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| JUNE 2005 | |
| From the CEO's Desk | |
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Steel prices continue to
remain lower. HRC prices have reached below $500 mark. Even the raw material
prices have shown considerable decrease. For instance, sponge iron, which
was priced at around Rs.12 / kg is sold now at Rs.9 / kg. The whole arithmatic
of sponge iron business has changed due to this price dip. The other sub-segments
of the iron & steel industry have more or less similar story. The whole
supply chain is suffering because of the slackness in price. D.A.Chandekar |
TISCO |
| Headlines
Centre to invest Rs 600 cr on Salem steel modernisation Steel sector needs Rs.1 trillion investment in 5 yrs SAIL to raise output by 1M tons Tata Steel signs loan agreement for $300M Orissa govt. clears Posco’s decks DSP to see Rs 2800 cr investment Tata Steel's Bangladesh venture underway Jindal plans steel, power projects in Orissa JFE, ThyssenKrupp set up JV in Japan for auto steel operations Oregon Steel cuts 2Q EPS view, cites delivery problems AK Steel announces July surcharges Posco to sign Indian steel deal soon Steel cos to cut output to avert price fall Russia’s MMK steel output down 1.7% on year in Jan-May Govt to sell 3% China Steel stake in 2H Mittal Steel conveys Lake Vessels
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Centre to invest Rs 600 cr on Salem steel modernisation The Centre will invest Rs 600 crore on modernising the Salem steel plant in Tamil Nadu, Union Minister for Steel, Fertilisers and Chemicals, Ram Vilas Paswan has said. “We are going to invest Rs 600 crore on the blast furnace of the plant as part of the modernisation programme,’ he said while speaking to newsmen after participating in the Golden jubilee celebrations of Indian Potash Ltd recently. However, he refused to give any more details on the matter. Paswan said shares of the plant would not be sold to private parties. Several political parties in the state had been urging the Centre to give up any plan of privatisation of Salem Steel Plant. |
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Steel sector needs Rs.1 trillion investment in 5 yrs Steel Minister Ram Vilas Paswan said that the country’s steel sector needs investments of up to Rs.1 trillion in the next five years to raise output and meet growing demand. “By 2020, investments to the tune of Rs.2 trillion will be required in the steel sector,” Paswan said at a news conference. He added that state-owned Steel Authority of India Ltd. will invest up to Rs.250 billion in the next five years, while Rashtriya Ispat Nigam Ltd. will invest Rs.80 billion in the next three years to raise their respective production capacities. Meanwhile, the government has asked state-run steel companies to prepare plans showing their aim to increase output by around 10% a year. The minister recently met the chief executives of all state-run steel makers to advise them to improve their marketing and operational efficiencies. |
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SAIL to raise output by 1M tons State-owned Steel Authority of India Ltd. plans to raise its steel-making capacity by one million metric tons in the current financial year that began April 1, reports said. Currently, Steel Authority has a capacity of 13 million tons. The increase in production will come from fixing bottlenecks at existing production facilities, sources said. |
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Tata Steel signs loan agreement for $300M Tata Steel has signed a $300 million loan agreement with World Bank’s International Finance Corp. In a statement to the Bombay Stock Exchange, Tata Steel said the loan agreement consists of a direct loan of $100 million and a syndicated loan of $200 million. The syndicated loan amount will be underwritten by Bank of America N.A. Calyon, Hongkong & Shanghai Banking Corp. and Standard Chartered Bank. Tata Steel, India’s largest private-sector steel company by capacity, said the loan from IFC is to finance its future projects. Tata Steel earlier said it plans to expand its capacity to 15 million tons by 2010 from its current four million tons a year. |
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Orissa govt. clears Posco’s decks Decks have been cleared for the signing of the MoU between the South Korean steel giant Posco and Orissa government for the biggest FDI in a single project in the country - a 52,000 crore steel project at Paradip. The controversial project was cleared at a meeting of the state government’s Project Clearance Authority with the Koreans expected to sign the MoU soon, the Industries minister Biswabhushan Harichandan said. The meeting discussed the various aspects of the proposed 12 million tonne project to be set up over a period of ten years. However, opposition parties maintained their objection to the company being allowed to export iron ore from the state. The government appeared unfazed at the opposition demand that Posco should not be allowed to export iron ore from the country. Harichandan said the government had stipulated that export of iron ore by Posco would be allowed only against import of equal amount. The company had sought 600 million tonnes of iron ore for its project. The project would provide jobs to 13,000 people while another 35,000 would get indirect employment, he said adding the MoU would include a clause that the displaced people would be properly rehabilitated by the company. Leaders of four opposition parties - CPI, CPI(M), Janata Dal(S) and OGP - accompanied by senior Left leaders Sitaram Yechury, Basudev Acharya and D Raja, called on Prime Minister Manmohan Singh in Delhi on Friday and urged him to conduct a thorough inquiry into all mining deals including the Posco proposal. |
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DSP to see Rs 2800 cr investment Buoyed by the record-breaking performance of Durgapur Steel Plant which posted a profit of Rs 874 crore in 2004-05, Steel authority of India Ltd has decided to pump in Rs 2,800 crore to expand its capacity to three million tonnes and strengthen the finishing line to further improve the plant’s bottomline. As part of its efforts for strengthening the finishing zone, the company would instal bar and rod-making capacities and a medium structural mill which together would cost around Rs 1,200 crores, managing director of DSP, S K Bhattacharya said. He said that setting up these mills was crucial for increasing the plant’s bottomline since at present DSP produced almost 50 per cent semis. The finishing mills, he said, had in-principle approval of the SAIL board as they were part of the package of the company’s corporate plan. The feasibility report was complete and after working out the exact cost, the proposal would go to the board for formal clearance. As a first step towards the plant’s upgradation, work has started to put up a 0.85 million tonne bloom caster involving an expenditure of Rs 271 crore. DSP, a perennially loss-making plant, had turned around last year with a net profit of Rs 81 crore and in 2004-05, its profit had shot up to Rs 874 crore on a turnover of Rs 4,029 crore. The proposed bar and rod making plant would have a capacity of 0.7 mt while the medium structural mill would have a capacity of 0.4 mt, Bhattacharya said, adding that there were proposals to put another caster and a finishing mill. |
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Tata Steel's Bangladesh venture underway Bangladesh has sent an invitation letter to India’s Tata Group for initiating “conclusive negotiations” from July 2 on a $2.5 billion investment deal to set up steel, power and fertiliser units. A senior official said the government would, in the meantime, finalise its terms and conditions for the negotiations on the proposed deal under which Tata will set up two 5,000-mw gas-fired power plants, one fertiliser plant and a steel mill. “We will try to conclude the negotiations in the next round of talks instead of prolonging the process,” a senior government official said, adding that the Board of Investment had sent the invitation recently. The talks - the second round after the Tata Group formally submitted the investment proposal in April - were scheduled for June 19. The date has now been deferred to July 2 because of the preoccupation of Finance Secretary Zakir Ahmed Khan, who heads the committee for negotiating with the Tata team, with the national budget. Before starting the upcoming critical negotiations, the government will have to finalise its positions on all important and contentious issues that will be tabled during the meeting. A member of the national committee headed by Industries Minister Motiur Rahman Nizami identified three issues as being critical to the negotiations - fixing the price of the gas, guarantee of its uninterrupted supply to Tata’s plants, and the method of coal mining, if it is leased out. Apart from demanding pricing at an ‘agreed rate’, Tata wants guarantee of uninterrupted gas supply for 30 years while the government is likely to allow 20 years’ guarantee of gas supply. After an agreement is signed, Dhaka will hold talks with New Delhi while the Tata Group will negotiate with multilateral lending agencies for funding the projects. Bangladesh will also talk with the lending agencies for financing infrastructure projects required for the three Tata plants. |
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The Kolkata based MSP group is planning to tap the capital market with an initial public offering (IPO) to part finance its ambitious Rs 124 crore sponge iron and captive power plant in east Chhattisgarh. The sponge iron and captive power plant will be under MSP Steel and Power Ltd. Incidentally, MSP Group has presence in sponge iron, mild steel ingots and construction bars in the eastern region. It has sponge iron manufacturing facilities in West Bengal, Orissa, Jharkhand and Chattisgarh. The group is hoping to push up sales to Rs 450 crore in 2005-06 after the completion of the project. MSP group currently has a combined turnover of around Rs 290 crore. The director of MSP group, Saket Agarwal informed that it is planning to raise Rs 16 crore through the IPO for the Chhattisgarh plant. ‘It will be an integrated steel complex in eastern part of Chhattisgarh. We are tapping the market later this month,’ he said. According to him, the plant will have a capacity of 2 lakh ton of sponge iron, one lakh ton steel melting, 85,000 TMT bars and a 24 megawatt (Mw) captive power plant. ‘The majority of the Rs 124 crore investment will be in sponge iron and captive power plant. We are investing around Rs 50 crore in captive power plant and Rs 38 crore in sponge iron. The company is also building a railway siding for the project,’ Agarwal said. He claimed that after the completion of the project, the group will have sponge iron capacity of around 5.25 lakh ton per year, which Agarwal claimed as one of the highest in the country. ‘We shall be the second biggest after OP Jindal group as far as coal based sponge iron is concerned,’ he said. Commenting on the project, the MSP director said the group has already tied up Rs 76 crore term loan for the project. Besides, the promoters are bringing in Rs 33 crore as equity apart from the Rs 16 crore proposed IPO. ‘We hope that the project will be operational by the end of September 2005,’ he added. |
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Jindal plans steel, power projects in Orissa Jindal Stainless Ltd. plans to set up a 1.6 million-metric-ton integrated steel plant, along with a 500-megawatt captive power plant, at Kalinga Nagar in Jajpur district in western Orissa, reports said. The project will be the largest integrated stainless steel project in South Asia. The steel project is estimated to cost Rs.70 billion. Jindal Stainless was set to sign an agreement with the Orissa government soon. |
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JFE, ThyssenKrupp set up JV in Japan for auto steel operations JFE Steel Corp. and ThyssenKrupp AG’s steel unit have set up a joint venture in Tokyo to work more closely with automakers. JFE Holdings Inc.’s steel-making unit said in a statement that through the 50-50 joint venture, JEVISE Corp., the two firms will take part in developing new vehicles from an early stage to better meet demand from automakers, who are major customers for steel manufacturers. |
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Oregon Steel cuts 2Q EPS view, cites delivery problems Oregon Steel Mills Inc. cut its second quarter earnings view, citing problems in the delivery of welded pipe products. The steel company lowered its outlook to 75 cents to 85 cents a share, from 85 cents to 95 cents a share. Analysts, on average, expected the company to earn 96 cents a share, according to Thomson First Call. In the year-ago period, Oregon earned 53 cents a share. Oregon also said it expects 2005 operating income from continuing operations will be about the same as 2004, before the 2004 labour dispute settlement charges, even as total shipment of product in 2005 is seen declining about 5% from a year ago. Oregon said the second quarter earnings revision is primarily due to the inability to achieve the scheduled delivery on about 30,000 tonnes of welded pipe products, representing about $34 million of revenue. Railroad car shortages and bad weather at the product destination points hurt the delivery. The product is expected to be delivered and the associated revenue recognized in the third quarter. Oregon said that while sales volume for its plate and rod products have declined in recent months due to customer inventory balances, operating margin per ton for these products continues to compare favorably to those realized in the first quarter. Welded pipe and rail products continue to meet volume and operating margin expectations. |
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AK Steel announces July surcharges AK Steel has advised its flat-rolled carbon steel customers that a $208 per ton surcharge will be added to invoices for products shipped in July 2005. AK Steel has also advised its electrical steel customers that a $200 per ton surcharge will be added to invoices for electrical steel products shipped in July 2005. AK Steel’s surcharges are based on reported prices for raw materials and energy used to manufacture the products, with the May 2005 purchase cost used to determine the July 2005 surcharges. Headquartered in Middletown, AK Steel produces flat-rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products, for automotive, appliance, construction and manufacturing markets. |
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Posco to sign Indian steel deal soon South Korean steelmaker Posco said it could sign an agreement as early as next week for a $12 billion steel project in the poor but iron-ore-rich Indian state of Orissa. If finalized, the deal would be the largest single foreign investment in India. Posco, the world’s fifth-largest steel producer, has been courting the government of the state of Orissa for months. State officials have been reluctant to strike a deal that could lead to the export of iron and steel when demand for these important commodities is growing in India. A Posco spokeswoman said that Orissa officials told the company they were preparing to sign a memorandum of understanding. But she cautioned that the deal could face last-minute hitches. Indian officials have indicated interest in signing at least twice before, only to pull back at the last minute, she said. But one Posco official closely involved with the project said he was confident that this time the deal would go through. Orissa and the Central government have agreed to hold a signing ceremony on June 22, the official said. If the deal goes through, it will represent a major new investment even as the global outlook for steel is weakening, production capacity expanding and demand softening. A multibillion-dollar deal between Orissa and Posco would signal that India is prepared to open its doors a bit wider to the kind of marquee foreign investments that could lift it to more prominence in the world economy. Anglo-Australian mining company Rio Tinto PLC and other international companies also have been considering major investments in Orissa. The Posco investment would easily dwarf the previous largest foreign investment in India, the $2.9 billion power plant by Enron Corp. at Dabhol. Under the terms of the agreement, Posco would build a steel mill with an eventual annual production capacity of 12 million tons. The company would get the right to use 20 million tons of iron ore from local mines annually for 30 years to provide raw material for its mill, the Posco official said. Posco will likely need to build railroad and port facilities at the site as well, he said. |
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Russia’s MMK steel output down 1.7% on year in Jan-May The steel output of Russia’s largest steel smelter Magnitogorsk Metal Plant, or MMK, decreased 1.7% on the year to 4.61 million tonnes in January-May, the company sources said. Cast iron output decreased 3.6% on the year to 3.88 million tonnes in the period. MMK produced 575,900 tonnes of ore, 4.4 million tonnes of sinter, 2.32 million tonnes of coke, the company sources said without providing any comparisons. MMK exported 50.2% of its general production in the period, the company said. In May, MMK produced 87,000 tonnes of ore, 917,400 tonnes of sinter, 482,600 tonnes of coke, 815,400 tonnes of cast iron and 952,600 tonnes of steel. In 2004, the company produced 11.29 million tonnes of steel, down 1.8% on the year, while output of sinter stood at 10.36 million tonnes. No comparison was provided. The company’s coke output in 2004 amounted to 5.87 million tonnes, up from 5.5 million tonnes in 2003, while the company’s output of cast iron was at 9.65 million tonnes, down from about 9.7 million tonnes in 2003. |
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Govt to sell 3% China Steel stake in 2H The Taiwan government plans to sell as much as a 3% stake in China Steel Corp. in the second half of the year, reports said. The sale is expected to inject around NT$10 billion into national coffers. The Taiwan government controls 23% of the island’s largest steel maker, and is obliged by a legislative resolution to maintain a stake of at least 20% in the firm. |
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Steel cos to cut output to avert price fall Several steel companies plan to cut production to prevent steel prices from falling due to oversupply, sources said. Taiwan’s largest steel company, China Steel Corp., will shut down its second furnace for 90 days for maintenance, which will help lower the company’s production. Sources don’t say whether the maintenance period is longer than usual. Chien Shing Stainless Steel Co. plans to cut its production by a 10th because of the outlook for weakening demand. Global economic weakness and China’s measures to slow its growth have weighed on steel demand. |
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Mittal Steel conveys Lake Vessels Mittal Steel has disposed of its bareboat charter interests in two lake vessels that provide raw materials to its steel works in Burns Harbor, Ind. The vessels were chartered by International Steel Group, which was acquired by the global steelmaker, Mittal Steel Co., on April 15. Mittal Steel has made these arrangements: M/V Burns Harbor — Ownership has been transferred to American Steamship Co. from a vessel trust. The 1,000-foot-long vessel can hold more than 72,000 tons of bulk cargo, water levels permitting. A trust had operated the vessel through an agreement with a financial institution. M/V Stewart J. Cort — ISG operated the ship under a “bareboat charter” agreement, which now has been assigned to a subsidiary of The Interlake Steamship Co. The 1,000-foot-long Cort has capacity for more than 58,000 tons of bulk cargo in its hold. A consortium of financial institutions owns the vessel. Mittal Steel also has entered into long-term agreements with American Steamship Co. and a subsidiary of Interlake Steamship Co. to time-charter the Burns Harbor and the Cort for the transport of iron ore on the Great Lakes. The U.S. Maritime Administration has confirmed that such arrangements are in accordance with the statutes and regulations administered by the agency. |
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