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| FEBRUARY 2006 | |
| From the CEO's Desk | |
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For the last few years, the global iron & steel industry has undergone a lot of structural changes. In late ninties, the steel manufacturing industry was sort of sandwiched between raw materials supplying / equipment supplying industry and the user industry like auto industry. These industries had undergone good amount of consolidation and hence were in a position to excert pressure on their suppliers as well as users. Thus, steel industry was a looser from both the ends. This situation gave rise to the theory that our industry should also consolidate itself so as to maintain a upper hand in dealing with other industries. As predicted by the experts, the industry started consolidation process few years back. Closure or take over of unviable units also accelerated this process. This phenomenon gave rise to the new generation steel coglomerates like Arbed, Usinor, Arcelor, Ispat which brought other steel making capacities under their control and grew into a bigger organisation with multi locational plants and offices. First time in the history of the industry, the companies grew beyond the boundries of not only the countries but also the continents. The pace of this process remained gradual for some years and the degree of consolidation was quite low as compared to auto or mining sector where there are only five to six global players. Generally the consolidation was welcomed by shareholders as it has always given them handsome returns. It was undoubtedly Mr.L.N.Mittal who not only emerged as the smartest player in the game but is instrumental in changing the mindset of steel business community. Many so called 'steel gurus' commented that he is more of a 'Deal Maker' rather than a 'Steel Maker' but he never stopped. From a small re-rolling mill owner to the biggest steel maker and the third richest person of the world !!! Simply amazing journey ! Today the whole world admires him and Indians surely have atleast one more reason for being proud about him. I am quite sure that many Indian steel houses would follow his footsteps and the process has already started. Mittal Steel, which was uptill now producing over 70mt out of world production of over 1000mt of crude steel, has bid for the second largest steel producer, Arcelor. As per Mr.Mittal, the merger will give more value to the shareholders. Ever since they have made this offer, the combined market cap of two companies has gone up by US $ 8bn. Secondly, this will not only benifit Mittal Steel and Arcelor but also benifit the steel industry at large. The new entity will have over 10 % of the world's steel making capacity under its control and this consolidation would make the industry better positioned while dealing with other industries. It seems there is some opposition to this offer from Europe but at the end of the day, it is the share holding community which will decide the fate of this deal. "There is no place for emotions in business" says Mr.Mittal. Afterall, the fact remains that worldwide, the steel stocks are up and the industry has created approximately Rs.1,00,000 crores in investor wealth !!! D.A.Chandekar
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Beekay Engineering Corporation
Engineering & Industries Consultancy
Services |
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Jindal Steel & Power signs contract with Lurgi Jindal Steel & Power Limited (JSPL), part of the US $ 4 billion Jindal Organization, has successfully signed a contract with Sasol-Lurgi Technology Company (South Africa) and Lurgi AG (Germany) for a coal gasification facility at its proposed 6 MTPA integrated steel plant in the state of Orissa. The gasification technology will employ state of the art fixed bed dry bottom type mark IV gasifier and produce approximately 320,000 normal cubic meters per hour of synthesis gas, which will be adequate for the production of two million tonne per annum of direct reduced iron (DRI) and meet all the plant fuel requirements. There are two production routes for manufacturing of DRI; one is a coal based using rotary kiln where JSPL has the largest production facility of 1.37 million tonne per annum in the world at Raigarh in the state of Chhattisgarh. The maximum available kiln capacity in this route is 500 tonne per day with an annual maximum production of 150,000 tonnes. Another route is gas based DRI where natural gas is used as process reductant. |
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Jaypee lines up Rs 3000 cr expansion The New Delhi-based Jaypee group has drawn up an investment plan of Rs3,000 crore to raise its cement capacity to 15 million tonne per annum (tpa) by 2007 from the current 7,000 tpa. The investment will come from the recently-concluded foreign currency convertible bond (FCCB) issue of $200 million which, the company hopes, will deliver a 100 percent growth in revenues to Rs7,000 crore. Post expansion, they will be the third-largest cement player in the country after AV Birla group and Holcim. The group is also modernising UP cement. |
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Ramos invites Indian business to Philippines The Philippine government has embarked on a serious program to revitalize the mining industry by way of fiscal and non-fiscal incentives in this sector which aims to balance mining development with socio-environment concerns the former president and ex-General, Fidel V Ramos said. Some of the tax incentives for the mining sectors are: income tax holidays, exemption from taxes and duties on imported spare parts, wharfage dues, export tax & duty, impost fees, tax credit on raw materials and supplies including simplified customs importation procedures. In addition to these incentives, the new Mining Act also grants incentives for pollution control devices and income tax carry forward losses, amongst others, he said. Currently he is the Chairman of RPDEV (Ramos Peace for Development Foundation). He has brought in a business delegation from the Philippines to enhance business linkages and strategic alliances between companies in the two countries. This event was jointly organized by the AIM Alumni Association India & CII. |
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RINL celebrates its 24th formation day in a novel way RINL has celebrated its 24th Formation Day on 18th February in a novel way this year by conducting RINL Health Run in the morning, focusing on empowerment of differently abled children, launching of Jatropha plantation for bio-diesel and recognizing outstanding contribution of employees by conferring Jawaharlal Nehru Awards and other Awards. |
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NID designer stainless steel utensils are coming right into dining table, literally. The National Institute of Design (NID) has developed a range of stainless steel utensils to address Indian cuisine and eating habits. The utensils have been developed for Bangalore based Salem Steel plant. The range mainly includes dinner set, rice plates, water jug, glass, dessert bowl, soup bowl, spoons, cutlaries among others. The company has developed three variations with contemporary feature, style and aesthetics which jells with today’s lifestyle. These utensils have been designed to cater to Indian cuisine, a faculty at NID who designed the utensils. The designs have already been submitted to the company. The utensils would mainly target urban and semi urban market. It took about 3-4 months to design these utensils. However, this is not the first time that Salem has got their utensils designed at NID. Earlier, the institute had designed their utensils about 20 years ago. |
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SAIL to pump in Rs 8,017 cr to revive Iisco SAIL has embarked on a plan to invest Rs 8,017 crore for revival of the ailing Indian Iron and Steel Company (Iisco) as part of merger of the two PSUs, the West Bengal Assembly was informed recently. Replying to a question in the house, Industrial Reconstruction Minister Nirupam Sen said merger of the two PSUs was undertaken following an initiative by the state government. Allocation for the revival was sanctioned through SAIL’s corporate plan 2005-2012. The merger of Iisco with SAIL would help the steel giant procure raw materials internally and this, in particular, would help its Burnpur plant’s for in modernisation and capacity growth programmes. The minister said the West Bengal government had agreed to extend SAIL a concession of Rs 450 crore to facilitate modernisation of the ailing PSU in the state. |
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Gallantt Metal lines up Rs 191 crore for Kutch steel plant The 122 acre integrated steel plant of Kolkata based Gallantt Metal Steel Ltd at Samakhayali village of Kutch with a production capacity of 500 tonne per day, has started its production. The company is investing Rs 191 crores in the project in two phases. The plant is currently producing about 200 tonne TMT bar per day. Expected to get fully operational in about a week, the plant has facilities to manufacture 99,000 MTPA sponge iron, convert the same to 1,76,420 MTPA mild steel billets and produce 1,68,300 MTPA TMT bars. Production of bars initaited from December 29 and is currently producing about 200 tonne bar per day. It will be producing 500 tonne per day, which would be sold in Gujarat. The company would get Thermax Technology next month and it's products will be Thermax TMT bars. Also, the company is setting up a 18 MW captive power plant (CPP) that is likely to be operational by October this year. The company will also be coming up with a public issue by February end or first week of March to raise Rs 37.12 crores to part finance its CPP. The company believes that their production of 18 MW power plant at low cost will be the main advantage in the long run. |
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Blast may hit Essar Steel production Essar steel may face a production loss as it has closed one of its three arc furnaces at the Hazira unit following a blast on Saturday evening. The 1.5 million tonne electric arc furnace remained shut for at least a week. The furnace was closed for investigation into the cause of the incident. Recently, water came in contact with molten steel at one of the arc furnaces, thus pushing the temperature inside the furnace nearly 35 times the limit and triggered a blast. The accident injured 11 workers, who were admitted to various hospitals in Surat city. The three furnaces put together have an installed capacity of 4.5 million tonne. With the closure of one furnace, Essar’s capacity would go down by nearly 30 per cent till the time it is restored. In a company release, Essar stated that the remaining two furnaces had resumed normal operations. |
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Visakhapatnam Steel Plant’s (VSP) cumulative sales turnover from April 2005 to Jan 2006 reached Rs 6,424 crore, representing a growth of 4 per cent over Rs 6,180 crore recorded in the corresponding period last year. This includes a 174 growth in export sales to Rs 368 crore as compared to Rs 134 crore in the corresponding period last year. During the current year, the steel plant is aiming at a turnover of about Rs 8,000 crore, including exports. The steel plant’s sales turnover was at Rs 864 crore in January 2006, up by 11 per cent over Rs 780 crore in the corresponding month of last year. A labour productivity of 291 tonne/man year in January 2006 reflects the determination of the employees to enhance their efficiency. On the production front, VSP achieved a production of 3,63,000 tonnes of hot metal, 3,21,000 tonnes of liquid steel and 2,86,000 tonnes of saleable steel in January 2006. With this, the cumulative (April’05 to January’06) production of hot metal reached 3.43 million tonnes, liquid steel to 2.96 million tonnes and saleable steel to 2.64 million tonnes, a growth of 7 per cent, 1 per cent and 2 per cent respectively over the corresponding period of the previous year. |
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Abu Dhabi ship building earns Dh46.2 million net profit Abu Dhabi Ship Building announced a net profit of Dh46.2 million on total revenues of more than Dh577 million for full year 2005. Net profit and earnings per share increased by more than 22 per cent compared to the previous year. In addition ADSB has also added to its order log of existing projects, which is worth about Dh2 billion. The company is currently working on shipbuilding projects that include the much proclaimed six-vessel Baynunah naval Corvette programme, along with 64-metre and 42-metre naval landing craft, four fast supply vessels, and a 40-metre crew boat. ADSB is a public joint stock company listed on the ADSM. (1 US$ = 3.67 Dirhams) |
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Chicago Bridge & Iron wins $30 million storage tanks contract Chicago Bridge & Iron (CB&I) has been awarded the estimated $30 million storage tanks subcontract by the German/South Korean consortium of Linde and Samsung Engineering Company on the 1.2 million-tonne-a-year ethane/propane cracker planned at Jubail by the local Tasnee Petrochemicals. The local Nasser al-Hajri Corporation has been awarded the estimated $89 million mechanical, electrical and instrumentation (MEI) and civils package. The Linde/Samsung team is carrying out the technology-plus-EPC contract. |
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Mtrans & Bombardier in race for 16-kilometre Arabia monorail project Malaysia’s Mtrans and Canada’s Bombardier are in the final leg of talks for an estimated Dh587 million contract for a 16-kilometre “automatic people mover” or mini monorail project at the City of Arabia, a top official was quoted as saying. “Out of the five bidders, negotiations are going on with the two and we hope to make a decision soon,” Anwar Sher, director of City of Arabia, said. One of them is expected to be awarded the contract once technical and pricing details are agreed, reports said. The monorail will have 14 stations in the development and will connect to the Blue Line of Dubai’s Light Rail Transit project. City of Arabia’s development cost is likely to reach Dh22 billion, requiring Dh7.3 billion investment by developers Elyas and Mustafa Galadari Group. Bids for the City Arabia’s estimated Dh1 billion infrastructure package have been received and five companies are in the race. “Request for proposals has gone out to five pre-qualified bidders. We hope to close the bid next month and award contracts by this summer. City of Arabia will be up and running by the middle of 2008,” he said. The developer has also awarded some contracts for a power and water recycling project for the 1.4 kilometre Wadi Walk lake and Restless Planet theme park, part of City of Arabia. Siemens has won the substation contract. |
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Hadeed targets sales of 4.3MT of long products this year or the second consecutive year production of the Saudi Iron and Steel Company (HADEED) exceeded 1 million tonnes of flat products and 2.6 million tonnes of long products. The total production of the flat products was 1.13 million tonnes in 2005 compared to 1.037 million tonnes in 2004, up by 8.94% and of the long products 2.7 million tonnes compared to 2.6 million tonnes during the same period of comparison, up by 2.2 %. According to the production figures Arab Steel obtained from the company’s sources, the company has achieved a new production figure in 2005 amounting to 3.8 million tonnes compared to 3.6 million tonnes in 2004, up by 4.1%. The sales volume of both long and flat products amounted to 3.676 million tonnes in 2005. 90.3% of the total sales of the long products were channeled to the domestic market against 9.7 % to the export markets, while 82.2 % of the total production of flat products was channeled to the domestic market against 17.8 % to the export markets. The fall of prices, especially during the last months of 2005, resulted in a slight decline in the sales volume reflecting a limited decline in the sales level of 2005 compared to 2004. The company is planning to increase its sales in 2006 up to 4.3 million tonnes of long products, which is the same figure achieved in 2005, while the sales volume of flat products will reach 1,5 million tonnes. What was helpful for achieving these new sales figures was putting into the stage of production the new expansions in the second half of this year. |
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Arab crude steel production reaches 14 MT in 2005 The Arab companies producing crude steel in Egypt, Saudi Arabia and Libya increased their production of crude steel by more than 1.25 million tonnes in 2005 compared to 2004. Egypt’s production of crude steel which exceeded 5.5 million tonnes in 2005 compared to 4.4 million tonnes in 2004 ranked first, up by 15.40%, followed by Saudi Arabia in the second rank, as the production of Saudi Iron and Steel Company amounted to 4.1 million tonnes in 2005 compared to 3.9 million tonnes in 2004, up by 7.2%, followed in the third rank by the Libyan Iron and Steel Company which achieved the highest production increase during 2005 compared to 2004; its production amounted to 1.2 million tonnes compared to what is a little bit more than one million tonnes in 2004, up by 22.7%. Qatar’s and Algeria’s production exceeded one million tonnes each. Thus, the crude steel production of the largest six Arab steel producing companies amounted to 13 million tonnes in 2005 compared to 11.8 million tonnes in 2004. To this figure the production of a number of companies which have steel mills producing limited quantities of steel as well as the new companies, which entered the steel production stage in 2005 have to be added, as the total production of these companies is estimated by about 850.000 tonnes in 2005. Thus the initial estimates of the total Arab steel production in 2005, according to ArabSteel information approach is 14 million tonnes, which makes an increase reaching to 14.3%. |
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EU regulators cleared proposed acquisition of Erdemir by Arcelor European Union regulators cleared the proposed acquisition of Turkish steelmaker Erdemir by Luxembourg-based Arcelor SA, the world’s second largest steelmaker, and the Turkish pension and investment fund Oyak Group. “The proposed transaction would not significantly impede effective competition in the European economic area,” the European Commission said in a statement. Since agreeing late last year to join up with Oyak to buy into Erdemir, Arcelor has itself become the target of a hostile takeover bid by its rival Mittal Steel Co., the world’s largest steelmaker. Oyak beat off bids by Arcelor and Mittal in October to buy a 46.12 percent stake Erdemir, for $2.77 billion, but later agreed to sell part of its holding to Arcelor. The sale of Erdemir is part of a privatization program in Turkey that is backed by the International Monetary Fund. Opposition to the sale had been intense in Turkey, provoking strikes by thousands of workers. However Turkey’s government says privatization of large state-owned enterprises like the steel company whose full name is Eregli Demir ve Celik Fabrikalari T.A.S. are crucial to ensuring the nation’s competitiveness and prosperity. |
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L&T secures US$32.64 million transmission line order Larsen & Toubro Limited (L&T) has secured an order from the Abu Dhabi Water and Electricity Authority (ADWEA) for the construction of 85 km long 220 kV transmission lines. Valued at AED 117.470 million (US$32,639,473), the project is to be completed in 24 months from January 2006. Mott MacDonald is the project consultant. The scope of work, to be executed by L&T’s Engineering Construction & Contracts Division (ECC), involves completion of a 220 kV grid interconnection by connecting Sweihan 440/220 kV Grid Station with Al Hayer 220 kV Grid Station (35route km) and to Ramah/Al Khazna 220 kV OHL (50 route km). The project also involves live line replacement of existing earth wire / 8 fiber optical fiber ground wire (OPGW) by new 32 fibre OPGW for a length of 92 km in three different circuits. The main OHL comprises double circuit twin aluminium conductor steel reinforced (ACSR) ‘Dove’ conductor with single OPGW. The towers will be designed in-house by the Engineering Design and Research Centre team of ECC, and will be sourced from the L&T’s Transmission Line Towers manufacturing facilities in Pondicherry and Pithampur (India). On completion of this project, Sweihan Station will be connected to the 220 kV network consisting of Ramah, Khazna, Al Hayer, Dahma, Salamat substations in UAE thus increasing the stability of 220 kV network. |
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China steel firms up output to avoid closure Chinese steelmakers have been increasing their capacity in a bid to grow too big to face closure under government-led attempts to rationalise the booming sector. Four of the country’s steelmakers lifted their annual capacity beyond 10 million 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 year’s national steel plan. The steel groups that either have or will soon reach the 10 million tonne threshold are Jinan Steel, Tangshan Steel, Laiwu Steel, the Shanggang Group and Maanshan Steel. Some have increased output organically, while others have taken over smaller steelmakers. “The expansion of these [five] plants has made them too big for the government to intervene in their operations,” said Yang Deze, director of a metals industry research institute in Beijing. Deze said the government’s planning agency had stipulated that steel producers with capacity under 1.5 million tonnes would not survive. China has accounted for 78 per cent of the growth in global steel production since 2000 and produced almost 350 million tonnes of the metal last year, a total almost equal to the combined output of Europe and Japan. Increased steel production is a key barometer for investment, which remains the most important driver of the Chinese economy, ahead of consumption and exports. The central government has said it wants consumption to take over as the engine of growth for the economy, although this is likely to take some years because of China’s high savings rate. In a report released in Beijing yesterday, the World Bank painted a positive picture of the Chinese economy’s prospects this year, predicting a growth rate of 9.2 per cent based on strong investment and exports, coupled with low inflation. |
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Millennium stockholders approved new share issue to Tata Steel Shareholders of Thailand’s Millennium Steel PCL have approved an issue of 2.105 billion new shares for private placement with India’s Tata Steel Ltd. at a price of THB1.15 each, the Thai firm said. The approval, granted at an extraordinary shareholders’ meeting yesterday, seals an agreement reached in December under which Tata Steel will also acquire 40% of Millennium Steel’s current share capital from Thailand’s Siam Cement PCL for about THB3 billion (US$73 million). Millennium Steel said in a filing to the Stock Exchange of Thailand that its paid-up capital will rise to THB11.026 billion after the issue of new shares, from THB8.921 billion currently, based on a par value of THB1.00 a share. Following the stake purchase from Siam Cement and the share placement, Tata Steel is expected to own at least 51% of the enlarged share capital of Millennium Steel. Tata will then proceed to make a tender offer for the remaining shares at THB1.15 a share. The tender offer - required under Thai regulations when a purchaser’s holdings rise above 25% - could raise the cost of the deal substantially, but some analysts said minority holders may want to hang on to the stock ahead of its takeover by a strong partner. |
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Mittal Steel to spend EUR380M in Poland this year Mittal Steel Poland, a Polish unit of Mittal Steel Co. (MT), plans to invest about EUR380 million in 2006. The total investment in 2006 will probably be close to EUR380 million. According to the 2003 privatization agreement under which Mittal Steel bought Polskie Huty Stali, Poland’s largest steel producer, Mittal Steel pledged to invest 2.4 billion zloty (EUR1=PLN3.7615) by 2009. Given the rising global demand for steel products, Mittal Steel decided to revise the plan. The changed plan increased the capacity of the continuous cast-iron plant in Dabrowa Gornicza to 3.0 million tonnes from an initially planned 1.5 million tonnes. Another change was to build a new hot-strip mill in the Cracow steel plant instead of modernizing the existing one. The hot-strip mill in Cracow will be one of the top three mills of the world, it will cost EUR270 million. For the last 20 years, there was no new hot-strip mill put up in Europe. Under the terms of the privatization agreement, these investments should be completed by the end of 2006. But the investment process would take 20 months, and couldn’t be shortened given the time scale. Given the upgraded investment plan was approved by the European Commission in July 2005, the launch of the new units by the end of this year could be difficult. Mittal Steel owns 69% of Mittal Steel Poland, formerly Polskie Huty Stali, and has an option to acquire another 25%. |
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Anyang Iron & Steel starts continuous caster SMS Demag, Germany, have successfully commissioned the singlestrand continuous caster for ultra-wide medium slabs at Anyang Iron & Steel Company, PR China. The continuous caster will produce ultra-wide medium slabs between 1,600 and 3,250 mm at a thickness of 150 mm, thereby boosting Anyang’s production capacity by around 1.1 million tonnes per year. The slab caster is designed as vertical bending unit with a vertical length of 2.5 m and a metallurgical length of 18.6 m. Its maximum casting speed is two meters per minute. The new slab caster will produce a large variety of high-quality steel grades ranging from high-strength structural steels to pipe qualities. The slabs produced by the caster will then be processed further by hot charging in the Steckel mill to yield plates and hot strip. The scope of supply includes the basic and detail engineering, the moulds, a spring-guided resonance oscillator with hydraulic actuator, supervision of fabrication and erection, and commissioning plus supplies and bought-out items for local fabrication. SMS GmbH is the holding for a group of companies internationally active in plant construction and mechanical engineering relating to the processing of steel, non-ferrous metals and plastics. The group is divided into the Business Areas of Metallurgical Plant and Rolling Mill Technology, Tube, Long Product and Forging Technology and Plastics Technology. In the year 2004 some 9,500 employees worldwide generated a turnover of about EUR 2.20 bn. |
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Sanyo Special Steel, Nippon Steel JV eyes expansion Expanding specialty steel operations and erecting anti-takeover defenses were cited as reasons for Nippon Steel Corp.’s plan to make Sanyo Special Steel Co. an equity-method affiliate, reports said. By cooperating in consignment production, materials procurement and distribution, the companies aim to boost shipments of specialty steel products to carmakers now that supplies are tightening. Specialty steel is durable and corrosion resistant, with 60%-70% of it used in the auto industry in making transmissions, crankshafts and other parts. Due to increased domestic car output, demand for this steel has risen 20% over three years. The two firms complement each other geographically, with plants located in eastern and western Japan. In addition, orders for each company’s specialty products can be integrated, allowing them to streamline production and beef up supplies. Nippon Steel has factories in Muroran in Hokkaido, and Kamaishi, Iwate Prefecture, while Sanyo Special Steel has production facilities in Himeji, Hyogo Prefecture. Nippon Steel produces around 1.8 million tonnes of steel bars and wires each year to Sanyo Special Steel’s roughly 800,000 tonnes. |
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Vietnam to import 2MT scrap steel in 2006 Vietnam will import more than 2 million metric tonnes of scrap steel this year to feed the production of domestic plants, an industry official said. Vietnam will import more scrap steel this year than last. Last year, the country imported 2.23 million tonnes of scrap steel and produced 3.66 million tonnes of billet steel for domestic consumption, government figures show. These plants have a processing capacity of more than 6 million tonnes this year, while it can (only) supply them with 4 million tonnes of raw material, resulting in a supply shortage (of raw material). Vietnam’s steel industry is facing a shrinking pool of available raw material, without elaborating. Vietnam imported 150,000 tonnes of steel ingot, another type of raw material, valued at $55 million in January, up 55.9% on year in volume and 42.5% in value. Due to low domestic sales of about 200,000 tonnes of billet steel in January, traders have a total stockpile of 300,000 tonnes. Billet steel is used by the construction industry. |
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