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In our last edition, we had mentioned that the Govt. of India has revised the steel consumption projections from 110 MT to 175 MT by the year 2020. The logic behind this upward revision is that we had earlier presumed the GDP to rise by around 7.3 %, but now we can safely assume an annualized growth of around 9% in the coming years. Secondly, the thrust on infrastructure is yielding very good results and the steel consumption is growing at a faster rate than expected before. All the other user industries like auto, white goods, engineering are surging ahead and this would have a substantial impact on the steel consumption curve. This upward revision, though looks like a positive development, will bring many related issues to the surface.

Firstly, with regards to the raw materials. Yes, we have enough iron ore but what about coking coal? What about refractories? And where are the consulting firms and equipment manufacturers to build those many steel plants and processing lines? Even today I can see all such companies having an overflowing order book. There is no time to cater to any new enquiries. Second issue is transport. It is well-known that to produce one tonne of steel you have to transport nearly three tones of raw materials. We are talking about 110 MT by 2012 and 175 MT till 2020. Can we transport the raw materials required to produce such huge tonnage? I have learnt in the recently held 'Steel Summit' at New Delhi that Orissa has more than 50 MT of MoU's signed. This means the State needs a transport system to carry at least 150 MT per year. Can somebody explain how and when will this happen?

The third issue is manpower. It is sad that most of the metallurgical engineering graduates would try to jump into other streams given a chance. Even IIT graduates are said to be happy doing 'Research' for other countries rather than serving the steel companies in our own country. What a pity!! What poor perception the society has of our Industry!!

Now, if we know that this industry is all set for a quantum jump, we all have to work together to change this negative perception. We have to open new engineering colleges to teach metallurgy. Metallurgy is the mother of all the industries and no industry can exist without it. We all know it, but it is not enough. There should be a concerted effort from our part to let our entire society know it !!!.

 D.A.Chandekar
Editor & CEO

 

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Essar set to buy Algoma Steel for $1.58b

Adding further impetus to the merger and acquisition led consolidation in steel space, the Ruias promoted Indian conglomerate Essar Group has agreed to buy Canada's Algoma Steel for about $1.58 billion in cash. The deal marks the third major M&A transaction involving an Indian in the recent past after NRI business tycoon, Mr Lakshmi Mittal's over $38-billion takeover of European giant Arcelor in 2006 and Tata Group's $12-billion acquisition of UK-based Corus Group earlier this year. Algoma, which specialises in making steel sheets for automotive industry, would provide Essar an excellent platform for the Canadian and North American market, Essar Group chairman, Mr Shashi Ruia said. The acquisition is expected to provide Essar access to a number of leading car makers in the USA such as General Motors and Ford Motors. The deal which is expected to be completed in June, is likely to be instrumental in the global expansion plans of Essar, which also signed a deal in February with two Vietnamese firms to build a $527-million hot-strip mill plant. Mr Ruia said in a statement: “We believe Algoma is an excellent addition to our existing steel business and also offers growth potential. This acquisition fits in with our global steel vision of having world class low cost assets with a global footprint.” The steel industry has witnessed M&A deals worth more than $100 billion since 2006 including the Algoma acquisition, which was done by Essar Group's overseas investment arm Essar Global. Incidentally, this M&A wave had started with the buyout of Dofasco Inc, Algoma's larger Canadian rival, for about $5 billion in January last year by Arcelor, before it was taken over by Mittal Steel. The Essar deal follows a failed takeover of Algoma by Germany's second largest steel maker Salzgitter a couple of months ago.

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Tata Steel to raise $862 mln via rights issue to fund Corus buy

India's Tata Steel Ltd said it plans to raise a total of 36.55 bln rupees ($862 mln) through a 1:5 rights shares issue at 300 rupees a share to fund its acquisition of Anglo-Dutch steelmaker Corus Group PLC.The company also plans to raise 43.50 bln rupees (1 bln usd) through a simultaneous un-linked 1:7 rights issue of convertible preference shares, having a coupon rate of 2 pct with conversion into equity shares after two years at 500-600 rupees per share.The steelmaker said it may also consider a foreign equity issue of up to $500 mln on an ex-right basis, subject to shareholder approval.The long-term financing pattern of the $12.9 bln Corus acquisition would be in the form of Tata Steel equity capital of $4.10 bln, long-term debt of $6.14 bln , and the balance amount of 2.66 bln usd through a bridge finance in Tata Steel Asia Singapore.Tata Steel said it will use additional debt of only $500 mln (21.70 bln rupees) for the acquisition, which represents 12 pct of the total amount.

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India - 7th largest steel producer

India´s Tata Steel, which recently acquired Anglo-Dutch firm Corus Group, has been ranked the world´s sixth largest producer of the alloy with an output of 24 million metric tons reports a London-based agency. India-born business tycoon Lakshmi Mittal-controlled Arcelor Mittal has emerged as the largest producer with total production of 118 million metric tons in 2006, after Mittal Steel acquired European giant Arcelor SA for 38.3 billion dollar in the industry's biggest ever transaction. According to data compiled by London-based Iron and Steel Statistics Bureau (ISSB), Arcelor Mittal's total output rose from 109.7 million MT in 2005 to 118 million MT last year, while the combined output of Tata Steel and Corus rose from 23.2 million MT to 24 million MT. In the country ranking, India has been ranked at seventh position with a total output of 44 million metric tons (up eight % from previous year), while China retained its top position with 418.8 million MT (up 18 %). Incidentally, Brazil witnessed a two % fall in output to 31 million MT and was ranked ninth. Total global crude steel production rose 9 % to 1.24 billion metric tons, while top 15 producers accounted for about 35 % of the total output. In the company ranking, Japan's Nippon Steel and JFE jumped from third to second position and from fifth to third position respectively in the world ranking. South Korean major Posco maintained its fourth position, while China's Baosteel gained one rank from sixth to fifth position with total output of 26 Million Tons in 2006. Other steelmakers in the top ten list included China's Anben (at seventh position created after merger of Anshan and Benxi), Shandong (at eighth rank after merger of Laiwu and Jinan), US Steel (ninth) and Nucor (tenth). ISSB said the rankings were based on data collected from International Iron & Steel Institute and Metal Bulletin.

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TATA Steel posts record performance for 2006-07

TATA Steel has completed the fiscal 2006-07 on a thumping note and stepped into its centenary year with stupendous all round performance as it surpassed all its previous bests and established new records across all fronts. 2006-07 was marked with the best ever hot metal production of 5.55 million tonnes, crude steel at 5.05 million tonnes and saleable steel at 4.93 million tonnes.

TATA Steel's flat products achieved the highest ever sales to the automotive segment at 0.85 million tonnes up by 28% as against last year sales of 0.67 million tonnes. The domestic sale of long products, at 1.3 million tonnes is up by 27% YoY. TATA Steel's turnover of branded products was INR 4479 crore up by 17% YoY with TATA Tiscon recording a turnover of INR 1100 crore up by 40% YoY.

TATA Steel's tubes division commissioned a new 3" commercial tube and 4" precision tube mill and increased its annual production by 16%. Its bearings division produced over 30 million bearings in the current fiscal as compared to 28 million in the previous year and agrico division marketed 6.7 million agricultural tools up by 16% YoY.

During 2006-07, TATA Steel received the Global Supplier Approval from Honda for its cold rolled sheets, Best supplier Award from Whirlpool, Best Supplier Award from Lucas TVS and Best Contribution Award from Hyundai Motors.

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India's Essar gets nod for $527mln JV steel plant

A joint venture between India's Essar Global Limited and two Vietnamese partners has received the license for a US$527 million hot-rolled steel mill in Ba Ria-Vung Tau Province. Essar, Vietnam Steel Corporation (VSC) and Vietnam Rubber Group (Geruco) had signed a contract last month to build the facility at Phu My 1 Industrial Park, with the Indian firm holding 65 percent, VSC 20 percent, and Geruco 15 percent. The first plant to produce hot-rolled steel in Vietnam, it will have an installed capacity of 2 million tons per year and use billets imported from India.

Construction is expected to take around two years. Around half its output will be supplied to cold-rolled steel plants and zinc-coating factories, and the rest for manufacturing steel pipes and structures. The country's annual steel demand is put at some six million tons, including two million tons of hot-rolled steel that is entirely imported. Vietnam also relies heavily on import of steel billets, mainly from China, with overall steel imports in January and February totaling $286 million, 35 percent down from a year earlier. Essar, a diversified, family-owned holding company, has business interests from telecommunications to construction. It also plans three steel plants in the Middle East, including a 1.5 million ton plant in Iran.

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Gujarat NRE signs pact with SAIL

Gujarat NRE Coke Limited, a manufacturer of low ash metallurgical coke (LAMC), has signed an agreement with Sailcon, a division of Steel Authority of India (SAIL). Under the agreement Sailcon would be providing consultancy services for the implementation of 15 mw power plant each at Bhachau and Dharwad, totalling 30 mw. The power plants are being designed by using the sensible heat of the flue gas generated from GNCL's coke oven batteries. Each power plant is expected to cost around Rs 50 crore and will be commissioned within 24 months. The setting up of the power plants would help reduce the operating cost of its steel mills. The company also has plans to set up a 3rd power plant of 15 mw at its Jamnagar coke works which would be implemented in the 2nd phase. Gujarat NRE plans to double the coke making capacities at its Dharwad plant in Karnataka. It will also set up a coal washery in Bachau, Gujarat. The company is hopeful to do better in 2007-08 as the Chinese coke prices have been moving up sharply in the last few months after languishing for more than a year. The demand for the Chinese coke decides the fate of the rest of the global coke industry. The Chinese price rise has a natural and direct effect on the bottom line of Gujarat NRE Coke, which is the largest producer of the commodity in the non-captive sector in the country.

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Steel Authority bags Sitanala coal block

Steel Authority of India Ltd (SAIL) has been allotted the Sitanala coking coal block in Jharkhand, which will result in significant cost savings on raw materials. In an intimation to the stock exchanges, SAIL has stated that as per the communication from the Union ministry of coal, the central government had decided to allot the Sitanala coking coal block in Bharat Coking Coal Ltd (BCCL) command area. Industry sources said Sitanala has reserves of around 108 million tonne. SAIL's total coal requirement is around 15 million tonne, of which around 10 million tonne is imported. SAIL evinced interest in the Sitanala block in October 2005. In 2005-06, the steel PSU incurred a cost of Rs 8,022 crore on account of coal usage. While the company is covered for its iron ore requirements, the situation is not the same with coal. SAIL has three collieries, Chasnala with reserves of 40 million tonne, Jitpur with 16 million tonne and Ramnagar at 150 million tonne. Sources said SAIL had also indicated interest in the Kapuria block in Orissa. The block has reserves of around 40 million tonne. SAIL's requirement of coal will only go up. According to the corporate plan 2011-12, the company would endeavour to achieve 22 million tonne capacity and the coal requirement for enhanced capacity would be in the region of 22-23 million tonne as against 15 million tonne at present. SAIL was also in dialogue with Coal India subsidiary, BCCL for floating a special purpose vehicle, for joint mines development.

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Ore exports down 33 pc in March : FIMI

Mineral export body, the Federation of Indian Mineral Industries said recently that, the imposition of Rs 300 per tonne export duty on iron ore has impacted the industry with the exports from India expected to come down by 33 per cent in March itself. Dismissing allegations levelled by the steel manufacturers that iron ore exports in March will increase by 34 per cent post imposition of export duty, FIMI said China's decision to suspend ore imports from India has infact resulted in a 33 per cent decline in the month."India will export about 7.16 million tonnes of ore this month compared to 10.57 million tonnes in the same month last year. The duty coupled with suspension of Indian ore imports by China, the single largest market for Indian ore, has impacted the industry drastically," FIMI Senior Vice President Rahul Baldota told reporters recently. He said the domestic mining industry is dependent on China for iron ore sales and the export duty would lead to near shut down of mining operation and exploration activities in the country.
“Chinese companies have started buying ore from Brazil and Australia. These two countries are increasing ore export capacity by nearly 250 million tonnes per annum just to cater to the increased demand," he said.The mining body has argued that the Indian companies are left with no option but to export fine ore, which is generated during mining for lumps and forms a majority of domestic use."The industry has to extract nearly 2-2.5 tonne of fines before extracting one tonne of lump. The domestic industry doesn't have enough capacity to use these fines, leaving miners with no option but to export these fines," FIMI Secretary General R K Sharma said.

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Salem Steel makes a spectacular turnaround

SAIL's Salem Steel Plant, the producer of high quality Salem Stainless, has made a spectacular turnaround during 2006-'07 with the highest ever annual sales of 1,99,544 tonnes and highest saleable steel production of 1,83,260 tonnes.During 2006-'07, apart from the highest ever overall sales and production, the plant has also achieved 34 per cent growth in domestic stainless steel sales. The sales of carbon steel has also gone up by 13 percent to 1,30,869 tonnes, which is also the highest till date. Exports have gone up by 138 percent. The overall sales of stainless steel has also had an impressive growth of 60 percent. Inspired by the turnaround, Salem Steel has set the bar higher for 2007-'08 with a production and sales target of 1,40,000 tonnes of stainless steel and 1,80,000 tonnes of carbon steel products. Of this 84,000 tonnes of stainless steel has been planned for export.And, as has been the culture of SSP, the plant has won several laurels and accolades in the fields of quality, safety and quality circle activities during the year.

The plant is set for further growth with the implementation of the Rs.1553 crores expansion-cum-backward integration plan for new Steel Melting Shop and Continuous Casting Facility to produce 1,80,000 tonnes of stainless steel slabs per annum. Its existing cold rolling mills would also be augmented to a capacity of 1,46,000 tonnes per annum. With good growth prospects and unstinted commitment, Salem Steel has turned around and is set to achieve greater heights in the coming years.

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Arcelor-Mittal, Birlas in final leg of Sesa takeover

The race for Mitsui Corp's 51% stake in iron ore major Sesa Goa has reached the last phase with Aditya Birla group and LN Mittal's Arcelor-Mittal as the top contenders. According to people in the know, the two companies lead the group of possible final bidders that also includes Vedanta Resources and Brazilian mining major CVRD. Sesa Goa is India's largest private exporter of iron ore. The bids by the two leading contenders are believed to be near Rs 2,000 per share. This is much below the range of Rs 2,500 per share that prevailed in second round of the bidding. “The Budget proposal to levy a duty of Rs 300 per tonne on iron ore exports has had an impact,” said sources. “In fact, Rio Tinto, which was earlier a front runner for the stake, backed out after the announcement,” they added.

It has been learnt that the Japanese trading major's advisor Morgan Stanley has been in touch with the Birla group and Arcelor Mittal on a daily basis and the final decision might come by the end of April. The stake sale is part of Mitsui's global plan to exit from non-core businesses. The proceeds from the sale is expected to finance the company's new initiatives in the energy sector. Sources however added that “it is too early to count out Vedanta Resources. The bids alone may not be the deciding factor. Mitsui is also looking at each bidder's share purchase agreement, which can also tilt the race.” Share purchase agreement includes details on payment, government approvals and legal issues. While speculation is on that Mitsui might choose to call the top two contenders to Tokyo for a final round of negotiations, this could not be confirmed. “Though Mitsui would want to wait a little longer to see if the government makes a revision on the duty proposal, the announcement is expected before the end of March, when the validity of the bids expire,” added sources. Sesa Goa's stock rose by 2.1% to Rs 1,715 on the BSE recently, outpacing the sensex that was up 1.3%. The metal index rose 1%.

Arcelor Mittal has globally taken an initiative to acquire mining assets. In India it has asked the governments of Jharkhand and Orissa for captive mines for its steel projects. The Birla group's unlisted company Essel Mining, is one of the major iron ore exporters in the country. Sesa Goa has annual production of about 9 mtpa and is known to have iron ore reserves in the excess of 150 million tonne. The company also has a prospective license for Jharkhand-based mines.

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Bhushan Steel eyes Chhattisgarh

 Bhushan Steel is planning to revive the proposal it had abandoned some four years ago to set up a steel plant in Chhattisgarh. The company entered into a pact with the state but then backed out. A top official in the department of industries told a leading business magazine that, Bhushan Steel had expressed its interest to revive its earlier proposal of setting up a steel plant in Chhattisgarh with an investment of more than Rs 2000 crore. The company had signed a Memorandum of Understanding with the state when the Ajit Jogi-led Congress government was in power. The company had identified land near Kharsia in Raigarh district for setting up steel plant with a capacity of 2 lakh mtpa. The proposal was dropped by the company allegedly because of the non-cooperation and lack of support from the state government. The Bhushan group had signed a pact with the government to set up a 1000-MW power plant in Chhattisgarh a few months back. "Land selection work is on for the power plant and the company would start the construction work once land was finalised," the official said. After the power project, the company would to put up the steel plant. "The state has informed the company that it cannot help in providing iron ore, but Bhushan is still keen on the project," sources said. The Chhattisgarh government has been cautious about steel plant proposals as there was a shortage of iron ore. To Bhushan Steel however, the government had reportedly given green signal as the company said it would not require ore from the state. Sources said that the company had planned to ship iron-ore from Orissa where it owned a mine.

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Rastriya Ispat eyes Rs 10000 cr turnover

Rastriya Ispat Nigam (RINL), the flagship company of Visakhapatnam Steel Plant (VSP), witnessed a 23 percent growth in profit before tax (PBT) and an eight per cent growth in its sales turnover for the financial year ended March 31, 2007. “Our PBT was provisionally put at Rs 2,246 crore during 2006-07, as against Rs 1,820 crore in the previous year, while our turnover touched Rs 9,126 crore as against Rs 8,482 crore in the previous year. This includes the by-product sales of Rs 220 crore. We are targeting to touch Rs 10,000 crore this fiscal,” Y Siva Sagar Rao, chairman and managing director of VSP, said.

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Zamil posts US$12 mln net profit in Q1

Zamil posts USD12 mln net profits in Q1 with expectations to boost its steel manufacturing capability from recently launched RAK facility. Zamil Industrial has announced its interim financials for the first quarter ending 31 March 2007 in a statement released by Khalid A. Al Zamil, Managing Director. During the first quarter, net profits after Zakat contributions were SAR 44.9 mln (USD 12 mln) compared to SAR 44.1 mln (USD 11.8 mln), representing an increase of 1.6 percent over the same period in 2006. Net profits for the same period last year accounted for non-operational profits from the sale of investment shares which amounted to SAR 22.3 mln (USD 5.9 mln). A comparison of net profits, not withstanding returns from investments, shows an increase of 105.2% for the period ending 31 March 2007 against profits of SAR 21.9 mln (USD 5.8 mln) for the same period last year. Total turnover for the group was SAR 815.5 mln (USD 217.5 mln), a growth of 37.1 percent compared with same period last year. Shareholders' Equity also increased by 15.6 percent to SAR 715.5 mln (USD 190.8 mln).

Zamil Industrial operating profits, on the other hand, posted an increase of 60.6 percent from SAR 38.5 mln (USD 10.3 mln) in 2006 to SAR 61.8 mln (USD 16.5 mln) as at 31 March 2007. Post Zakat Earnings per Share grew to SAR 1.00 (USD 0.27) from SAR 0.98 (USD 0.26) representing 1.6 percent growth. Khalid Al Zamil said, "Sector businesses maintained their excellent performance in this quarter. Our export sales have also soared 35.1 percent over the same period last year representing 40 percent of our consolidated sales." He added, "Last week we inaugurated our latest production facility in Ras Al Khaima, UAE, which represents an important junction in our strategic expansion. It is expected to boost our steel manufacturing capability from 2007 and improve our deliveries and services to our clients.”

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Qatar steel, iron imports rise four-fold

There has been an incredible four-fold increase in the import of iron and steel into Qatar in as many years from 2001 until 2005, says the Gulf Organisation for Industrial Consulting (Goic) in a report released recently. The increase was, obviously, due to a string of mega projects that were launched here and due to the rising demand for iron and steel (pipes to lay pipelines, being one of the main import items) in the vibrant oil and gas industry. Iron and steel imports into the country rose from 311,000 tonnes in 2001 to 1.2 million tonnes in 2005, according to the GOIC report.

As mentioned earlier, the biggest increase was in the import of pipes (to install oil and gas pipelines), which rose from 408,000 tonnes in 2004 to 641, 500 tonnes the next year. GOIC said in its report that the regional iron and steel industry is considered among the most effective processing plants in the economic and social development of the Gulf as it lays the foundation for heavy industries as well as the base for manufacturing. Iron and steel was the first basic industry which was set in the region since the setup of Jeddah Steel Factory in 1966. Abundant availability of energy in the GCC member states region, constituted one of the relational advantages that support this industry.

As a result, the number of plants producing basic iron and steel reached 45 in the region with their total investment being $2.8bn and employing over 11,600 workers. On the other hand, the number of plants which produce metal products manufactured from iron and steel reached some 1,725 in GCC-member states in 2005 with an investment size of $6.5bn employing 136,000 workers. All the GCC states have witnessed rapid advancement in the iron and steel production and there are many expansion projects which are currently under way.

The GCC states are considered among the largest consumers of iron and steel products with per capita consumption estimated at 378 kg. World per capita consumption is barely 182 kg. The import of iron and steel products has doubled between 2001 and 2005 from around 7.1 million tonnes to 14.3 million tonnes as a result of big increase in demand and insufficiency of local production of reinforced iron and metal as well as other constructional products in meeting the growing market needs. The demand for basic iron and steel products is expected to increase from 15 million tons in 2005 to around 19.7 million tonnes in 2008.

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Libyan Iron & Steel Co. to increase capacity to 4 mln tpy

Five local banks have agreed to grant the Libyan Iron & Steel Company (Lisco) an LD 840 mln (USD686 mln) loan. It plans to use the funds to increase its production capacity. Tripoli says the loan will help Lisco satisfy local demand for iron and steel and create jobs. The company's facilities at Misurata include a direct reduction plant, two steel melt shops, three bar and rod mills, a light and medium section mill, a hot and cold strip mill. Lisco now plans to increase its directly reduced iron and raw steel capacity. It plans to increase the annual capacity at the plant from 1.3 mln to 4 mln tons. The banks providing the loan are: Sahara Bank, Gumhouriya Bank, Umma Bank, Wahda Bank and National Commercial Bank.

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Hadeed Hama to boost meltshop capacity up to 400.000 tpy

The state-owned General Company of Iron and Steel Products (Hadeed Hama) in Syria is planning to increase its melt shop production capacity up to 400.000 tons per year against 70.000 tons per year production in 2006. Financing of this development process will be made by loan from India. Hadded Hama company is the only company in Syria, which has a meltshop for melting scrap, which is used to cover the requirements of its rebar mill, the production of which in 2006 was a little bit more than 70.000 tons per year, according to authorized sources in the company. Besides, it is worth noting that the controlling authorities of this development process have chosen implementation of plans in stages and proposed first stage as developing the melt shop by Indian loan, which amounts to US$25 mln.

In 2006, the decision for investing in this company by the Austrian Hares Group, which offered USD53 mln to develop the company's mill over 15 years has been abandoned. It is expected that a tender announcement will be published to develop the company's melt shop. It is also expected that Indian companies will be the only candidates to participate in this tender because the Indian loan was transferred for the development of four mills which Hadeed Hama owns: the melt shop, reinforcing steel mill, steel pipes mill and a fourth mill to produce forgings. The development plan targets increasing the present production capacity of the melt shop, be it to satisfy the requirements of the reinforcing steel mill affiliated to the company or to satisfy the requirements of the existing mills in Syria belonging to the private sector, the present number of which exceeds five mills importing their requirements of billets from the world markets. Furthermore, Hadeed Hama company has achieved net profits of 346 mln Syrian Pounds in 2006, equivalent to 6,9 mln US dollars derived from total sales of 3.1 bln Syrian Pounds, equivalent to 59.4 mln US dollars.

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Qasco increases production by addition of new capacities

Qatar Iron and Steel Company has achieved during the first quarter of 2007 a new production peak at the level of all its affiliated mills. Its production of the direct reduction iron has doubled. Its production amounted to 460.206 tons during the first quarter of 2007 against 221.862 tons during the same period in 2006, i.e., an increase of 107%. Its production of molten steel amounted to 556.782 tons against 267.434 tons in the same period of comparison, i.e., an increase of 108%. Its production of billet has doubled and amounted to 455.211 tons during the first quarter of 2007 against 201.785 tons during the same period in 2006, i.e., an increase of 108%. Rebars production during the first quarter of 2007 has increased 44 % from 182.697 tons in 2006 up to 332.921 tons during the first quarter of 2007.

This increase in the production quantities has come as a result of new capacities that came into existence. The company plans to increase its production of sponge iron to 2,250 thousand tonnes per year with its new mill, which has come into production stage in March 2007. Rebars production will be increased to 1,440 thousand tonnes per year with addition of its new bar mill, which came into production stage in March 2007.

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Hadeed produces 65 pct of the total steel production capacity in the country

The volume of the sales of Saudi Iron and Steel Company (HADEED) amounted to 389.8211 tons in 2006 compared to 367.2574 tons in 2005, i.e., up by 6.1%. Kingdom has five mills with a production capacity of up to 8,430 thousand tonnes of long and flat products of which Hadeed is the largest steel producer according to Mr. Mohammad Saleh Al-Jabr, Deputy President of SABIC Metals Group. He said that the Kingdom of Saudi Arabia and the GCC's countries are witnessing an industrial and construction development, which requires efforts to develop the iron and steel industry in the region. He also said that SABIC's steel products produced in the complex of the Iron and Steel Company (HADEED) alone account for 65% of the total production in the country (with a total production capacity of 5.500.000 tons/year) of which 90% are sold in the domestic market.

The Kingdom, according to Mr. Al-Jabr, will witness an increase of the iron and steel mills (2 mills) with a production capacity of 1,250 thousand tonnes/year within the next few years in order to keep at least with the demand for the iron and steel products. “With the rising crude oil prices worldwide and continuation of growth in the construction sector, which depends on the iron and steel products, we expect on increase of iron and steel consumption” he said.

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Iron ore giants turn their sights on Africa

In a remote region of the continent's west, Rio Tinto and BHP Billiton have teams of exploration geologists on the ground spending millions of dollars on drilling. Hopes of firming up potential $1 billion plus iron ore development projects due to increased global demand, are high. In the midst of the resources boom, it sounds like a very familiar story. But perhaps not when the continent is Africa rather than Australia. As the cost of expanding production in Western Austrialia's Pilbara has skyrocketed in the last few years due to a shortage of skilled labour and equipment, Rio and BHP have started to venture beyond their traditional comfort zone. Rio estimates the cost of labour in the Pilbara has risen by 48 percent, materials by 53 percent and equipment by 41 percent since 2003, and as BHP Chief Executive Chip Goodyear noted last month : “Approving an additional project in (WA) puts pressure on every other project because you are cannibalizing your existing workforce.”

So to give itself more options for the future, Rio has already sunk US$50 million (A$64 million) into studying the Simandou iron ore project in the west African nation or Guinea, which is undergoing pre-feasibility studies. BHP is in the late stages of exploration at Mount Nimba in Guinea and is reviewing potential iron ore projects in Liberia. Citigroup commodity analyst Alan Heap says it's a smart move for BHP and Rio to examine iron ore developments in Africa because the economics have changed since the start of the mining boom. “In the case of iron ore, the (barrier to entry) is capital cost,” he says. “It has always been cheaper to incrementally expand at existing operations in the Pilbara and Carajas (in Brazil) than to build greenfield projects elsewhere, primarily because the brownfield projects leveraged off existing infrastructure.

However, capital cost in the Pilbara have doubled in recent years, and it is no longer clear that expanding these operations is the lowest-cost growth option. In a report released last week, Heap notes the capital cost per tonne of building a new iron ore project in Africa is lower than expanding capacity in the Pilbara. Producing iron ore in Africa would also allow BHP and Rio increased access to markets in Europe and North America due to the location. BHP and Rio aren't the only ones taking a serious look at African iron ore opportunities. The world's largest steelmaker, Arcelor Mittal, last month singed an agreement with the Senegal Government to build a US$2.2 bilion iron ore mine, port and rail project, which would produce between 15 million tonnes and 25 million tonnes a year. In Garbon, China National Machinery and Equipment Import and Export Corp is developing a US$3 billion iron ore project, and just 170 kilometers across the border in Cameroon, Australian explorer Sundance Resources is undertaking a feasibility study on US$2.5 billion development.

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Noble to commission 2M TPY Indonesian Iron Ore Project

Hong Kong based Noble Group is expected to bring on stream a 2 million tpy iron ore mining project in Indonesia by the end of this year. Noble Group only has a minority stake in the project but it has the exclusive marketing rights' to the iron ore, Harry Banga, Vice Chairman of Noble Group, told MB recently. “The Indonesian government does not allow majority ownership by foreign investors. We are fine with it, it is the marketing rights that matter,” said Banga.

An Indonesian company holds the majority share but its name was not disclosed, nor any more details concerning the project. Noble Group sold 20 million tonnes of iron ore into the Chinese spot market last year, with 80 percent sourced from India, and the balance from Russia, other CIS countries and Canada.

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Nippon Steel all set to lift production in China

Nippon Steel Corp, the world's second-largest steel maker, may increase output at its joint venture in China with Baosteel Group Corp and its joint venture in China with Baosteel Group Corp and Arcelor Mittal to meet demand from the country's auto makers. “We are considering various options,” Akio Mimura, President of the Tokyo-based company said recently after the Nikkei English News reported it may double production. “I haven't heard of any plans to double the output,” said Chen Ying, Chief Financial Officer of Baoshan Iron & Steel Co., Baiosteel's listed unit. China's economy has grown by an average nine percent a year in the past decade, making car ownership affordable for more people, Bloomberg News reported recently.

Auto makers, including General Motors Corp and Volkswagen AG, sold 25 percent more vehicles in China last year, as sales surpassed those in Japan for the first time. Doubling output at the Baosteel NSC / Arcelor Automotive Steel Sheet Co's plant in Shanghai to 1.6 million tons will cost as much as US$ 425 million, Nikkei reported without citing anyone. The three companies are expected to meet at the end of march, the paper said. “A production capacity increase is one option,” Mimura said. The expansion in China's auto market is beyond expectation. But we have not decided anything.” The joint venture, which began in 2005, initially produced about 800,000 tons a year of galvanised steel sheets mostly for automobiles, according to Nippon Steel.

The plant has the capacity to produce one million tons of galvanised steel, according to Baosteel. Baosteel, China's largest steel maker, has a 50 percent stake in the venture, with Nippon Steel holding 38 percent. Arcelor Mittal, the world's top steel producer, holds 12 percent. China's vehicle sales will likely rise 18 percent this year a economic growth boosts demand, the China Association of Automobile Manufacturers said recently.

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JFE's China venture opens plant

A joint venture between JFE Steel Corporation and China's Guangzhou Iron & Steel Enterprises Holdings Ltd. opened a plant in Guangzhou recently to making automotive sheet metal to supply to Japanese carmakers operating in China. Guangzhou JFE Steel Sheet Co. is one among a number of steel concerns competing in the rapidly growing Chinese automotive market through partnerships with local producers. Nippon Steel Corp. has a similar venture with a company in the Baosteel Group Corp. Group, China's largest steelmaker, based in Shanghai.

Germany's Thyssenkrupp Steel AG is engaged in a similar joint effort in Dalian. Guangzhou JFE Steel Sheet will import partially processed metal from the Japanese plants of JFE Steel, a core unit of JFE Holdings Inc., and will turn it into hot-dip galvanised sheet steel resistant to rust.

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POSCO to look for M&A deals

Lee Ku-taek, Chief Executive of POSCO, said that the company will not shy away from considering possible mergers and acquisitions (M&A) for further growth in the global market where active tie-ups are taking place among international steel makers. “If there's a synergy effect related to POSCO's steel business, we will definitely make an M&A challenge when the opportunity comes,” Lee said in a press conference in Seoul recently. He added that any company in the world could be considered, but did not clearly indicate whether it included Daewoo Shipbuilding & Marine Engineering. Rumors have spun for months that POSCO is actively going after the big shipbuilder, but the steel maker has constantly dismissed such claims. Upon his reappointment as the company's CEO recently by its shareholders, Lee said that POSCO should produce at least 50 million metric tons annually to become a world-class steel manufacturer.

“Additionally, we need to expand our production of value-added steel to 70 percent and development of energy resources to over 30 percent,” Lee said. As part of his corporate vision over the next three years as Chief Executive, Lee said that the firm will expand human resources exchanges between POSCO and its affiliates. Lee is determined to raise the value of POSCO's stock, which he believes is undervalued, to fend off possible takeover attempts. “There is a notion that since POSCO doesn't have a controlling shareholder, this makes the company vulnerable to such M&A attempts,” Lee said. “But POSCO is operating at above standard levels, and we are optimistic that our stock value will go up in the future.” He went on to say that friendly holdings should be at least one-third of its total shares in order for the firm to secure a stable business, adding that currently they are “not insufficient but not enough.”

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Hyundai Steel could touch 12MT p.a. or more at Dangjin

Hyundai Steel's planned integrated steel mill complex at Dangjin, South of Seoul, will initially boast two blast furnaces each with a capacity to produce 4 million tonnes / year, with a third stage adding another 4mt p.a. to be built later. Hyundai Steel President Park Seung Ha revealed the true scale of the plant at a press briefing in Seoul on 6 March. At the same meeting, the company also said that Luxembourg based Paul Wurth had been selected as the preferred bidder to build the blast furnaces. A formal contract signing is expected this month, Hyundai Steel declared. As recently as the ground-breaking ceremony in Dangjin last October, Hyundai Steel was still insisting it would build two 3.5mt p.a. blast furnaces, with the first to be commissioned by 2010 and the second by 2011. Hyundai Steel initially under-scaled the size of its project to calm local opposition to its ambitious plans, company officials have admitted.

In a recent Press Conference, Park announced financing details for the KRW 5.24 trillion ($ 2.52 bn) integrated project. Last October, the company said half the project's costs would be self-funded through earnings, with syndicated loans, dept and other financing sought for the rest, as Steel Business Briefing reported. Hyundai Steel also announced on 6 March that discussions were underway with ThyssenKrupp Steel (TKS) for a cooperation pact, though this too was revealed several months ago, as SBB had reported. Hyundai Steel says it is seeking TKS's advice on equipment procurement and steel plant layout, but says that a formal agreement is yet to be signed.

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Offer hiked for Arcelor Brasil

Arcelor Mittal, the world's largest steelmaker, raised its offer for the shares it does not already own in Brazilian subsidiary Arcelor Brasil recently. The company, which owns about 66 percent of the unit, said it would now offer 11.70 Brazilian reais ($5.75) in cash and 0.3568 class A common share of Arcelor Mittal for each share in Arcelor Brasil. "This floating reference price after adjustment for dividends and interest on cash would represent a total value which as of April 4, 2007, would be equivalent to 18.89 euros or 51.27 reais," Arcelor Mittal said in a statement released recently. Arcelor Mittal said shareholders could receive the mixture of cash and shares proposed or purely cash, with the value based on the close of Mittal shares in New York on the business day prior to the auction date.

The company said the maximum amount it would pay in cash would be 10.9 billion reais ($5.35 billion) and the maximum number of shares it would issue would be some 76 million, representing 5 percent of the share capital of Arcelor Mittal. The company said it would file an amended request to register the offer with Brazilian regulator CVM. The offer would be open for 30 days following CVM's approval. The revised offer, which appears to meet the demands of CVM, comes after eight months of wrangling with Arcelor Mittal over whether it had to make an offer to buy out the Brazilian unit and over the price it should pay. In February, CVM ordered the global steelmaker to pay 51.27 reais, based on Arcelor Brasil's average trading price, far higher than the company's initial offer of about 35 reais. Minority shareholders had called for the price to be determined by the average trading price on the Sao Paulo stock exchange. However, in March CVM accepted Arcelor Mittal's view that it should use multiples of EBITDA (earnings before interest, tax, depreciation and amortisation) to calculate the offer price.

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Mittal steel workers to protect environment

About 20,000 employees of Mittal Steel USA, a subsidiary of Arcelor-Mittal, will take the Energy Star "Change a Light" pledge to use energy-efficient lighting in an effort to protect the environment for future generations. The company helped employees fulfill the goal of the campaign by exchanging each pledge for a compact fluorescent light (CFL) bulb and a fact sheet on the amount of energy that's saved by replacing an incandescent bulb with a CFL. The Energy Star "Change a Light, Change the World" Campaign is a national challenge sponsored by Environmental Protection Agency (EPA) and the US Department of Energy to encourage Americans to switch to light bulbs and fixtures that have earned the Energy Star for energy efficiency. Mittal conducted the campaign as part of its overall energy-awareness initiative, which seeks to reduce the use of energy in its operations as well as in employee's homes. Lighting accounts for about 20 per cent of a home's electricity use, and Energy Star touts the switch to energy-efficient lights as a significant way to reduce greenhouse gases, save energy and protect the environment. According to EPA estimates, Mittal employees 20,000 pledges have the potential to save more than 5.5 million kilowatt hours of energy and nearly 9 million pounds of greenhouse gas emissions. "These are the savings from each employee changing just one bulb," said Larry Fabina, coordinator of the company's energy-conservation initiative. ENERGY STAR was introduced by the EPA in 1992 as a voluntary, market-based partnership to reduce air pollution through increased energy efficiency.

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Novolipetsk '06 net profit up 50%, sees export prices grow in Q2 ‘07

Russian steel maker OAO Novolipetsk Iron & Steel Works reported a 50 % increase in its full-year net profit on strong revenue, primarily driven by growth in sales and production volumes as well as the consolidation of its recently acquired units. The LSE-listed Russian steel producer said export prices growth for most of its steel products during first quarter of 2007 will continue in the second quarter.

The company reported an EBITDA of 2.63 bln usd for the year to end December, up 26 pct, while its sales rose 38 pct to 6.05 bln usd. Net profit for the year was up 50 pct to 2.07 bln usd. Its operating income came in at 2.24 bln usd from 1.84 bln usd. Novolipetsk also expects a further spur in domestic price growth and sees price softening towards the end of 2007.

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Kazakhstan boosts steel output by 14% in Q1

Kazakhstan boosted crude steel output 13.9% year-on-year in January-March 2007 to 1.106 million tonnes, the National Statistics Agency told Interfax-Kazakhstan. Output of flat steel products rose 24.9% to 811,300 tonnes, including 46,354 tonnes of tin-plate and tin-plated sheet, up 71.7%, and 143,916 tonnes of galvanized steel, an increase of 7%. Ferroalloy production rose 2.6% to 421,815 tonnes. The agency also said that Kazakhstan reduced coal production 6.4% year-on-year in the three months to 23.387 million tonnes.

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China on 60 billion tons of proven iron ore reserves

The proven iron ore reserves in China are close to 60 billion tons, according to the Ministry of Land and Resources. The iron content of the reserves is 30 to 35 % on average and 41.5 billion tons among the total reserves is magnetite, the ministry said in a statement posted on its Web site. It noted that China has proven copper reserves of 85.31 million tons, located mainly in Tibet, the middle and lower reaches of Yangtze River, the southeast coastal areas and the eastern part of China's Northeast.

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CSN to gain $100 mn from Corus shares

Brazilian steel-maker CSN, which had rivalled Indian giant Tata Group's takeover bid for Corus, will record a net gain of about $100 million from the sale of shares it had accumulated in the Anglo-Dutch firm. Despite losing the battle for Corus as well as the takeover of US-based Wheeling Pittsburgh in the recent past, the Latin American firm recently asserted it remains committed to emerge as a leading global player in steel space and would continue with its overseas expansion plans. As part of its global ambitions, CSN plans to export iron ore to leading consuming markets in Asia, Europe and the Middle-East. The Sao Paulo-based firm said in a statement that, it would sell its 3.8 per cent stake in Corus, which it had bought for about $345 million later this year.

The company was outbid by Tata Steel with a winning bid of 608 pence a share in a nine-round auction for Corus held on January 31. It anticipates total proceeds of about 445 million dollars from sale of these shares at 608 pence a share. The Brazilian firm would also receive a disengagement fee of about 120 million dollars from Corus, as its offer had been approved by the board of the UK-listed firm. CSN reported 12 per cent jump in its fourth-quarter revenue to $1.26 billion, taking the annual net revenue for 2006 to over $4.40 billion. The company said it aims to become the world's fourth largest iron ore exporter this year, after kick-starting its global market foray with first shipment to Bahrain last month. Talking about India, CSN said economic growth in China and India, which continued to record significant jump in output, have a significant impact on global steel market. CSN said the global steel market continued with the consolidation process last year, with expansion projects concentrated in low-cost production regions like BRIC (Brazil, Russia, India and China) nations. The bids for Corus and Wheeling-Pittsburgh were important steps forward in the company's operational globalization process, the company said.

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Chinese iron ore imports could exceed 2007 projections

Chinese iron ore imports, which are the second-largest exports from Brazil to China, could exceed the projection of 355 million tonnes from the Chinese Association of Iron and Steel, the Chinese official press reported recently, citing sector analysts. "Analysts have said that if the growth posted in the first quarter of the year carries on between April and December, total imports for 2007 will exceed the forecast of 355 million tonnes," said official Chinese news Agency New China. In the first quarter of the year, China imported 100.19 million tonnes of iron ore, or 23.4 percent more than in the same period of last year. China, which is the world's biggest producer and consumer of steel, imported 325 million tons of iron ore most of it from Brazil and produced 418.78 million tonnes of steel in 2006. Brazil is the largest exporter of iron ore to China and the material is, following soy beans, the second-largest export product from Brazil to China. Brazilian company Companhia do Vale do Rio Doce (CVRD) became China's biggest supplier of iron ore in 2006, having sold 77.8 million tonnes on the Chinese market, or 37.8 percent more than in 2005 and almost a quarter of all iron ore bought by the Chinese that year.

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European steel producers win against US steel duties

The US Department of Commerce has accepted a ruling by the World Trade Organization that required a change in the calculation of anti-dumping duties on eight European steel exporters. In most cases, the recalculation resulted in the elimination of all duties and a reduction in other cases, the DOC said in a 26-page decision recently.

The duties were eliminated on hot-rolled coil from the Corus Group in the Netherlands (from 2.59% to zero) and stainless steel bar from Ugitech in France (from 3.9% to zero) and Corus Engineering Steels in the UK (from 4.48% to zero). Duties were also eliminated or reduced on six other stainless steel bar and wire rod producers in the UK, Italy, Germany, and Sweden, previously ranging from 4.76% to 32.32%. Duties on imports of cut-to-length carbon steel plate from Palini and Bertoli in Italy were reduced from 7.85% to 7.64%.

The US petitioners included Nucor, Mittal USA. Ipsco, Steel Dynamics, and Carpenter Technology. The duties were recalculated without using a methodology called "zeroing," and allowed companies to offset goods sold at lower (or dumped) export prices with like products sold at higher prices in the US.

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