic and mechanism reasons can be found to explain the rough road of M&A in China, the enterprises have limited power determining where to go, local government often pursues better economic performance by introducing in foreign capital etc. The key to the problem still rests on how to simplify the investors in the merger wave. In China's miscellaneous situation, taking effective measures to promote market driven capital integrity is said important.
(Sourced from Mysteel.net)
China announces new levy for iron ore imports
Chinese ministry of communications recently revealed that all discharging ports of iron ore imports are to levy charge for facility maintenance as of November 1st 2006. The move is taken to rein in ore imports for China to gain a better position in upcoming benchmark ore talks, which is rumored to start in late November. Prior to this, China has introduced registration of ore imports contracts for monitoring the sector.
However, market insiders held that the impact of above measure would tail away in due course since the traders would be able to pass on added costs to end-users on robust demand from China.
That can well explain the great concerns of the authority, who are stepping up efforts in curbing ore imports in advance for gaining a better leverage and hopefully reversing the final outcome.
(Sourced from Mysteel.net)
ConsMin to focus on nickel operations in Kambalda
Consolidated Minerals Ltd plans to ramps up its key Western Australian nickel exploration and mining operations and has undertaken an ambitious target of 15,000 tonnes of nickel per annum within the next 3 to 5 years. ConsMin said that it would push this 40% higher to between 6000 tonnes to 6,400 tonnes by end of June 2007 at a targeted cash cost of A$4.5 to A$5 per pound.
Consolidated Minerals has exploration and mining operations centered on Kambalda and the nearby Widgiemooltha Dome, south of Kalgoorlie. ConsMin has just completed its first full year of nickel production for a 4,445 tonne outcome.
Mr Alistair Croll COO of ConsMin while addressing the 2006 Paydirt Australian Nickel Conference in Perth said that nickel was the growth platform for the Company. He said "After coming through a watershed year for the Company, we have geared Consolidated Minerals for growth with a new Board and management team and will be seeking to bed down synergies from the Titan acquisition by developing these extensive nickel assets.
ConsMin also has established manganese and chromite businesses as well as interests in iron ore, zinc and copper.
UMW launches seamless tube mill in Wuxi
Malaysian UMW Holdings Bhd has launched a 0.5 million tonne seamless tube mill at its Chinese JV Wuxi Seamless Oil Pipe Co Ltd in a move to establish itself as an international player in the oil and gas industry.
Dr Abdul Halim Harun chairman of the group said We have to be global to make our presence felt. Then people will recognize us as a serious O&G player. Dr Abdul Halim said UMW had so far invested RM200 million in O&G operations in China, with RM71 million in WSP.
UMW Holdings has five subsidiaries in China in this segment and has also extended its presence to Dubai and Turkmenistan and soon plans to venture in India.
Chinese coke overcapacity to reach 24% in 2006
China's coke industry has been chronically plagued by overcapacity, seriously unreasonable product mix and especially high pollution.
According to statistics, there are over 1300 coke enterprises in China with total capacity of about 300 million tons of coke made by machinery oven, up 25% from the total capacity in 2004. Plus the existing capacity of coke from beehive oven and coke from primitive oven, China boasts a total coking capacity of almost 320 million tons.
Chinas coke output amounted to 230 million tons in 2005 up by 17.9% YoY, accounting for 57.5% of global coke output. Thus, China's coke overcapacity hit some 24.1%. The nation, likely to demand for about 185 million tons of coke, is expected to realize coke apparent consumption of some 200 million tons in 2006 if coke exports remain at last year's level, 12.76 million tons. Thus, the nation's coke capacity is some 120 million tons higher than the actual demands.
In addition, fresh capacity addition will hit some 20 million tons in 2006. In spite of obsolete capacity elimination, the nation's coke overcapacity will still stand at some 24% this year. At present, there are still many projects under construction or to be constructed, which will result in more severe overcapacity.
Another problem preventing China's coke industry from healthy development is the low industrial concentration degree. Accumulative outputs of top ten Chinese coke enterprises only accounts for 8% of the nation's total outputs. Only 3 coke enterprises possess annual capacity of over 3 million tons. 95% coke capacity in developed countries is set up as supporting department of steel enterprises while only 33% coke capacity in China is established within steel mills.
(Sourced from Mysteel.net)
Universal Stainlesss Q3 profit surges by 73% YoY
Universal Stainless & Alloy Products Inc has reported that its net income for the third quarter of 2006 rose by 73% YoY to a record $5.7 million as compared with $3.3 million last year on a 28% YoY increase in sales which reached a record $55.1 million.
Net income for the 9 months period ended September 30th 2006 rose 50% to a record $14.2 million on a 16% increase in sale that reached a record $148.1 million. In the prior year period net income was $9.5 million and sales were $128.0 million.
Mr Mac McAninch CEO said "Continued robust aerospace demand, coupled with strong petrochemical and power generation markets, enabled us to achieve record results for the third quarter of 2006. Sales were further accelerated by the rapid increase in the cost of nickel, a major component of stainless steel, which increased the prices of our products due to the effect of the surcharge mechanism. Our Dunkirk operation also benefited from continued workforce additions, the timing of feedstock procurement and effective cost management. As a result, Dunkirk's sales reached $20 million and its operating margin rose to a record 19% of sales."
China calls for higher coal mine safety in winters
Xinhua has reported that Chinese State Councilor Mr Hua Jianmin on Friday urged local authorities to watch out for coal mine and other workplace related accidents as the country is entering winters.
Mr Hua at a teleconference on coal mine and work safety on Friday said that to ensure coal mine safety, heads of coal mines and local authorities must be held accountable when accidents occur. He said that the country's goal for this year on closing small, unsafe coal mines must be met in the remaining months.
With rising demand for coal for heating in northern parts of the country during winter usually the rate of accidents goes up. Statistics show that the number of deaths in the fourth quarter of 2005 accounted for one third of that last year.
Chinese coalmines suffer frequent accidents, claiming about 6,000 lives a year. Since the beginning of this month, eight major accidents have taken place in China, with 55 dead or missing.
AK Steel appoints Mr Gerber to board
AK Steel announced last Friday that Mr William Gerber has been elected to its board of directors effective January 1st 2007. Mr Gerber is the executive VP and CFO for Troy based Kelly Services. He formerly served as a senior manager in corporate finance for The Limited retail chain.
Mr Gerber, a CPA, earned a bachelor's degree in economics and finance from the Wharton School at the University of Pennsylvania, and an MBA from the Harvard Graduate School of Business Administration.
Mr James Wainscott chairman, president and CEO of AK Steel said "Bill Gerber brings an impressive background in executive management and corporate finance to AK Steel's board of directors.
Arch Coals net income surges in Q3
Arch Coal Inc has reported third quarter 2006 consolidated net income of $50.9 million as compared with $18.9 million in the prior year period. Arch more than doubled its income from operations during the third quarter of 2006, reaching $82.2 million as compared with $34.2 million in the prior year period. Adjusted EBITDA increased by nearly 50% over the year ago period to $135.8 million from $92.0 million, while revenues declined on a YoY basis due to the disposition of select Central Appalachian operations at the end of 2005.
For the first nine months of 2006, Arch reported consolidated net income of $181.3 million as compared with $29 million during the first nine months of 2005. Income from operations increased more than three fold to $276.2 million, and adjusted EBITDA rose more than 75 percent to $427.4 million over the same time period.
Mr Steven F Leer chairman and CEO of Arch said "Despite the recent weakening in market conditions, Arch Coal achieved a solid operating performance in the third quarter of 2006 compared with the third quarter of 2005, with substantial improvement in EPS, operating income and EBITDA. At the same time, we made a strategic investment in a growing Illinois basin coal producer to expand Arch's footprint in that increasingly attractive region and acquired an interest in DKRW Advanced Fuels, LLC, to participate in the emerging coal-to-liquids industry. Additionally, we announced and commenced a share repurchase program of Arch's common stock to enhance value for our shareholders."
International Nickels update on Santa Fe-Ipora project
International Nickel Ventures Corporation last week reported on the successful results of the expanded 2006 drill program at the Santa Fe - Ipora nickel laterite projects in the Goias State of Brazil with JV partner Teck Cominco Ltd.
INVC informed that approximately 60% of the expanded drill program was completed by the end of September with about 4,000 meters drilled in 233 holes. Total drilling since inception of the joint venture program is now about 55,000 meters in more than 4,100 holes. The expanded drill program and scoping studies are expected to be completed by the end of October, 2006.
The scoping studies will consider two potential production scenarios of 30,000 tonnes and 60,000 tonnes per annum of nickel respectively.
It also said that the recent prospecting at Santa Fe Property has discovered garnierite, an important nickel ore, in outcrop and surface float extending over an area of about 300 meters by 400 meters located southeast of the Central Area. The area is open in three directions and a program of intensified exploration is being initiated to quantify the extent and grade of this new occurrence.
It said that drilling at 200 to 400 meter centers in the Rio dos Bois region in Ipora North continues to expand the extensions to the Northeast and Central Areas. These extensions collectively cover an area of 2.1 square kilometers. Results from 10 selected drill holes include 1.4% to 2.2% nickel over 2 to 10 metros.
New resource estimates are currently being completed for both Santa Fe and Ipora and are expected to be available in early November.
