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| JULY 2004 | |
| From the CEO's Desk | |
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Few days back, I happened to see a very special advertisement on a TV channel stating "There is little bit of steel in everybody’s life". A nicely made one. I think it was released by ‘Indian Steel Alliance’ to make everybody aware of how important this metal is in their life. Apart from this one, I have not seen many ads of steel companies. The other industry sectors, like IT, construction, engineering, FMCG clearly dominate the screen. If one really compares, ‘iron & steel’ is much much bigger industry than all these. It generates highest employment, direct and indirect. The industry contributes huge chunk in the foreign currency earnings. In fact, no other industry can even be thought of without steel. In spite of all this, I would say, the industry is un-noticed. We know that the industry offers excellent carrer to a metallurgical engineer, but the fact remains that metallurgy is the last choice of majority HSC students. We talk about increasing per capita steel consumption, but our civil engineers and architects are taught only about RCC construction. They do not know how to use more steel in a building, reduce the cost and increase the lifespan !! Is it not something we all should think about ? May be last few years were too bad to think about anything like this. Now, if the time is comparatively better, we all must do something for our industry. May be sponsoring some more ads like this, may be trying to upgrade the civil engineering syllabus, the ways and means can be varied but the goal is one and only one - To achieve a complete ‘Face Lift’ of our industry. D.A.Chandekar
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A memorable Summit by Steelworld Organised by Steelworld at Goa between July 16-17, the Iron & Steel Summit was first of its kind in the country. The importance of venue inhanced the glamour of the summit due to geographical advantages the state possesses. The Summit was represented by a wide gamut of industries including iron ore, sponge iron, pig iron, steel scrap, steel and all those related with iron and steel industries. The Summit comprised Business Sessions like viability of mini-sponge iron industry, co-generation, problems / issues associated with mining and export of iron ore etc. The well known speakers shared their experience and thought with the well attended audience and made the event memorable. |
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The Steel Authority of India has unveiled its corporate plan ’12 envisaging an investment of Rs.25,000 crore. As per the plan, over Rs 4,300 will be spent on immediate priority schemes, to be completed by ’06-07. Sail chairman VS Jain, while announcing his company’s corporate plan, said “The capital expenditure envisaged will be financed mainly through internal accruals, and will be supplemented by market borrowings if the need arises. ” He added that care would be taken to ensure that the company’s debt-equity ratio is maintained at a level of 1:1. “The areas broadly identified for investment include development of iron ore mines, rebuilding of coke oven batteries at the Bhilai Steel plant (BSP) and Durgapur Steel plant (DSP), revamping of iron and steel making at BSP, DSP and Bokaro Steel plant (BSL), installation of one blast furnace at Rourkela steel plant, installation of auxiliary fuel injection system in all blast furnaces in a phased manner and installation of new finishing mills. “Among the new finishing mills planned are, a 1.1m tonne thin slab casting and inline hot strip mill, a 1m tonne bar and rod mill and a 2 lakh tonne pipe plant at BSP. DSP will get a bar and rod mill of 1.4m tonne and a structural mill of 4 lakh tonne, while RSP will have new 7 lakh tonne plate mill. The plan also includes a 2.5m tonne hot strip mill and a 6 lakh tonne cold rolling mill at BSL. “The planned capacity expansion includes increase in hot metal production from current level of 13 million tonnes to about 20 million tonnes per annum in 2011-12 . This would result in augmentation of production of crude steel to a level of 18.7 million tonnes as against current levels of 11.83 million tonnes and increase production of saleable steel to 17.38 million tonnes which is presently 10.73 million tonnes. Mr Jain said that the plan includes increasing the share of value added products. “We plan to reduce generation of semi finished steel from the current level of 20% of saleable steel to about 4% in 2012.” said Mr Jain“Meanwhile, the steel major is scouting for global suppliers for supplying one lakh tonnes of pulverised coal to meet its requirements for August-November 2004, even as it grapples with a steep hike in its coal import bill for the year. |
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GNCL may enter into steel making Looking at lucrative return form steel business existing companies have expanded the capacity while several new companies have tasted water of this industry. Gujarat NRE Coke (GNCL) is one of them who is planning to enter into steel making. The company, the country’s largest non-captive manufacturer of metallurgical coke, is contemplating a foray into steel production. It is also planning to pick up equity stakes in Australian mines from where it sources raw coke. “We are toying with the idea of forward integration into steel and looking at buying stakes in supplier mines based in Australia,” Arun Kumar Jagatramka, managing director, GNCL was quoted as saying. There is no concrete plan yet to set up a steel production unit, but that it looks like a natural forward integration of business. Met coke is used in the production of steel. Buying stakes in supplier mine firms would help maintain a long-term commitment to uninterrupted supply. The company is also planning to set up a third unit in Dharwad which may take its coke manufacturing capacity to 1m tonnes per annum (mtpa) by the end of financial year ‘05. There is a plan to increase the capacity to 1.4 mtpa in the short-term, through a parallel capacity enhancement at the Dharwad unit. In the half year ended March 31, ‘04, the company recorded a profit before depreciation, interest and taxes (PBDIT) of Rs 42 crore on total sales of Rs 105 crore. |
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JVSL Q1 net grows 139% to Rs.55 crores Jindal Vijayanagar Steel Limited has reported a net profit of Rs.54.89 crores for the first quarter ended June 30, 2004, as against Rs.22.92 crores of corresponding quarter in the previous year. The company registered production and sales volume of HR Coils of 3,55,154 MT and 3,58,168 MT respectively. The pellet plant has also produced 7,50,081 MT during the quarter. The company has taken shut down of its Hot Strip Mill for 7 days during April & May 2004 for capital maintenance and Pellet plant for 13 days for operationalising the enhancement of capacity from 3 mtpa to 4.2 mtpa. In view of the shut down of Hot Strip mill, the company sold 18,000 MT of slabs during the current quarter. Inspite of lower production due to these shut downs, the company posted highest ever sales of Rs.1059 crores showing a growth of 38% over corresponding quarter in the previous year. The earnings before interest depreciation and tax (EBIDTA) for the quarter is Rs.291.35 crores (Rs.226.97 croes in the corresponding quarter of pervious year). The EBIDTA margin of 29% on net sales could be achieved even after steep increase in input prices particularly coal and coke. The strategic cost reduction initiatives taken by the company viz. captive coke manufacturing facility and lower power tariff are expected to improve operating margins significantly on commissioning of these projects. The net profit after tax is Rs.54.89 crores once again showing a growth of 139% compared to that of corresponding quarter in previous year. The earnings in the current quarter does not include any exceptional profits as was there in the corresponding quarter in the previous year. The company’s improved results without any exceptional profits reflect better quality of earnings. |
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Tata steel to finalise SA’s project after September Tata Iron and Steel Company Ltd. (Tata Steel) is all set to finalise the investment details for its ferrochrome project in South Africa after September. The technology to be used has already been chosen and negotiations have begun for short-listing equipment suppliers. Talking to newspersons, the Deputy Managing Director of Tata Iron and Steel Company (Tisco), T.K. Mukherjee, said that the project would be finalised following completion of the ongoing ‘environmental impact study’ in September. The project cost could go up from the initial estimates because of ‘reasonable appreciation in land prices.’ The company had recently launched “Wiron”, a branded galvanised wire, aiming at a sales target of three lakh tonnes and revenues of Rs 1,000 crore this fiscal from the brand. According to Tata Steel Managing Director B Muthuraman, the galvanised wire, produced by its wire division, would be sold both in India and abroad, with the company aiming at doubling its production to six lakh tonnes next year and one million tonnes in two years. |
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DSP to go for Rs 271-cr modernisation Durgapur Steel Plant (DSP), a favourite arm of SAIL, will soon start work on a fresh phase of modernisation, setting an ambitious target of producing the plant’s entire output through the continuous casting route. At present, only 55% of steel produced at DSP is through continuous casting, with the rest being semi-finished steel items, like billets. In particular, DSP has lined up a Rs 271-crore package for setting up a bloom caster, adding another ladle furnace and setting up a re-heating furnace. The new facility will bring down DSP’s cost of production by Rs 1,000/ tonne. DSP’s overriding priority is to lower its cost of production, while improving quality. This also prompted its decision to invest in a bloom caster over investing in a wire rod mill. “We have plans to invest in wire rod mill, but the bloom caster received top priority,” sources added. The plant, which bounced back into profits last year after a gap of two decades, needs to find ways to sustain its turnaround. While enhancing DSP’s finishing sections, the operations of a wire rod mill would have been largely dependent on market conditions. The bloom caster will convert top-poured ingots into blooms. Apart from improving the yield by 10-15%, this would also lead to a significant improvement in the quality of steel produced by DSP. However, the most substantial cost savings will come from a cut down in energy consumption levels. |
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India joins the Euro Club, to supply steel for coins Now, after the 10 small country’s inclusion to the Euro club, it is the turn of India. Now there will be Indian steel in some 7.5bn euro coins in circulation. Jindal Stainless, the country’s largest stainless steel making outfit, has bagged an order to supply coin blanks to Monnaie De Paris — the French national mint. France, according to ’02 data, produces some 7.5bn — 15% of the total 49.8bn euro coins in circulation, sources said. The highest producer of the 8 denominations of Euro coins in circulation is Germany with some 17bn coins or 34% of the total number in circulation. Coins are made using various alloys of metals like nickel, copper and zinc. The metals, in appropriate composition, are melted in furnaces, cast into ingots and passed through rolling mills to reduce them into strips. These strips are fed into high-speed punch presses to be converted into coin blanks, also known as planchets of appropriate diameter. Coin blanks go through the process of being cleaned, processed further metallurgically and imprinted to result in coins for circulation. In itself, coin making is a niche just opening up for business for stainless steel makers around the world. SAIL officials point out that “till ’03-04, the Salem Steel Plant has supplied about 33,000 tonnes of coin blanks and 24,000 tonnes of stainless steel strips to the four Indian government mints.” Jindal Stainless already supplies AISI 430 grade ferritic stainless steel and cupro nickel coils to the government. |
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Tata Steel, L&T in Orissa port JV Tata Steel is in talks with Larsen & Toubro to set up an equal joint venture company for the development of Dhamra Port in Orissa, the Bombay Stock Exchange announced recently. The statement said that the steel major was clarifying a newspaper report about the joint venture. The Dhamra port was likely to become operational by 2007. |
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Steelmaking plant for Al Rajhi Jeddah Danieli Centro Met has been contracted for the supply of a new 850,000 tpy Steel Making plant to be installed in the Jeddah Industrial area (KSA). The new state-of-the-art SR950 million factory, featuring all latest technology in steel making and casting will feed Rajhi Steel hot rolling mill division designated to produce 750,000 tpy of merchant long products. The order foresees the supply of new complete steel making plant basically composed of a 100-ton full-platform EAF, Ladle Furnace and 5/6-strand CCM for casting 100-160 mm billets, plus materials handling system, Fume Treatment Plant and melt shop auxiliaries. The Al-Rajhi Group will also play a major role in the government’s Saudization programme by employing 250 Saudis at the joint venture stele plant to be opened in Jeddah at the end of 2005. Al Rajhi Group had been in the steel business for the last two decade and has seven factories for the production of steel and other allied products. The factory, which is ISO 14000 certified will apply stringent environment. State-of-the-art technology will sterilize the ambient environment against pollutants and other health hazards. It will also implement ISO 9000 standards to bring its products into conformity with American, Dutch and Saudi Standards. |
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Jindal Stainless buys Indonesia steel co Jindal Stainless Ltd., India’s largest stainless steel producer, bought Indonesian steel company Maspeon Stainless Steel for $32 million. In a statement to Bombay Stock Exchange Jindal said that the Indonesian company would now be named PT Jindal Stainless Indonesia. Jindal plans to invest an additional $12 million by the end of this fiscal year ending March 2005 to double the Indonesian plant’s annual capacity to 100,000 metric tons. The Indonesian unit will help Jindal meet stainless steel demand in SoutheastAsia, which is estimated to be growing at 10% a year, the company said. Demand in the Indian stainless steel market is currently growing at 8% a year. |
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Steel majors including Tata Steel have increased basic selling price of their products by Rs. 500 to 1000 with effect from Aug 01, 2004 but company like Ispat are not favouring the move. However, PSUs like SAIL & RINL have convened executive body meeting for the pricing decision. |
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Iron ore demand remains strong: Rio Tinto Anglo-Australian resource house Rio Tinto (RTP) said that demand remains strong across all markets for its iron ore products, with second quarter output for its key Hamersley mine of 18.4 million tons up 6% from the same period a year earlier and up 17% from the first quarter. Rio Tinto’s share of production at its Robe River venture of 7.1 million tons was up 22% from the second quarter last year and up 31% from the first quarter. In its latest activities report, Rio Tinto said second quarter production of most major commodities was up from the year-earlier period. |
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US steel makers are reporting huge gains in the second quarter, with Charlotte-based Nucor Corp.’s (NUE) second-quarter income coming in at $251.4 million, or $3.17 a share, up from the $8.4 million, or 11 cents a share, reported a year ago, as US manufacturing, mainly automotive and machinery sectors, fuel demand and maintain pricing momentum. The company established records for steel production, steel shipments and steel sales to outside customers in the first half of 2004, largely due to strong domestic demand. Steel production was 10 million tons in the first half of 2004, up 18% from the 8.5 million tons produced in the first half of 2003 and shipments jumped 15% to 9.1 million tons during that time, up from 7.9 million tons during the first six months of 2003. In addition to making traditional flat-rolled products, Nucor does heavy business in typical construction and machinery products such as bars, beams, joists, girders, fasteners, decks and framing systems, which are experiencing growth this year. The Washington, D.C., American Iron and Steel Institute says that steel mill shipments in the first five months of 2004 are up 7.7% overall from the same period a year earlier. Shipments to the automotive sector are up 4.8%, and have risen 8.8% in the construction sector and 5% in appliances, utensils and cutlery. |
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S Korea’s Posco To raise stainless steel prices Posco Co. of South Korea, one of the world’s largest steel makers, raised domestic prices of its stainless steel products later this month to reflect higher material costs. “We will hike most stainless steel product prices by between 2.9%-8.2% from July 28,” said a Posco spokesman on the condition of anonymity. For hot-rolled stainless 300 series products, the price will be raised to KRW2.63 million a ton from KRW2.43 million and for stainless 400 series products, the price will be hiked to KRW1.29 million a ton from KRW1.24 million, another official at Posco said. The price of nickel, the main ingredient of stainless steel, surged to $15,100/ton in mid-July from $11,200/ton in June. Buoyed by firm steel prices at home and abroad, Posco recently reported a record high net profit in the second quarter. It realized a net income of KRW914.6 billion, up 66% from a year ago, while its sales jumped 35% to KRW4.75 trillion. |
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AK Steel Holding Corp. (AKS) swung to a profit from a loss in the latest quarter, which included an after-tax gain and a tax benefit related to discontinued operations. In a news release, AK Steel said second-quarter net income of $92.7 million or 85 cents a share included an after-tax gain of $44.2 million or 41 cents a share, on the sale of the company’s Houston industrial park, and a tax benefit related to discontinued operations of $27.2 million or 25 cents a share. The Thomson First Call mean earnings estimate was for 16 cents a share. In the year-ago second quarter, AK Steel had a loss of $78.2 million or 72 cents a share. The company said net sales in the second quarter totaled $1.31 billion on shipments of 1,565,100 tons, 34% and 12% higher, respectively, than sales of $981.3 million and shipments of 1,399,000 tons in the year-ago quarter. AK Steel noted that increased global steel demand spurred the higher shipment volumes and increases in spot market pricing helped increase revenues. Steel prices also rose as a result of surcharges implemented to help offset unprecedented prices paid for certain raw materials and energy sources, it said. The company’s average flat-rolled selling price per ton reached a record $835 per ton in the second quarter of 2004, up 22% from $682 per ton in the second quarter of 2003 and nearly 12% higher than the $747 per ton average in the first quarter of 2004, it said. AK Steel expects continued improvements in its operating profitability for the third quarter and second half of 2004, due primarily to anticipated higher selling prices and lower planned maintenance and overhead costs that, collectively, are expected to more than offset higher raw material costs. |
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Handan Iron & Steel looks abroad for sales Handan Iron & Steel Group, one of China’s major steel makers, has increased export sales to offset falling domestic demand as the government attempts to slow economic growth, a company spokesman said. China’s government is trying to stymie investment in the steel sector and downstream buyers such as the property and automotive industries in a bid to slow blistering economic growth to more sustainable levels. In response to the expected crimp in local demand, Handan Iron & Steel has looked overseas for sales growth. Between April and July, the company exported 34,600 metric tons of high-quality steel sheets to countries including Italy, South Korea and the U.K., Handan spokesman Wang Weigang said. “It has been the largest volume of steel sheets the company has ever exported within such a short period of time,” Wang said, without providing a comparative figure. The sharp growth in exports has helped offset the impact of China’s macroeconomic controls, which eroded the profit in the company’s low-end construction materials sector, Wang said. Handan’s total steel output in 2004 is expected to remain unchanged from the 6 million metric tons produced in the previous year. |
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HK Johnson Electric predicts stable steel prices Hong Kong-listed Johnson Electric Holdings Ltd. said that copper and steel prices are stabilizing after the sharp increases last year that weighed on the company’s earnings. The micromotor maker said costs rose and its profit margin was squeezed by the more than 30% jump in the average cost of steel and the 29% rise in the average London spot price of copper in the fiscal year ended March 31, 2004. The company reported a 22% drop in net profit to US$116.6 million in the same period. Steel and copper are major raw materials for Johnson Electric. “We are not anticipating any large movement one way or the other on those (copper and steel prices),” said Senior Vice President and Chief Financial Officer Eric Davis. However, Davis noted steel and copper prices are “still a little higher than they were last year.” Chairman and Chief Executive Officer Patrick Wang said the worst of the impact of higher commodity prices on the company’s earnings is over. In its annual report, the company said it forecasts low double-digit growth in sales for the current financial year. The growth will be helped by cost-cutting measures, Wang said. |
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Mexico’s Imsa reports Q2 net up 27% Mexican steel maker and conglomerate Grupo Imsa (IMY) reported a 27% rise in second-quarter net profit Monday on higher steel sales. In a press release, Monterrey-based Imsa said its net profit rose to 615 million pesos ($1=MXN11.372) from MXN484 million in the like-2003 period, backed by higher sales and lower operating costs. Imsa’s quarterly sales increased 34% to MXN10.59 billion, led by a 52% surge in steel sales amid higher global demand. Steel accounts for more than half of Imsa’s revenue, with aluminum, plastics and battery sales making up the rest. Imsa is now planning to exit the automotive battery business, selling out its stake to joint-venture partner Johnson Controls Inc. (JCI) of Milwaukee, Wisconsin. Johnson Controls will pay Imsa $525 million, including debt for the stake. Imsa plans to use the proceeds of the sale to pay down its debt. The company had total liabilities of MXN18.80 billion as of the end of June. Imsa reported a MXN185 million foreign exchange loss for the quarter, compared with a MXN271 million gain in the same period of 2003. The Mexican peso weakened 2.3% during the April-June quarter. Imsa derives more than half of its revenue from Mexican sales, with the rest coming from the U.S., Europe and other parts of Latin America. |
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