The positive trend in Indian steel industry continues !!!

This growth is well supported by the rise in demand for steel products.

The user industries like infrastructure, auto, white goods are doing well and would need additional steel in coming years. Naturally, many steel business houses have announced ambitious expansion plans while many others are going ahead with greenfield expansion. This sentiment is really encouraging for a steel professional but if one thinks that there are no problems at all then he is wrong.

Pig iron prices have improved over the last few weeks thanks to a revival in demand from steel industry. Higher steel prices typically lead to a pick up in pig iron prices too, say analysts. Pig iron prices are currently estimated at Rs 14, 000-16, 000 per tonne as compared to Rs 11,000-12, 000 levels in mid - January 06, point out analysts. Pig iron is typically poured directly out of the bottom of the blast furnace into pots to form ingots. The ingots are then used to produce steel. Improved prices realisations for pig iron is expected to help domestic suppliers like Tata Metalliks, Adhunik Metals and Visa Steel. Meanwhile, a revival in pig iron prices has also helped to improve prices of key inputs. It is understood that pig iron can be made from either met coke or steel scrap. Met coke prices which had earlier dipped to $ 130 - 140 per tonne levels in December 2005 have currently improved to about $ 180 per tonne levels thanks to improved demand conditions, say analysts. Met coke prices were pegged at $ 275 per tonne levels in mid-September 2005. Key domestic suppliers for met cokeinclude Gujarat NRE Coke. Improved pig iron prices has also helped scrap prices to rise about 20-25 percent over the past two - three months to currently about $ 300 per tonne levels. For pig iron manufacturers, typically nearly 70 per cent of operating costs relates to inputs like met coke or scrap, say analysts.

Posco to set up $14 million unit in Pune

South Korean steel major Posco will process and sell 1.3 lakh tonne of electrical steel from its upcoming Posco-India Processing Centre (POS-IPC) in Pune.

Earlier this year, the steel maker had tied up with consumer electronics major LG in a 65:35 joint venture for the centre. A senior official at Posco’s Indian office stated that the $14 million centre will come up by November this year. "Almost 25 per cent of the output will be sourced to LG and the rest will be sold in the local and international markets," the official said. "We foresee a surge in demand for electrical steel in the country owing to huge investments in the power sector and the expanding white goods sector. And there are hardly any players processing this steel in India," he added. Electrical steel is used in the manufacturing of electrical home appliances and for transformers. One of its variants, CRGO steel, is used in making transformers and at present, the country imports the entire requirement of the value-added metal. The centre will include four cutting and shearing machines, including a grain-oriented magnetic steel sheet and strip facility, and will be capable of producing up to 130,000 tonne of electrical steel sheets. It will be located in Pune’s Talegaon Industrial Complex, which is surrounded by large-scale transformer manufacturers, including Siemens. Many electronic appliances manufacturers, including LG and Whirlpool, also have manufacturing facilities in the complex and are expected to demand large volumes of electrical steel sheets. After production begins in November, Posco will introduce a core cutting machine that can manufacture cores for transformers and motors, enabling the new coil centre to be considered a specialised centre for electrical steel sheets. The company has constantly invested in overseas processing centres since the mid-1990s with the intention of making these centres play active roles in supporting Posco’s overseas marketing of steel products.

Bhilai Steel breaks 5mn.t. barrier Bhilai Steel Plant has surpassed the five million tonne-mark in production of hot metal, for the first time since inception. At the present rate of production the plant was likely to end 2005-06 with a record hot metal production of 5.14 million tonne. The plant had surpassed its previous best of 4.93 million tonne hot metal production in 2003-04. Bhilai Steel officials said, except for May 2005-January 2006, during which the plant operated all seven blast furnaces, the plant achieved the record production with just six blast furnaces. Managing director, R P Singh informally told Bhilai Steel officials that modernisation and upgradation of blast furnaces should be put on the fast track. Bhilai’s thrust on higher volumes would lead to controlling cost of production as well. He referred to increased costs of coke and that of using more oxygen to increase volume of hot metal production. Singh also said that there should be a change in parameters and the best of world practices should be adopted for increasing productivity further.

The commissioning of an air separation unit also helped the plant achieve the record production.

Indian steel companies can expect even better pricing for their products over the next few months, as production levels in several neighbouring countries are on the wane. Of crucial importance is that steel production in the key Chinese steel market has finally shown signs of falling on a month-on-month basis, owing to the recent steps taken by the Chinese authorities to curb production levels. For instance, Chinese steel production was reported to be 32.04 million tonne in December 2005 and it had fallen to 30.16 million tonne in January 2006. It fell further to 29.46 million tonne in February 2006, according to the Brussels-based International Iron and Steel Institute, a global industry tracking body. Similarly, in CIS countries, which have traditionally supplied steel to the Indian market, there have also been fall in steel production levels on a month-on-basis.

South Korean steel major Posco has decided to significantly bring down the extent of iron ore swapping, the most controversial concession granted to it by the Orissa government, for its $12 billion, 12 million tonne steel project at Paradip. "We will minimise the extent the iron ore swapping for the Orissa project following a decision to use Finex process instead of blast furnace route to make steel", said Ku Taek Lee, the chief executive officer of Posco. He, however, asserted that the company may not totally drop this clause in the MoU signed with the state government last June. Though he declined to mention by what per cent the declared rate of swapping will be brought down, sources said, it could be cut down by half to about 15 per cent to 20 per cent from the present level of 30 per cent when the company goes for final agreement with the state government for the project in near future. In the MoU, the company had been granted the option of exporting 30 per cent of the iron ore from its allotted resources against import of high quality ore from Brazil. This had created hue and cry in different circles as critics thought the concession may lead to "unnecessary" depletion of scarce iron ore resources of the country and put the company in an advantageous position vis-à-vis domestic steel makers. Posco, however, justified the clause saying Indian iron ore had high alumina content of over 2.6 per cent which was a hindrance in efficient operation of the blast furnace. "The blending of Indian ore with imported ore from Brazil, which has only 0.6 alumina content, is necessary for efficient operation our Paradip plant", Lee had asserted during his visit to the state last year. Meanwhile, the company has made a change in technology selection for its proposed Paradip plant following a detailed feasibility study.

The ferro alloys & minerals division (FA&MD), a profit centre of Tata Steel, is in the process of doubling capacity of its ferro chrome plant at Bamnipal in Orissa and adding a captive power plant. The investment in capacity expansion would be to the tune of Rs 100 crore and the captive plant could cost Rs. 200-250 crore. P Roy, executive in-charge, FA&MD said, the company had already started contracting, ordering for the project and was expected to be completed over the next 18 months. The capacity of FA&MD own plants was to the tune 50,000 tonne, which was being increased to 110,000 tonne. Apart from the plant at Bamnipal, FA&MD has a plant at Joda, as well. Roy said, the investment in such projects varied widely but Tata Steel was putting up facilities complete with ancillaries and hence was estimated to cost Rs 100 crore. Roy said, the F&MD handles around 120,000-130,000 tonne ferro chrome out of which around 50 per cent was conversion. He said that the market for ferro chrome was currently buoyant but would be shortlived. "A number of furnaces have been taken down in South Africa so there is a demand-supply mismatch now but supply may catch up in August-September. So, the buoyancy is expected to last only one quarter" explained Roy. Prices of long-term contracts internationally went up on April 1 by around 7.25 cents per pound. The power plant would have a capacity of 60 MW, which would result in huge cost savings.

Tata Metaliks is toying with the idea of jointly bidding for coal blocks outside India with associate company, Hooghly Met Coke & Power Company, a joint venture between Tata Steel and West Bengal and Industrial Development Corporation (WBIDC). Harsh K Jha, managing director, Tata Metaliks, said, "We are thinking whether we can bid together for coal blocks outside India." However, no discussions had been initiated with Hooghly Met Coke, as yet. Jha explained that five years back Tata Metaliks’ capacity was at 1.3 lakh tonne and today it stood at 6.5 lakh and the key factor in driving profitability of the company was raw material. Hence the pig iron manufacturer wasputting extra effort on backward linkages like iron ore and coal. Tata Metaliks had already applied for iron ore in the western parts of the country. For coal blocks the company had applied in Jharkhand in 2004.

Jha said, the company was awaiting the mineral policy. The policy would deal with the clause advocated by some of the state governments that mines would only be allocated to companies setting up plants in those states. However, Tata Metaliks had also eyes set on coal blocks outside India. Jha said, Hooghly Met Coke would require around 1.6 million tonne of coking coal, once it was fully operational.

Vizag-based Steel City Securities Limited (SCSL) registered a 111 per cent growth in trading turnover at Rs 47,478.58 crore during the financial year ended March 31, 2006, as compared to Rs 22,468.84 crore in the previous year. "The significant rise in commodities trading helped us achieve this growth," G Raja Gopal Reddy, executive director of SCSL, said. In 2005-06, the company’s commodities trading turnover on MCX was Rs 10,526.84 crore (a growth of 469 per cent) and Rs 6,528.05 crore on NCDEX (a growth of 1,500 per cent), as compared to Rs 1,848.31 crore and Rs 410.57 crore respectively in the previous year, he said. This apart, SCSL has added 80 new branches across the country taking the total number of branches to 256. "The increase in turnover saw the revenues of the company rising by 44 per cent to Rs 30.01 crore in 2005-06. Last fiscal, SCSL reported an income of Rs. 20.83 crore," he said. SCSL, which earned a net profit of Rs 4.5 crore last financial year, expects to cross this figure in 2005-06. The company is also eyeing a trading turnover of Rs 70,000 crore following the expansion works which it plans to take up in 2006-07. Rao said SCSL also witnessed more than 100 per cent increase in its clientele base. "By the end of March 2005, we had 35,000 DP accounts, which increased to 76,000 by the end of March 2006." The company was awaiting Sebi’s nod to go public, he added.

Major steel companies have evinced interest in forming a joint venture with Bharat Coking Coal Ltd for operating the Kapuria mines in Jharia. Partha S Bhattacharyya , chairman and managing director of Bharat Coking Coal Ltd (BCCL), said that Tata Steel, Sail and the Jindal group were interested in the mine. "Tata Steel has sent a proposal to the Union ministry of coal which was later forwarded to us. Sail and Jindal too have evinced interest. BCCL is looking for a partner for exploration of Kapuria mines as it is going to be an expensive project," he said. The coal reserve in Jharia, at five billion ton, is considered to be one of the biggest in the country. The coal reserve in Kapuria alone was close to one billion ton.

According to him, the investment required for Kapuria was close to Rs 800 crore. He said BCCL was likely to float a special purpose vehicle (SPV) for development of the mine with one or two steel majors. The BCCL CMD indicated that it was even ready to have a minority stake in the joint venture so that the SPV could have the status of a non-public sector enterprise.

Flat products consumption in Turkey this year is expected to increase by 12% on 2005’s figure of 8.3-8.4m tonnes. This view is based on strong sales in the automotive, white goods, construction and ship building industries. In turn, it means that imports into the region will continue at a high level. Turkish traders report a general shortage of flats on the market - not only locally, but also in Europe and North Africa. Coil prices are expected to remain strong, and increase by around 2-3% per month until the end of 2006, traders say. The only exception is China, where price rises have not been as steep. On the Turkish market, HRC and CRC imports have risen $30-40/t in the last month. Today, Russian HRC is being offered at $520-530/t cfr Turkey up from $350/t two months ago. Illych is offering hot coil at $500/t cfr. Galvanised prices in Turkey have risen sharply, with Erdemir and other galvanised or CR mills being booked out until June. "Last month Borcelik prices were $690-700/t base price. Today they are looking for $740/t," claims one trader.

Larsen & Toubro Ltd has bagged a Rs 581 crore contract order from Kuwait Aviation Fuelling Company for a new fuel depot project at Kuwait International Airport. The project entails pumping fuel through underground pipelines from Mina Al-Ahmadi Refinery to the storage depot. L&T would be involved in installation of new pumping units at MAA refinery, laying jet fuel pipeline from the refinery to fuel depot, construction of high fuel tanks at the new storage depot. The company would also be involved in the installation of interconnecting pipeline from the new fuel depot to existing hydrant system of the airport, construction of headquarters building, providing depot control system with associated instrumentation works and the complete electrical system including the total power backup facilities. "The fuel storage facility project is yet another landmark for L&T in Kuwait and marks the company’s continued involvement in major oil and gas projects in the Gulf region. L&T is well placed to contribute significantly for the growth and development in the region through critical infrastructure projects" L&T’s ED Mr K V Rangaswami said.

UAE local rebar prices moved from 2000 AED to about 2,100 - 2.150/mt (US$575-590/T). Turkish mills are offering at around $510/mt CFR Dubai for June shipments. Ukrainian origin wire rod offers increased to around $440-450/ton FOB. Ukraine steel rebar price is priced at around $425/mt FOB. While rebar and wire rod prices increased in the Middle East, the Turkish local market remained stable or showed some signs of slight downwards corrections.

Qatar Petroleum (QP) is conducting a feasibility study to set up a new oil refinery with a capacity of 200,000 barrels per day (b/d), Second Deputy Premier and Minister of Energy and Industry H E Abdullah bin Hamad Al Attiyah told reporters on the sidelines of the Qatar Economic Forum. Qatar Petroleum, he said, was preparing to launch mega projects in the downstream sector such as petrochemicals, iron and steel, as part of ambitious expansion plan. A plant to produce power was also under active study, the Minister said. Talking of oil, Abdullah bin Hamad said that Qatar had come a long way over the past 10 years when oil production capacity was barely 350,000 b/d.

The capacity has now soared to 850,000 b/d and plans were afoot to raise it to 1.1m b/d over the next three years. He said the current production capacity of liquefied natural gas at 25 million tonnes per annum (mtpa) would be raised to 77 mtpa by the end of 2010. The production capacity of green fuels (gas-to-liquid or GTL) will be 34,000 b/d when the Oryx project comes on stream and over the next few years this capacity will be increased to 400,000 b/d when other GTL projects are commissioned, the Minister said.

Rising Zinc prices (3.080 US$/T LME price end last week) and strong demand are driving the prices of galvanized coil further up. Offers of Galvanized Coils from India to the Middle East are in the range of 850-900 US$/t CFR Dubai base price for 0.9mm. Taiwan and Japan are reported to have sold some limited quantities of HR GI coils at rsvly around 780 and 800 US$/T CFR Persian Gulf ports. Chinese mills are offering HR GI at the same levels. Indian export prices to the USA for 0.3mm galvanized coils are at $880-900/t FOB, to Europe for 0.6-0.8mm about 800 US$/T FOB Indian port. Chinese mills’ export offers for 1mm base galvanized steel coil are around 720 - 740 US$/t FOB China for July shipments. Also Korea and Taiwan increased their GI coils export prices to more than 700US$/T FOB for 1mm base. Turkish mills offer hot dip galvanized coils in the local market at prices ranging form 780 US$/T for 2mm to 870 USD/T for 0.5mm and 980 USD/T for 0.30mm. Iranian Mobarakeh’s local sales price for 0.50-0.60 mm galvanized coils increased to IRR 6.660/T (about US$720/T) for July 2006 shipments.

Chinese mills export prices for steel plates have gone up rapidly, in line with CIS prices. Chinese mills seem to have booked certain quantities to the Middle East over the past 2 months, at prices slightly below the traditional Ukrainian and Russian plate imports.

The Chinese plate mills Jigang and Qinban are reported to be fully booked till end May. Angang’s export allocation has been reduced from 40.000 T/ months to 15.000-25.000 T/month, not sufficient to serve their long term export clients. Nangang is booked till end of June, mostly for European and Mexican destinations.

The traditional Ukrainian mills are still recovering from delays caused by gas shortages at Illiych and production stoppages at Azovstal’s blast furnace, during the bad winter time. Russian plate is also limited for exports thanks to strong local demand.

Jubail Industrial City, an hour’s drive north of Dammam on Saudi Arabia’s Gulf coast, is one of the world’s greatest heavy manufacturing centres. It has a refinery, the biggest Middle East steel smelter, the largest fertilizer complex in the Gulf and about 10 per cent of global bulk petrochemical capacity. An expansion is under way that will double Jubail’s area.

Nowhere will use more energy for at least a generation. To the south lies Dhahran, headquarters of Saudi Aramco, now engaged in a $60,000 million plan to raise oil, gas and refining capacity. In between is Ras Tanura. It is the site of the biggest crude export terminal on earth. Plans for a multi-billion-dollar downstream petrochemical project linked to the existing 550,000-barrel-a-day (b/d) Ras Tanura refinery should be finalized later this year. Two new Saudi export refineries, one to be built in Jubail, are on the agenda. Jubail is built on hydrocarbons. It is an unlikely place to find concern about climate change and the threat posed by soaring carbon emissions to the future of the planet. But the Gulf ascending is an unusual place. With steam billowing from a cracker column in the background, Arabian Petrochemical Company (Petrokemya) president Abdullah al-Rabeeah turned to the challenge as oil prices in April headed towards $70 a barrel. "Hydrocarbons are too valuable to burn," he said. "And there should be an alternative to using gas to produce plastics." The 1997 Kyoto protocol is failing. Disastrous global warming seems inevitable. But oil prices above $50 a barrel are converting Gulf energy leaders into carbon missionaries.

Local Turkish producers offer rebars at around 480-500 US$/T. Steel angles are sold at $510-530/ton, steel flat bars at $530-540/ton. Kardemir increased its local sales price for commercial grade steel billets to about 425-435 US$/T. In Steel Flat products, local producer Erdemir is reported to offer in the local market, hot rolled coils at 580-600 US$/T and hot dip galvanized steel coils at $760-780/mt base price for 1mm thickenss.

Companies were due to submit prequalification documents by 13 April for the completion works on the estimated AED 3,000 million ($545 million) terminal 3 (T3), concourse 3 (C3) project at Dubai International Airport. The package will be the last major contract awarded on the $4,100 million scheme. C3 will be an extension and continued development of concourses 1 and 2. It will be a fully airside structure connected to the two major public levels of T3 via an automated people mover (APM) and vehicular and baggage handling system utility tunnels. The APM will also link C2 and C3’s lower levels. The building’s footprint is 90 metres wide and 645 metres long incorporating a total built-up area of 528,000 square metres. The partially underground structure will comprise APM stations and extend above ground to accommodate 20 aircraft stands out of which 18 will be for the Airbus A380. A joint venture of Germany’s Bauer and the local Middle East Foundations has been awarded the piling package on the project. The local Al-Naboodah Contracting is carrying out the enabling works package, while Jebel Ali-based Cleveland Bridge & Engineering Middle East has been awarded the structural steel frame package. Dubai’s Department of Civil Aviation is the client.

Qatar Steel Company (Qasco), a wholly owned subsidiary of Industries Qatar (IQ), will initially invest QR20mn for setting up a Rebar fabrication unit at its existing plant at the Mesaieed Industrial City in view of the rising demand for its products across the Middle East. The new unit, expected to start commercial production by the last quarter of 2006, is a state-of-the-art fully integrated and fully automated assembly line that is in line with Qasco’s focus on the needs of other target markets with select value-added products. Qasco director and general manager Sheikh Nasser Hamad al-Thani recently concluded and signed contracts for the supply of machinery with leading manufacturers of Europe, sources said. The new project is being internally handled by Qasco’s engineering department and other infrastructural requirement is currently being taken care off and should be ready by the time machines are delivered, the news item added. IQ had said total investments in its various new and expansion projects, including in the Latin American steel mines, is valued at over QR27bn, of which QR14bn will be its direct exposure. According to Shuaa Capital’s report on IQ, Qasco’s future capital expenditure amounts to QR2.5bn and bars represent 81% of the its revenues as of 2005.

Kobe Steel Ltd. said Tuesday it plans to expand its U.S. compressor production unit’s capacity 2.5-fold within fiscal 2006 ending next March to meet fast-increasing North American demand for compressors, sources said. Kobe Steel raised its stake in the subsidiary, Engineering Designs Transfer Inc., from 50.0% to 92.5% and renamed it Kobelco Edti Compressors Inc. in February. The unit will build a second compressor plant in the expansion, the steelmaker said. With the expanded capacity, Kobe Steel said, North American orders for the unit’s process gas compressors in 2007 will double from the $30 million in average annual orders between 2002 and 2005. In 2008, consolidated North American sales are expected to rise to $64 million.

China Steel Corp., Taiwan’s sole integrated steel mill operator, said Tuesday its March pretax profit dropped 63.5% from a year earlier to NT$2.85 billion. The company didn’t give March 2005’s earnings figures in a filing on the Taiwan Stock Exchange Web site. It said revenue in March totaled NT$14.3 billion, down 18.5% from the year-earlier level.

Nippon Steel Corp.’s recently introduced hostile takeover defense will serve as an effective method for its shareholders to objectively evaluate a potential acquirer’s proposal and decide what is best for the company, says the head of Lazard Freres K.K., its financial advisor. "In designing the rights plan, we spent quite a lot of time thinking about how to make the plan operate as an effective defensive measure and, equally importantly, how to make the plan acceptable from the stand point of the shareholders and the market," Yasushi Hatakeyama, the chief executive of Lazard Freres in Japan, said in an interview. Lazard put together the rights plan with Nippon Steel’s legal advisor, Sullivan & Cromwell. On March 29, Nippon Steel, Japan’s largest steelmaker by output, announced a takeover defense in which the company’s shareholders cast the final votes on whether to accept a bidder’s offer. If anyone tries to acquire 15% or more of the company’s voting rights, the steelmaker will request the necessary information for its shareholders to examine the offer.

Hitachi Metals Ltd. will form a Chinese joint venture with Shanghai Baosteel Group Corp. to produce and market high-quality cast rolls for hot strip mills, sources said. Bao Steel Hitachi Rolls (Nantong) Ltd. will be established by September to begin shipments in the first half of 2008. Capitalized at the equivalent of around Y7.5 billion, the planned firm will be 70%-owned by Hitachi Metals, with the rest controlled by Baosteel. Annual sales are targeted at Y6 billion in fiscal 2010. Japanese manufacturers of automobiles, home electronics and other products are increasingly launching operations in China and elsewhere in Asia, and steelmakers in the region are expected to increase output of high-grade steel materials.

Hitachi Metals and Baosteel seek to exploit this trend by offering high-quality cast rolls, which are used to roll steel sheet.

Cleveland-Cliffs Inc. (CLF) has resolved a dispute with Mittal Steel USA Inc. over terms of the iron-ore-supply agreement between it and Mittal’s Weirton, W.Va., plant. In 2005, Mittal shut down the Weirton blast furnace, and Cleveland-Cliffs and Mittal began discussions on the fate of the facility’s contract, which included a minimum annual purchase obligation that Mittal had to fulfill.

Cleveland-Cliffs said then that Mittal had taken the position that it had no future obligation to purchase pellets under the Weirton contract. According to a filing with the Securities and Exchange Commission, under the pact resolving the dispute, three separate iron-ore-supply agreements between Cleveland-Cliffs and Mittal’s facilities, including Weirton, were changed to aggregate Mittal’s purchases from 2006 through 2010. During that period, Mittal is obligated to buy from Cleveland-Cliffs specified minimum tonnages of iron ore pellets on an aggregate basis, the filing said, although Mittal can use the committed volume at any of its facilities. As part of the settlement, Cleveland-Cliffs will cancel its invoice for some 325,000 tons of iron ore pellets that weren’t purchased by Weirton in January.

Kobe Steel Ltd. announced a three-year business plan centered around a sales expansion of already competitive products and a further strengthening of its financial standing. Financial targets in the plan through the fiscal year ending March 2009 include an increase in the company’s group net profit to over Y100 billion from Y80 billion estimated for the year just ended on March 31, as well as a cut in its interest-bearing debt to below Y550 billion from Y600 billion during the same period. The latest growth strategy shows that, under its previous three-year plan to March this year, Kobe Steel managed to boost the number of distinctive, competitive products with a large or dominant market share, which the steelmaker refers to as "only-one" products. As for its financial standing, Japan’s fourth largest steelmaker by revenue aims for further improvements to make sure the company is ready to make necessary investments and adapt to future market changes. "For the only-one products, we plan to raise the ratio of their sales to the (Kobe Steel’s) overall sales from 35% in the fiscal year 2005 to 40% by the fiscal year 2008," Kobe Steel President Yasuo Inubushi said.

Japan’s five leading steelmakers plan to lift crude steel output to a combined total of nearly 89 million tons in fiscal 2008, the highest level in about three decades, sources said. Amid the growing momentum of global industry consolidation, these companies are aiming for growth by boosting output of competitive, high-quality steel. They will increase capital spending to Y2.22 trillion in the three years through fiscal 2008, up 37% from the previous three years. The five firms — Nippon Steel Corp., JFE Steel Corp., Sumitomo Metal Industries Ltd., Kobe Steel Ltd. and Nisshin Steel Co. — are all blast furnace steelmakers producing high-grade steel. Blast furnace steel accounts for some 75% of all domestic crude steel, which includes electric furnace steel. Crude steel output by blast furnace steelmakers hit its peak in fiscal 1973, during Japan’s economic boom period, at some 97 million tons. Since the 1980s, production has hovered between the lower 60-million-ton level and the upper 80-million-ton level. In fiscal 2005, the combined output of the five steelmakers came to a high 82.5 million tons on strong demand at home and abroad.

And in fiscal 2008, production is to be up 7.2% from the fiscal 2005 figure, to 88.4 million tons, which if realized would be the third-largest tally on record. Nippon Steel aims to boost output by 2.6% from fiscal 2005 to 32 million tons in fiscal 2008. It will focus efforts on car-use steel sheet and other high-quality steel, earmarking 35% of its planned 70 million yen investment for the three years through fiscal 2008.

JFE Steel, a member of the JFE Holdings Inc. group, intends to churn out more magnetic steel sheet, which has superior electrical properties for use in hybrid car motors. It is eyeing increased production of 12.2% to 30 million tons.

Strikers at a steel plant operated by Mittal Steel Co. (MT) in the Mexican port of Lazaro Cardenas agreed to return to work, sources said. They added the local chapter of the National Mining and Metal Workers Union decided to end the walkout at the Mittal facility when the company recognized Napoleon Gomez Urrutia as national leader of the union. The strike, begun April 3, affected three mills owned by Monterrey-based Grupo Villacero, as well as Mittal, whose workers belong to the same union chapter. The workers staged the walkout to demand government recognition of Gomez Urrutia.

Netherlands-based Mittal is among Mexico’s biggest steel makers, with annual production of about 3.8 million metric tons of steel slab. Villacero is the country’s biggest producer of rebar. Notimex said Mittal had threatened to close down the mill if a solution wasn’t reached. Mittal has frequently been caught up in conflicts between the union and Villacero, which said it had handed dismissal notices to 300 of its 2,000 workers who a company official said were the strike leaders.

South Korea’s Posco (PKX) is expected to post a 54% drop in its first quarter net profit from a year earlier because of persistent weakness in steel prices. Investors may have to wait a while before they see a meaningful earnings rebound at Posco as an oversupply by Chinese steel makers could drive steel prices further down, analysts said. According to the average estimates of twelve analysts surveyed by, Posco’s net profit for the quarter ended March 31 is likely to be KRW600 billion ($629 million), compared with KRW1.31 trillion posted in the first quarter of 2005. Operating profit in the period is estimated to have fallen 55% to KRW799 billion from KRW1.78 trillion in the previous year while its sales likely retreated 16% to KRW4.75 trillion from KRW5.66 trillion. "The (steel) price drop and decreased output due to blast furnace maintenance pushed down Posco’s earnings in the first quarter," said Kim Gyung-Jung, an analyst at Samsung Securities. The price of Posco’s hot-rolled coil in the local market was around KRW480,000 per ton in the first quarter, down 14% from a year ago, Kim estimated. Posco’s first quarter net income, however, is expected to have risen 57% compared with the previous quarter, when the steel maker recorded hefty one-time expenses related to restructuring and asset sales.

Growth focused in India; New Record Established as World Output Approaches 56 Million Tons Production of direct reduced iron (DRI) grew by about 2% in 2005 with total world output of 55.9 million tons according to statistics compiled by Midrex Technologies Inc. This represented an increase of about 1.3 million tons over 2004. This was the 27th consecutive year that the MIDREX(r) Direct Reduction Plants led the world, producing 63% of the world total, 35 million tons.

The HyL processes made nearly 20% of the world total and a wide variety of coal based processed produced 15% cumulative. The remaining 2% was made by other gas-based processes. (As a portion of the gas-based DRI the MIDREX Plants produced nearly 74%.)

India leads the Way : DRI Growth in 2005 was entirely due to a number of small capacity rotary kilns started in India. Following after a number of years of weak prices, there were no capacity additions outside India. As would be expected, India led the world in DRI production with 11.1 million tons. It was followed by Venezuela with 8.9 million tons, Iran with 6.9 million tons and Mexico with 6.0 million tons.

An extraordinary increase in the price of natural gas in North America closed all gas based capacity in the United States and Canada. By November the wholesale price of gas in the US was over $15 per million Btu’s, approximately eight times the level it had been at in the mid-1990’s. Due to this price increase, one of the three plants at Lazaro Cardenas in Mexico was shuttered for the same reason.

Production of DRI in Australia declined to zero as the BHP Billiton Finmet plant did not resume operation. In August, BHP Billiton announced the permanent closure of that facility.

Techint and SMS Demag, two of the leading European metallurgical plant building companies, are taking over LOI Thermprocess GmbH, based in Essen, Germany, from the Elster Group. The transaction is subject to approval by the antitrust authorities.

With around 600 employees and sales of approx. EUR 200 million, the LOI Group is an international supplier of high-quality industrial furnaces for the steel and aluminum industry. Since 2003 DREVER International based in Liège, Belgium, has been part of the LOI Group, a subsidiary of the Elster Group, the former Ruhrgas Industries.

The leading position of the LOI Group will continue to expand as a result of the takeover by Techint and SMS Demag. The existing corporate structure of LOI as an independent supplier of furnace technology will be maintained. The Essen headquarters and all other locations of the LOI Group will be retained and further developed.

Techint and SMS Demag have formed a joint-venture company for the takeover of LOI. The transaction has a strong industrial logic and will benefit all stakeholders of LOI, Techint and SMS Demag. The Techint Group comprises more than 100 companies with about 49,000 employees operating worldwide. Its annual sales are EUR 13 billion.

Techint through its Division Techint Technologies is active in the fields of industrial furnaces and iron and steel plants. Techint Technologies generates sales of approx. EUR 500 million with about 800 employees.

SMS Demag belongs to the SMS metallurgy companies within the SMS group, which reached an order intake of more than EUR 2.2 billion (2005) with approx. 6,500 employees. SMS Demag is one of the world’s leading suppliers in the area of metallurgical plant and rolling mill technology and has been successfully cooperating with LOI Thermprocess on many projects.

Elster Group is based in Luxembourg and had a turnover of EUR 1.2 billion in 2004. The group concentrates on gas measurement and control, electricity and water metering and industrial furnaces. The disposal of LOI is a further step in focusing Elster on the metering business.