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| AUGUST 2005 | |
| From the CEO's Desk | |
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The steel prices continue
to be soft and are expected to be so for some more time. Ofcourse, experts
feel that after the rainy season gets over, the construction activity
will pick up and this will naturally give a boost to steel consumption,
which is generally on the rise from October to March. This phenomenon
is a standard one and is being observed for many years. Thus the price
curve may get a good support from increase in the consumption. So, let’s
wait for a month or so and watch, the price curve may take an upward turn. D.A.Chandekar |
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| Headlines
Local steel cos wait in wings as CR prices seen up Pak delegation signs 7 MoUs with Chhattisgarh Cos. Mittal to sign deal on building steel plant HSE grants perpetual THERMEX rights to H&K Ispat SPV raises $150 mn to finance plants in Bulgaria S. K. Jain takes charge as ED BSP Mexico Labour Ministry rules against Sicartsa Steel Strike SMS Demag starts BOF gas recovery plant at Jindal Mittal not planning to reduce stake Demand spurs Nippon Steel to expand plant Maanshan sees China 2H steel supply beating demand Chinese steelmakers set for merger Mittal Steel SA H1 net up 108%
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Local steel cos wait in wings as CR prices seen up Experts believe that the current rise in hot-rolled (HR) and cold-rolled (CR) and galvanized steel prices are just market corrections, leading to nowhere for making firm decision for buying or selling. On the heels of a $20-25 price hike in HR coils by international steel majors, comes the news that prices of CR sheets and hot-dip galvanised steel are likely to shoot up by $60-70 per tonne. Whether the global price rise translates to equally dramatic price adjustments on the domestic front remains to be seen. As Indian Steel Alliance’s Moosa Raza was quoted as saying, “The global increases that are being cited work out to just a 5% hike as prices of HR coil is just about $450 per tonne. In fact, they are not commensurate with the price drops for the past six months.” Prices of HR sheet decreased from $780 per tonne in August-September ’04 to the current level of $440 per tonne. In fact, since May this year, the price never climbed to the $500 per tonne level. As a result, Indian steel companies, too, effected regular price cuts of Rs 1,000 or more on a monthly basis, bringing the price down to Rs 25,000 per tonne from Rs 28,000 per tonne in the first quarter this year. The reason behind the price cuts was the slashing of inventories in the first half of ’05 due to over-stocking all through the last quarter in ’04. Global importers had placed huge orders at high prices fearing difficulty in accessing steel. China’s huge appetite for steel in ’04 led to the surge in demand and by ’05 the country had built a huge inventory of 40 MT. |
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Pak delegation signs 7 MoUs with Chhattisgarh Cos. In a historic visit to India, a 16-member Pakistan Engineering Development Board delegation - led by Imtiyaz Ali Rastgar, Chief Executive Officer of the Export Promotion Board in Pakistan – signed six agreements with M/s B K Engineering of Chhattisgarh. Under the agreement Pakistan would invest US $102 million. In a two-day tour to India the Pakistan delegation signed a Rs.450 crore business memorandum of understanding with India mainly pertaining to steel industry, subject to the approval of the recommendation by the government of both countries. Under this agreement, BK Engineering would provide equipments used in steel plants to six key Pakistan industries. In another agreement signed by Pakistan private industry Carbross Engineering and Raipur-based Raipur Alloys Limited, the former would import 1000 metric tones of ferro-manganese every month. This was the first-ever official visit by a Pakistan trade and business delegation since the creation of Chhattisgarh. It was jointly organized by the Confederation of Indian Industry and Chhattisgarh State Industrial Development Board. The visiting delegates said that their visit has been extremely fruitful in building up a firm trade relation between the two neighbouring countries. Industries in Pakistan can benefit from the technological advancement made by their Indian counterparts. |
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Mittal to sign deal on building steel plant Mittal Steel Co. NV, the world’s largest steel maker, is likely to sign a deal by the end of August with the government of Jharkhand state in eastern India for building a steel plant with an annual capacity of 10 million metric tons, reports said. The state government seems to have finalized a memorandum of understanding that will be cleared by the state cabinet soon. The agreement is likely to provide some benefits to Mittal. |
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HSE grants perpetual THERMEX rights to H&K Hennigsdorfer Stahl Engineering GmbH (HSE) has granted perpetual rights to H&K for marketing, selling and installing the Licensed THERMEX Quenching Systems of HSE. With the new right, the exclusive H&K Territory for THERMEX expanded to now also include Bhutan, Myanmar (Burma) and Pakistan. India, Nepal, Bangladesh and Sri Lanka have been currently in the existing territory list of the company. In appreciation of the impressive performance by H&K India - more than 50 installations/orders for THERMEX Quenching Systems and 14 new orders have been passed on in the 6 months up to end June 2005. An Agreement to this effect was signed on 1st July 2005 by Directors of HSE and H&K India in Berlin-Hennigsdorf. Thus, with the current perpetual right the THERMEX rights to H&K is spread throughout Indian sub-continent. July 2005 saw two more orders for THERMEX System on H&K for rolling mills in Maharashtra. These orders are in addition to the two received from Varsana in Kutch and Saravana in Karnataka in June 2005. These take the tally of THERMEX orders to 16 in 2005 alone and 54 overall. On execution, the THERMEX rebar capacity in the country will go well past the 4 million ton mark. |
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Ispat SPV raises $150 mn to finance plants in Bulgaria Global Steel Holdings, a special purpose vehicle controlled by the Pramod and Vinod Mittal of Ispat group, has raised nearly $150 million to part finance its acquisition of a 71 per cent stake in Bulgaria’s largest steel maker, reports said. Sources in Ispat group said Global Steel Holdings had mobilised the fund against securitised debt from a host of steel traders including Stemcor of UK, Voest Alpine Industries of Austria and Selzgitter of Germany. The cost of borrowing of the debt instrument, which was securitised against off-take of steel, was 7 to 8 per cent a year. Merrill was the lead manager. Tudor Fund of the US, Glodman Sachs and Cheney Cap were other merchant bankers of the issue. Global Steel Holdings has paid a part of the fund for its acquisition of a 71 per cent stake from Finmetals and the remaining part would be used to take care of the company’s liabilities, estimated to be around $ 200-300 million. Kremikovtzi is supposed to pay this amount to several state agencies like railways and power. The Ispat group revamped the Kremikovtzi board following the completion of acquisition of majority stake. Pramod Mittal, chairman of Ispat and Global Steel Holdings, has joined the chairman of the supervisory board of the company. Bulgarian government still owns 25 per cent of Kremikovtzi, and individual shareholders hold the remaining four per cent shares. Global Steel Holdings had signed an agreement to acquire Finmetals Holding’s 71 per cent stake in Kremikovtzi nearly four months ago. In addition to the $ 150 million, Global Steel Holdings will infuse $ 300 million in Kremikovtzi in five years. |
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S. K. Jain takes charge as ED BSP Surendra Kumar Jain, General Manager I/c Works, Bhilai Steel Plant has been promoted as Executive Director (Works) of SAIL’s best performing unit. At a simple ceremony at Ispat Bhavan on August 1, 2005, Shri Jain was congratulted by Shri RP Singh, Managing Director, Bhilai Steel Plant , Shri G Ojha, Executive Director (P&A), Shri Nawaz Ahmed, Executive Director (MM), Shri R Ramaraju, Executive Director (Projects) and other senior members of the management team. Shri Jain took charge of the Works area of the Plant as General Manager Incharge (Works) of Bhilai Steel Plant on 8th December 2004. Prior to this, he was GM (Safety & Fire Services). |
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Mexico Labour Ministry rules against Sicartsa Steel Strike Mexican labour authorities ruled against a strike by workers at one of Mexico’s biggest steel plants in a move that could unleash a series of stoppages by miners and metal workers across the country. The Mexican Mining and Metallurgical Workers Union said in a statement that the Labour Ministry’s arbitration board declared void the strike at the Sicartsa plant in Lazaro Cardenas in central Michoacan state. About 2,000 workers have been on strike for over a week at Sicartsa, a unit of Monterrey-based Grupo Villacero, Mexico’s biggest producer of rebar steel. The union said that it was disappointed by the “cynical attitude” shown by company officials during talks mediated by authorities. Labor Minister Francisco Salazar said that the arbitration board found demands made to the company by union officials weren’t justified. “The board, which is an autonomous entity, found that reasons exist to declare this strike void,” Salazar was quoted by the Infosel financial service as saying. The minister said that if the striking workers don’t go back to work, they could lose their contract. The workers have several options, including taking the case to court if they decide to continue striking, a union spokeswoman said. |
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SMS Demag starts BOF gas recovery plant at Jindal SMS Demag AG, Germany, has successfully commissioned a BOF gas recovery plant for two 120-ton BOF’s at Jindal Vijayanagar Steel Ltd. (JVSL), Toranagallu, India. The newly established plant includes two BOF-specific gas changeover stations, a gas holder, pressure boosting station with two pressure booster fans, safety equipment and instrumentation. The BOF gas recovery plant allows the recovery of more than 120 million cubic meters per year of highly energetic gas from the oxygen blowing process of the BOF’s. This gas will be used for power generation in the works’ own power station. Following the successful performance test, the contractually specified guarantee data were attained on both BOF plants and the acceptance certificate as well as the certificate of successful commissioning were issued. SMS Demag AG forms part of the Metallurgical Plant and Rolling Mill Technology Business Area of the SMS group. |
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Mittal not planning to reduce stake NRI steel tycoon Lakshmi Mittal has no immediate plans to reduce his stake in Mittal Steel Group, rated as the world’s largest steel company, a spokesman said. Mittal, Chairman of the Group which produces 51 million tonnes of steel annually, was aware of the options open to him but he has no immediate plans to dilute his stake, the company spokesman said. The London-based ‘Financial Times’ newspaper had last week reported that the steel giant would be willing to reduce his 86 per cent stake in the Mittal Steel Group. The interviewer asked Mittal whether he would be willing to reduce his stake and he replied that he was aware of the options open to him but has no plans to change it now, the spokesman said. The Mittal Group is in the process of acquiring State-owned loss making companies in Turkey and Ukraine, which could cost it USD two billion. The group is also keen to buy steel companies in China. Mittal Group produces 51 million tonnes of steel annually, which may rise to 80 to 100 million tonne-mark in the next few years. |
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Demand spurs Nippon Steel to expand plant Responding to growing global demand for top-quality steel products, Nippon Steel Co announced that it is prepared to spend YEN25bn ($228.5m) to construct a new continuous casting machine for its Kimitsu facility, which begins production in November 2006. The equipment has a monthly capacity of 160,000 metric tons of semifinished steel. Shares in Nippon went up 2.7% to YEN301 following the news. |
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Maanshan sees China 2H steel supply beating demand Maanshan Iron & Steel Co. expects China’s supply of steel products to outstrip demand in the second half, as the country’s measures to cool the economy continue to restrict demand for steel. “Therefore, iron and steel enterprises may face strong pressure in their production and operation,” said Maanshan Iron Chairman Gu Jianguo. He said the company, based in eastern China’s Anhui province, will “capitalize (on) its comparative advantages” as a well-established steel producer to overcome these challenges. He didn’t elaborate. The company’s second-half outlook came after it reported an 8% decline in first-half net profit to CNY2.13 billion, weighed by shrinking margins and falling steel prices starting in the second quarter. Maanshan’s gross margins fell to 18.6% in the first half of this year, down from 25.5% in the same period last year. “Factors such as (Beijing’s) macro-economic control measures, market demand and supply and the trend of the international steel market have caused a significant drop in steel prices since April 2005,” said Gu. Global steel prices have declined this year from record highs in 2004. The decline in the company’s profit margins because of lower prices was partly offset by an increase in production volume, CSFB said in a research note. Maanshan said its first-half revenue rose to CNY16.66 billion from CNY12.81 billion, helped by a 15.3% rise in pig iron production and a 19.7% increase in crude steel production. |
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Chinese steelmakers set for merger Two of China’s largest steelmakers are all set to merge in what the government hopes will be the first stage in a broader consolidation of the sector. Angang Iron and Steel Group, the second-largest Chinese steel company, said that it had agreed to join forces with Bengang Steel, number five in the Chinese rankings, following more than a year of negotiations. The new company will rival industry leader Baosteel. The two companies first said in March they were close to a merger. However, the long delay in finalising the deal led to suggestions the talks were foundering. The companies, both based in the north-eastern province of Liaoning, are the listed arms of Anshan Steel and Benxi Steel. The news that the merger is to go ahead comes a month after Beijing launched a sweeping blueprint for the steel sector which included a plan for rapid consolidation and the creation of two or three companies to rank in size with the global top ten. The National Development and Reform Commission in Beijing has long called for more mergers and acquisitions in the steel sector but opposition from local officials worried about revenue and job losses has made it hard to push through deals. “In some ways this is a signal about future consolidation, although the two companies have been talking for a long time,” said Ian Roper, analyst at Macquarie International in Shanghai. Wuhan Iron and Steel in central China, which in May said it would buy Liuzhou Iron & Steel Group, is considered another candidate to make acquisitions of smaller steel mills. Planning officials hope a less fragmented industry would help curb the sort of over-investment that has increased production capacity in China by more than 50 per cent over the past four years and which has sent steel prices sharply lower in recent months. Consolidation would also help the industry in negotiations with iron ore suppliers. |
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Mittal Steel SA H1 net up 108% Mittal Steel SA, a unit of top global steel maker Mittal Steel, lifted half year headline earnings per share by 108 per cent to 723 cents, beating market expectations. Headline EPS, which exclude capital, non-trading and certain one-off items, was expected to rise to 671 South African cents in the half-year to June 2005, from 348 cents in the year-ago period. Their estimates ranged from 600 cents to 712 cents. Mittal’s headline EPS was 354 cents for the first quarter of this year. At the time it issued its Q1 result, the firm said it hoped to increase its exports and earnings even further. |
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