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While I am writing this piece, Chinese President Mr. Hu Jintao is in India with an agenda to strengthen the bilateral ties between the two countries. While the issue of border dispute will also be addressed, it is mutually decided that the thrust should be on commerce.

With ever growing production and customer friendly pricing in almost all the products, China is on a hunt to find new markets for its industry. They have already captured SE Asian markets, have very good presence in the middle-east, and have entered Africa few years back. Now, the huge Indian markets are attracting them.

While there can be a big debate on whether Indian government should take a protectionist's stance and try to protect Indian markets and also Indian business community from a so called 'Chinese Invasion', we will restrict our discussions to iron and steel industry. India exports good quantity of iron ore and in turn imports met coke, which is a vital input for steel production through blast furnace route. Can there be an official MoU between the two countries to this extent ? What I mean to say is that can China assure us a certain quantity of met coke against iron ore ?

With ever increasing steel making capacity, China is now gradually turning into a net exporting country. Though the Chinese steel exports are not substantial today, many fear that in coming years, they would flood at least the Asian markets. How can India and other countries in Asia protect their domestic steel industry in such a situation ?

A lot has been talked about Chinese technologies. It is said that they are suitable to Asian conditions and are extremely cost competitive. India is also known for its technological superiority. I think this is one area which can be explored for immense mutual benefits.

Lastly, one should hope that India and China should surely come together for mutual benefits and exploit the present situation to strengthen the bi-lateral trade including the trade of raw materials, finished products and also the technology in iron & steel sector.

 D.A.Chandekar
Editor & CEO

 

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Essar chases iron in Australia

The Essar group will invest Rs 3,500 crore in Australia, which will include acquisition of a stake in Australian iron ore mine company Cape Lambert, setting up a 7.5 million tonne pellet unit near the ore deposit, a pipeline and a concentrator facility. Sources close to the development said the Essar group had initiated talks with the promoters of Cape Lambert for acquiring a stake as well as signing an ore offtake agreement. An Essar team had recently visited Cape Lambert's deposits in the northern region of Australia, they pointed out. They added that the deposit might produce 15 million tonnes of ore a year with 60 per cent iron content at Cape Lambert.

The company would start mining by the end of next year, they added. When contacted, an Essar group spokesperson said, “We keep looking at opportunities globally in the sectors we are in. However, we would not like to comment on any specific project.” According to sources, Cape Lambert is yet to sign an offtake agreement for deposits, which makes it attractive. Essar Steel, a part of the Essar group, has an 8 million tonne pellet plant in Visakhapatnam. However, the company is unable to use its full capacity due to a shortage of iron ore. Essar Steel procures ore for this unit from the Mineral Development Corporation. Essar Steel is also in the process of setting up a second pellet unit in its integrated steel plant in Orissa. The group is in the midst of a restructuring, which is being advised by consultancy firm Ernst & Young.

After the restructuring, the group will emerge with a single balance sheet with operating companies in steel, oil and gas, power, shipping and logistics, and telecommunications and BPO operations. On the other hand, the Bolivian government is waiting to discuss the final points of the EI Mutun iron ore project with Jindal Steel & Power, according to Bolivia's Mining and Metallurgy Minister Guillermo Dalence. Jindal got the right to develop the project and will invest $2.3 billion, which includes setting up a 10 million tonne pellet unit, a 6 million tonne sponge iron plant and the 1.7 million tonne steel unit.

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Paswan for policy on Chinese steel

Steel Minister Ram Vilas Paswan today favoured framing a policy specific to the entry of Chinese steel companies into India, amid concerns in domestic industry about the market being flooded with cheaper steel. “The government should frame proper policies on the entry of Chinese companies into India. They (Chinese steel firms) could be looking for opportunities here,” he said after inaugurating the Ministry of Steel's pavilion at the India International Trade Fair. Given the capacity of Chinese companies to manufacture and sell steel at cheaper rates, the domestic steel industry is apprehensive that allowing entry could threaten their existence.

Paswan suggested that Steel Authority of India Ltd (SAIL) should emulate Tata Steel in expanding globally. “SAIL should look abroad for acquisitions, like the way Tata Group is acquiring Corus,” the minister said. He pointed out that the country was short of adequate coking coal and the public sector behemoth should scout for opportunities overseas. Paswan expressed concern over the low average steel consumption in the country, arguing that China was ahead of India in this regard with an average consumption of 250 kg. The minister said investment to the tune of Rs 3,50,000 crore would be required to take the country's steel production to 100 million tonnes by 2020. Paswan said a 600 dealer network would be set up throughout the country to ensure proper distribution of steel products.

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Galvanised steel firms to hike prices

Days after the country's largest zinc producer, Hindustan Zinc, announced a sharp increase in base prices of zinc, the domestic galvanised steel manufacturers, including JSW, Uttam Galva and Essar Steel, are expected to pass on the price rise to consumers. When this happens, it will be the second hike in the last two weeks. Galvanised steel prices saw a scheduled increase in prices by Rs 1,500 a tonne at the beginning of the month. According to sources, Uttam Galva will be increasing galvanised steel prices by Rs 750 to Rs 2,000 a tonne, followed by JSW Steel, which is expected to hike prices by Rs 1,500.

Officials from Essar Steel said the company will not be raising prices for the moment, as its agreements are on a long-term basis. But, there will be a revision in prices next month, they said. Ankit Miglani, director, commercial, Uttam Galva, said, “Due to rising international prices of zinc, the Indian steel industry is coming under pressure. We have no option but to pass on the rise to the customers.” Zinc prices, a critical ingredient for making galvanised steel, are still rising on the international metal exchanges. It takes about 40 kg of zinc to make a tonne of galvanised steel. Internationally, zinc is currently trading at $4,300-4,500 a tonne. Hindustan Zinc raised the price to Rs 2,21,800 a tonne, with the company effecting an increase of Rs . 9,500 earlier this month.

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Record October at Durgapur Steel

Durgapur Steel Plant (DSP), a unit of SAIL, has recorded its best ever October month's production in all the major areas achieving significant growth rates. Hot metal production touched 1,89,000 tonne last month surpassing the previous best of 1,80,110 tonne achieved in October, 2004. The blast furnaces also set up a daily production record with 7,204 tonne on October 18 surpassing the previous best of 7,178 tonnes. Crude steel production at 1,69,548 tonne surpassed the previous best ever October month production of 1,63,445 tonne achieved during October, 2004. Saleable steel also recorded its best ever October month performance at 1,50,240 tonne.

V Shyamsundar, DSP's managing director said, "Actually consistency is the key and our employees have responded excellently to the challenge". The plant, which employs around 15,600 people, has adopted a multi-pronged approach to ensure all round improvements laying emphasis on regular inspections, preventive maintenance, systems and safety. Moreover the first commercial assignment has been tested by the Railways' inspection agency RITES and Railways representatives with 100 per cent online testing.

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Arcelor Mittal`s Dofasco sale blocked

Arcelor Mittal, the steel group, has been blocked from selling Dofasco, its Canadian unit, after a trust which controls the unit refused on Monday to dissolve itself. Directors of the Strategic Steel Stichting, the Dutch foundation which holds Dofasco's shares, said they would not dissolve the foundation, which would have permitted the sale of Dofasco. Arcelor acquired Dofasco earlier this year and placed its shares in a trust as part of its defence against a ¤26 billion hostile bid from Mittal. However, after Arcelor and Mittal Steel merged to create the world's biggest steelmaker, they agreed to sell the Canadian unit.

Lakshmi Mittal said he wanted to sell Dofasco to ThyssenKrupp of Germany for $4.6 billion when he took over as chief executive of the newly formed group recently. “The boards of both Mittal Steel Company and Arcelor had previously requested the directors of the foundation in order to allow for the sale of Dofasco,” the company said in a statement. “Arcelor Mittal is reviewing the situation and will be in contact with the US Department of Justice,” the company added. US regulators had demanded that Arcelor Mittal sell at last some of its North American assets in order to have the merger cleared.

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SAIL, RINL may pick stake in Oman mines

Public sector steelmakers Steel Authority of India (SAIL) and Rashtriya Ispat Nigam (RINL) may pick up stake in limestone mines in Oman. A delegation comprising officials from the steel ministry and RINL Chairman Y Siva Sagar Rao was in Oman last week to conduct the initial talks and brought back limestone samples for examination. The sources said the quality would suit the requirement of steelmakers. According to them, an agreement would be finalised with the Oman government by the end of the year. A special purpose vehicle will be floated in Oman in which either the Oman government or a private company will hold 30 per cent stake.

The remaining 70 per cent would be held by SAIL and RINL. According to sources, Tata Steel was also pursuing limestone mines in Oman, but the company is yet to finalise the deal. Limestone is used as flux in the iron making process in blast furnace to remove impurities from the raw ore, which becomes a byproduct known as slag while lime is used in the steelmaking process in the melting shop to play a similar role. Metallurgists said for every tonne of hot metal produced, 0.3-0.5 tonne of limestone is required. For every tonne of steel produced, 8-9 kg lime is required. Currently, SAIL and RINL meet their limestone requirements from traders, but have decided that tying up long-term deposits would be more valuable to their future expansions. While the former is expanding from a capacity of 13.5 million tonne to 22 million tonne, RINL is more than doubling it from 3.5 million tonne to 8 million tonne.

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Tata Steel to face Corus test on Dec 4

Tata Steel will face the crucial Corus test at the extraordinary general meeting (EGM) on December 4, 2006. The company would require support of half of the shareholders present at the meeting and 75 per cent of shares in value. Managing Director B Muthuraman clarified that the company wanted 100 per cent of Corus but had stipulated a condition of 75 per cent. “We want it to be a part of Tata Steel,” he said, brushing aside the possibility of settling for a lesser stake. He was speaking on the sidelines of a press conference to announce an international symposium on steels for automotives and national metallugists' day celebrations. Responding to queries on the shareholders' response, Muthuraman said it was positive. Some of the shareholders had expressed displeasure at the offer price of 455 pence a share. Standard Life Investments with a 7.9 per cent holding in Corus had said the offer price was lower than expected. JCB, with around two per cent stake, shared Standard Life's view. Muthuraman said Tata Steel had made an offer, which represented a fair value of the enterprise, capturing the synergies. Severstal ruled out a counter bid on Friday, saying that Corus was overvalued. Muthuraman said there would be synergies between the two companies in terms of best practices, manufacturing, logistics and distribution. The MD said Tata Steel would carry the slabs from India, once the greenfield projects were ready, which would bring about greater production synergies.

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No blanket ban on iron ore exports

The government will soon formulate a policy on export of iron-ore but has ruled out imposing a blanket ban as demanded by the domestic steel industry. “The government is very concerned about the issue but it is not possible to put a blanket ban,” Union Minister of State for Steel Akhilesh Das said. He, however, said a policy would be framed soon to keep export of the raw material to the bare minimum.

Denying any shortage of iron ore on account of exports, Das said there were huge deposits of iron-ore in the country. Multinational steel giants including South Korea's Posco and Mittal Steel had sought permission to export iron ore from the country, but domestic players including Tata Steel were against allowing ore exports. The minister, who was addressing the 60th annual technical meeting of Indian Institute of Metals (IIM), said research and development in the steel sector was vital. “The central government is emphasising the need to focus on research and development in the steel sector and even contemplating allocating fund for the purpose,” Das said. “We have been encouraging all industries particularly in the steel sector to develop R&D wing in the country in view of the growing steel sector, he said.

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Tatas to invest Rs 2500 cr in TN

Tata Steel will be investing Rs 2,500 crore in its titanium dioxide project in Tamil Nadu.The company has completed the feasibility study and is likely to start production in the first quarter of 2009. Sources said the size of the project would be 5 lakh tonne of ilmenite (iron titanium oxide from which titanium dioxide is extracted). The new business will generate significant revenues for the company as titanium dioxide pigment in India is selling at Rs 1-1.2 lakh per tonne. Tata Steel will have a technology partner for the project and can even explore the possibilities beyond just a technical partnership. “We will need a partner, if only someone want to come on board,” said the sources.

The feasibility study was conducted with a consortium of partners comprising Outokumpu Finland's physical separation division based in the US, Outokumpu-Lurgi,Germany, Pincock Allen and Holt, US, a resource and mining consulting company, and L&T. The company was granted prospecting license over 80 sq km area in Tamil Nadu in Tirunelveli and Tutitcorin districts. Tata Steel was supported by MN Dasturco and TZMI, Australia-based marketing and process consultants. The study was designed to be carried out in two parts, the geological resources evaluation and the mineral separation, validation and optimisation of flow sheets. The sources said the feasibility study had shown that there was not enough water and the company have to set up a sea water desalination plant.

The construction time for the project will be 18-24 months. The project will be in phases with the first one involving mining, mineral separation and value addition. The final phase will see production of titanium dioxide or pigment, a key ingredient for the paints industry, among others. However, the project is running 6-7 months behind schedule due to delay in possession of the land. The target was to start the project in the middle of 2008. Tata Steel requires 5,000 acres of land for the project, which will come up near Tuticorin. The company signed a memorandum of understanding (MoU) with the Tamil Nadu government in the middle of 2002.

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Prakash Industries Ltd - towards financial growth

Prakash Industries Ltd., a diversified company, is into power generation, manufacture of Sponge Iron, Steel, Ferro Alloys, Heavy Structural, Wire Rod, PVC Pipes and TV Picture Tubes. Also, Prakash is into power generation through Wind Machines. During the quarter ended 30th September, 2006, Prakash achieved turnover of Rs. 235 crores as against Rs. 193 crores in the corresponding quarter of the preceding year, thereby registering growth of 22%. EBIDTA and Net Profit during the quarter ended 30th September, 2006 increased to Rs. 47.67 crores and Rs. 31.34 crores respectively as against Rs. 34.71 crores and Rs. 6.8 crores during the corresponding period of the last year.

During the half year ended 30th September, 2006, Prakash's net profit increased by more than 3.5 times to Rs. 59.21 crores over Rs. 16.45 crores in the half year ended 30th September, 2005. The marked improvement in the financial results is largely attributed to the captive coal mines, which became operational during the September,2006 quarter and resulted in substantial cost savings in steel making. The Wire Rod Rolling Mill and the new power plant, which was set up last year, also operated successfully during the first half of the current financial year. The PVC Pipe division has witnessed phenomenal growth in view of the growing demand of PVC Pipes.
 

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Sales of EZZ-Dikhelia Exceed 2.4 million tons during the 1st H 2006

Ezz-Dikheila's sales to the domestic market during the period January-June 2006 reached 1.6 million tons of long and flat products against 1,4 million tons during the same period in 2005, i.e., up by 13%, according to the figures 'ArabSteel' obtained from the company's resources. Sales of flat products to the domestic market during the comparison period amounted to 342 thousand tons against 232 thousand tons, i.e., up by 47% , while sales of long products to the domestic market were close to the level at which they were in 2005, as the sales of long products during the first half of 2006 reached 1.293 thousand tons against 1.207 thousand tons during the same period in 2005, i.e. up by 7%. Steel flats have headed the export sales. They amounted to 522 thousand tons during the first half of this year against 486 thousand tons during the same period in 2005, i.e., up by 7%.

Steel flats constituted 66% of the total export sales during the first half of 2006 they amounted to 786 thousand tons. On the other hand, the total production of Ezz-Dikheila of long and flat products during the first half of this year amounted to 2.359 thousand tons against 2.204 thousand tons in the same period in 2005. i.e., up by 7%.

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Sphere places further $1.3m shares with Saudi's Hadeed

The Directors of Sphere Investments Limited have today agreed to place a further 1,125,000 shares to Saudi Iron & Steel Company (Hadeed) at a price of $1.15 per share, raising $1,293,750. This is in addition to the placement of 10,300,000 shares to Hadeed announced on the 8th of March 2006 and follows the recent placement to Qatar Steel Company (QASCO) of 11,425,000 shares at $1.15 per share announced on the 25th of May, 2006.

In accordance with the terms of the agreement at the time of the previous placement, Hadeed has maintained its shareholding at the same level (in percentage terms) held prior to the transaction with QASCO and at the same price as the placement to QASCO. Hadeed and QASCO, the two largest steel producers in the Gulf Region that each have significant capacity expansions under construction, are supporting the development of the 7Mt/a Guelb el Aouj DR pellet project in Mauritius as an alternative and reliable source of DR pellets.

Hadeed and QASCO now reach hold 11,425,000 shares, representing a combined total of 18% of the Company. Sphere and its JV partner SNIM, the Mauritanian iron ore company, are working with Hadeed and QASCO as strategic industry partners in developing the Guelb of Aouj Project.

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China shows keen interest for Gara Djebilet iron ore mines

The Chinese companies have shown an important interest concerning the exploitation, by modalities which will be defined later, of the iron ore of Gara Djebilet situated between Tindouf and Bechar, which is considered as the most important iron ore of Algeria. It is expected that Chinese delegations carry visits in Algeira in order to guarantee the pursuit of negotiations relating to the deepening of cooperation and partnership in the field of energy and mines and especially files submitted during negotiations of Chakib Khalil in China on the participation of Chinese companies in petrochemical projects and the exploitation of uranium mines and the mine of Gara Djebilet.

The interest of the Chinese companies in first the mine of Gara Djebilet and second in the mine of Mechri Abdelaziz close to it, considering the reserves provided and the possibilities to export a part towards Europe or other countries, in addition to the possibility to exploit it to support the Chinese industry later.

The Algerian delegation headed by the Energy and Mines minister, Chakib Khalil, in a visit which has lasted one week, has noticed the big interest to the project especially that Algerian authorities have announced a tender concerning the exploitation of two mines situated in the East South of Tindouf. The region possesses a reserve which exceeds 3 billion of tonnes of ore of which 1.7 billions of tonnes of Gara Djebilet with 700 millions of tonnes consisting of 52.4pct of ore.

The Chinese interest intervenes after the announcement of Brazilian companies, in the end of 2005, of the send of experts of the company “Compania Val De Rio Dotsi” to examine the mines of Gara Djebilet and Mechri Abdelziz, the experts have visited the sites accompanied with representatives of the group “ferphose”.

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Steel pipe maker to tap Middle East pipe market after losing EU business following huge AD duties

Steel pipe maker to tap Middle East pipe market after losing EU business following huge antidumping duties. Ukraine's major steel pipe producer on Monday pledged to tap markets in the Middle East to compensate the loss of business in the European Union following anti-dumping investigation and duties imposed.

Nyzhniodniprovsky Pipe Rolling Works, a division of the Interpipe group, is considering shipping pipes to markets in the Middle East if its exports to the European Union decrease.

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Zamil Steel buys two new mobile rollers

Zamil Steel Viet Nam (ZSV) said it had invested US$1 million into two new mobile steel machines, which the company hopes will help maintain its market share in the regional steel factor. The machines, used to produce rolls of steel, were made by US machine maker Bradbury and have a production capacity of rolling out between per minute, the fastest roof rolling machine available in Viet Nam, according to ZSV. The decision to expand investment for further development of our MaxSeam roofing system operations is due to the ever increasing demand for this system in Viet Nam and the rest of the region said ZSV's general director George Kobrossy.

He said that the new machines can form continuous steel panel for up to 90m. The machines can be transported by truck, which allows ZSV to produce MaxSeam panels on construction sites, he said. The Ha Noi-based company, which also exports construction steel to countries in the region, earlier this month set a turnover target of about $60 million this year, up by 20 percent over 2005.

ZSV, owned by Saudi Arabia's Zamil Steel and Mitsui of Japan, last year commenced its second factory in Viet Nam, increasing its total investment in Viet Nam to more than $40 million. The second factory, which is based in Dong Nai and will be operational by the beginning of next year, will increase ZSV's total production output capacity from the current 50,000 tonnes of steel to 90,000 tonnes per year.

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Iran : Private sector to build steel production plant

The private sector is preparing to build the steel production plant in Bafq, a city in Yazd Province. The private sector has made huge investments in the region in the areas of ore agglomeration, iron and steel ingots production as well as in the production of the sponge iron, a provisional official with the Industries and Mines Organization said.

The project is expected to produce about 1,600,000 tons of iron and steel products, 2,400,000 tons of agglomerates and 1,060,000 tons of sponge iron per annum. Machineries and equipments worth about $220 million would be imported from foreign countries and the rest is to be provided from domestic companies, he explained adding, “when operational, the giant project is expected to create job opportunities for some 3,000 people in the region.”

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Brazil's CVRD signs MOU for pellet plant in Oman

Brazilian mining giant Companhia Vale do Rio Doce (RIO), or CVRD, had signed a memorandum of understanding to build a plant to produce iron pellets at the port of Sohar in Oman. The plant would produce 7.5 million metric tons of direct-reduction pellets per year when it is completed in 2010. CVRD, the world's largest producer and exporter of iron ore and iron pellets, will supply 100% of the iron ore fines used to produce the pellets.

The deal follows CVRD's exit in May from a similar pellet-production joint venture in Bahrain. In May, CVRD sold its 50% stake in Gulf Industrial Investment Company, or GIIC, for $418 million. CVRD sold off its stake in GIIC after reaching a mandatory buy-sell deal to resolve differences over management of GIIC. Since the sale, CVRD had supplied clients in the Middle East with pellets produced in Brazil. In China, CVRD has several studies and joint-venture agreements in place to build pellet plants. In September, CVRD signed an agreement with Zhuhai Yueyufeng Iron and Steel Co. Ltd. and Pioneer Iron & Steel Group Co. Ltd. to build a $40 million pellet plant in China's Guandong province.

CVRD will invest $4 million and hold a 25% stake in the plant through its Mineracoes Brasileiras Reunidas SA unit. The company also signed a 30-year contract to supply iron ore fines to the plant. The plant is expected to start operations in 2008. In the third quarter, the company reported record net profit of 4.0 billion Brazilian reals ($1.9 billion), up 47% from the same quarter a year ago. CVRD also had tallied record gross revenue of BRL11.6 billion. Revenue soared 29% higher from $9.0 billion in the third quarter of 2005. During the quarter, the company sold a quarterly record 63.1 million metric tons of iron ore, its primary product, an increase of 14.3% from the third quarter of 2005.

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Nippon Steel Ends N. Korean Coal Imports on Tougher Govt. Stance :

Nippon Steel Corp. has halted imports of North Korean smokeless coal in line with the Japanese Governments financial sanctions against the country in response to its missile firings in July, sources familiar with the matter said Sunday.The leading steelmaker has judged it is necessary to change its stance on business deals with North Korea as the government has decided to ratchet up pressure on the country to give up missile test-launches and the nuclear weapons development program, the sources said.

Nippon Steel's decision may deal a blow to the North Korean economy, they said.North Korea annually exports some 2 billion yen worth of coal to Japan, with almost all of the smokeless coal, called anthracites, purchased by Nippon Steel. Overall North Korean exports to Japan totaled 14.54 billion yen in 2005 and 17.74 billion yen in 2004. Coal accounts for more than 10 percent of its overall exports to Japan. Other North Korean export items include crab, sea urchin and clam.

Japan's overall imports from North Korea in August fell 40 percent from a year earlier. Anthracite coal has an advantage over the types of coal as it discharges only a limited volume of smoke when burned in a blast furnace and lessens the workloads of machines used in the furnace. Nippon Steel at present imports anthracite coal from such countries as China and Vietnam. But North Korean anthracites have been less costly, the sources said.

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Korea Forge Steel Alliance with Japan

Korean steel makers are looking inward and outward to survive the cutthroat competition in the global market. Dongkuk Steel, Korea's third-largest steel company, said it will strengthen strategic ties with JFE Steel, Japan's second-biggest and the world's fourth-biggest steel producer. In an investor relations meeting held at Dongkuk Steel headquarters in Seoul yesterday, Chang Sae-joo, the chief executive of the Korean steel manufacturer, and Bada Hajime, the CEO of JFE, signed a memorandum of understanding to boost business relations that include investment and technology exchange.

In detail, the Japanese steel maker will expand its stake in Dongkuk Steel to 15 percent from the current 4.09 percent, while the Korean steel firm will purchase shares of JFE Holdings worth about 10 billion yen ($85.8 million). Also, JFE will provide steel technology know-how to Dongkuk Steel for the Korean firm's steel plate mill to be established inside the Tangjin steel complex in South Chungchong Province.

Dongkuk plans to break ground for the new mill, scaled at around 200,000 pyong, in January 2007 with an aim to complete the construction in late August 2009. In a statement, Dongkuk said the 760 billion won plant will have an annual production capacity of 1.5 million metric tons of value-added steel plates for ships and will be fully operational by 2012. Additionally, Dongkuk signed a long-term contract with JFE to buy slabs from the Japanese steel firm to secure plate-production at the new factory in Tangjin. Slabs are semi-finished metal generally used for the production of ship steel.

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Better Times for Steel Players

Rising energy and scrap metal prices have pushed domestic steel bar prices above the government's ceiling price of between RM1, 570 and RM1, 675 per metric ton (PMT), depending on the grade. “In the last two months, mills have started selling steel bars at about RM130 PMT above the ceiling price. This matches the international price,” says one manufacturer. To the end user, prices have effectively gone up RM300 PMT above the ceiling price, according to Yap Yoke Keong, secretary general of the Master Builders Association Malaysia.

At the beginning of the year, domestic steel mills were selling bars at RM150 PMT below the ceiling price. Then, dumping by producers in China depressed international prices. However, the recovery in international steel prices since the second quarter has resulted in a narrowing of the price gap. Builders say some local steel mills have been adding surcharges and extra fees to make up for rising production costs, while they continue to quote the government's control ceiling price in the invoice. This practice, they say, is not uncommon and in effect, circumvents the ruling that they sell at or below the ceiling price.

Builders have raised the issue with the authorities but any action is unlikely because the policy is to reduce the nation's subsidy level as a whole. Another factor that does not help their case is that international prices have gone up. A steel player says producers would welcome a move to remove the ceiling price on steel bars and allow them to export freely. There are currently restrictions on steel bar exports but none on imports.

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Southern Steel Selling 3 Overseas Associates for RM67M

Southern Steel Bhd is disposing of its stakes in three associates to Singapore's NatSteel Asia Pte Ltd. for a total of RM67.27 million. NatSteel Asia itself owns a 24.82% stake or 89.93 million shares in Southern Steel. Southern Steel announced on Sept 27 it was disposing of its 40% stake in loss-making NatSteel Trade International Pte Ltd. of Singapore for RM15.16 million. It was also selling its 50% stake in loss-making Southern NatSteel (Xiamen) Ltd. for RM44.9 million. It was also selling its 22.6% in NatSteelVina Co. Ltd. in Vietnam for RM7.2 million.

Southern Steel said the proceeds from the disposal would be used to pare down its bank borrowings to strengthen its financial position. The disposal would result in interest savings of RM3.36 million per annum for the company. The company said the sale was expected to be completed by the first quarter of next year and result in a pretax gain on disposal of RM25,000. Southern Steel said the sale of its stakes in the three companies would enable Tata Iron and Steel to consolidate its business and focus its regional strategy. In the early 1990s, Southern Steel had formed a joint venture with NatSteel Ltd. whose major steel businesses were purchased by Tata Iron and Steel in February 2005.

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Grange to Commission Malaysian Mine in December

Australia's Grange Resources, whose Southdowns iron ore mine in Western Australia and Kemaman pellet plant in Malaysia is scheduled to be commissioned by 2008, said it will start mining iron ore at its Bukit Ibam mine in Kuantan, Malaysia, by December. Unlike its massive 6.5 million tpy Southdowns mine in WA, the Malaysian mine will only yield 240,000 tpy for two years. However, the low-cost project is expected to bring in early cashflow to Grange before its flagship A$1.15 billion magnetic mining and pellet project comes on stream.

The Bukit Ibam project will bring in a bit of cashflow by the start of next year, before our bigger projects in Malaysia take off. It's a great complementary project, said company secretary Neil Marston. Bukit Ibam's two-year mine life may be short but it dovetails the start of the Sothdowns/Kemaman project in 2008. Marston added that Grange might start extra explorations to expand the 500,000 tonne deposit.

Production from the mine has not been committed to offtake agreements yet but the company said that its joint venture partner, unlisted Malaysian firm Esperance Mining, is in the midst of negotiating with potential buyers. Grange owns 51 percent of Bukit Ibam, while Esperance owns the remainder.

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China Steel to Develop Biggest Steel Logistics Hub

Taiwan's largest integrated producer of steel products, has decided to set aside NT$4-5 billion (US$121-156 million at NT$33:US$1) for the development of an iron and steel logistics center in Kaohsiung Country, southern Taiwan. It will be the largest facility of its kind on the island. The CSC has pinpointed a Kaohsiung Country site for the construction of six large delivery warehouses, which will constitute a warehousing system separate from the company's production facilities. The proposed logistics center is expected to generate a new clustering effect that will attract iron and steel producers to set up nearby.

At the present time, the CSC occupies an area of 551 hectares at its headquarters in Kaohsiung, and dozens of those hectares are taken up by warehouses. A recent expansion of production from 8.05 million to 11 million metric tons a year has put a squeeze on the land area. The firm hopes to alleviate this problem by setting up two steel logistics centers, one each in Kaoshing and Taichung countries. The Kaohsiung Country Government has promised to help with the development of the 40 hectare logistics site there by removing obstacles to the project.

The Taiwan steelmaker is also working hard to upgrade its competitiveness in China, where it has already set up a comprehensive distribution network. To develop the market for high-end steel there, in May this year the company formed a joint venture, named Maruichi Foshan Co., in Guangdong Province. The partners in the new venture are the Chang Yi Steel Corp. of Taiwan and the Maruichi Steel Tube Ltd., Metal One, Toyoto Trading Co. of Japan, in addition to the CSC itself.

The CSC and Chang Yi together own 50 percent of the joint venture, which CSC executives say is their first move to forge global distribution channels by cooperating with downstream manufacturers. The cooperation model this has created will be extended to central and northern China, Southeast Asia, Europe, and the United States in years to come. Maruichi Foshan, which is capitalized at US$ 15 million, will focus on steel sheering and the production of steel pipes for automobile manufacturers in southern China. CSC will supply steel materials to the venture.

CSC and Maruichi Steel Tube already have a close relationship, and the Japanese firm has spent NT$1.6 billion (US$49.23 million) for a 42 percent stake in another CSC subsidiary, the Gains Investment Corp. There is also a cross-shareholding relationship, with Maruichi owning 1 percent of CSC and CSC holding a 2 percent stake in Maruichi.

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Brazil steelmaker Gerdau raises stake in Siderperu

Brazilian long steel giant Gerdau (GGB) has raised its stake in Peruvian steelmaker Empresa Siderurgica del Peru, or Siderperu, to 83.27%, Gerdau said in a statement. Gerdau acquired 324 million additional Siderperu shares through a public offer made by Sider Corp. S.A. at a total cost of $40.5 million, Gerdau said. In June, Gerdau paid $162.6 million in cash and debt for a 51.7% stake in Peruvian steelmaker Siderperu. According to Gerdau, Siderperu has installed production capacity of 450,000 metric tons per year. The company operates a direct-reduction blast furnace, two electric furnaces three rolling lines. About 80% of the Siderperu's production is long steel products, with the remaining 20% of output in flats. The move to increase its stake in Siderperu follows similar stake consolidations Gerdau has made in other countries.

Gerdau has worked to beef up its production capacity and presence throughout the Americas as it attempts to become one of the world's top 10 largest steelmakers, a goal of outgoing Gerdau President Jorge Gerdau Johannpeter. Last year, Gerdau consolidated control of Argentine steelmaker Sipar Aceros, in which it holds a 83.77% stake. Gerdau paid $40.5 million to raise its share of Sipar from a previous 43.28% stake. Gerdau also paid $75.2 million in 2005 for a 57.1% stake in Colombian steelmaker Diaco. Gerdau is the largest producer of long steel products in the Americas. It has 30 steelworks in eight countries, including Argentina, Brazil, Canada, Chile, Colombia, Spain, Uruguay and the U.S.

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CVRD inks supply deals with China steel company

Brazilian mining giant Companhia Vale do Rio Doce (CVRD), signed long-term iron ore supply contracts with a group of Chinese steelmakers, CVRD said in a statement. The deals will add average annual iron ore sales volumes of 19.4 million metric tons between 2007 and 2017, and 8.1 million tons between 2018 and 2031. CVRD did not disclose the steel companies involved in the deal. CVRD, the world's largest producer and exporter of iron ore and iron pellets, typically negotiates the long-term supply contracts to guarantee deliveries. However, iron ore prices are negotiated annually with global steelmakers, separate from the supply deals.

Recently, CVRD CFO Fabio Barbosa said that the company will start price talks with global steelmakers at the end of November or early December. The 2007 price talks are expected to be as rancorous as this year's negotiations, which resulted in a 19% increase to iron ore prices in May. In 2005, global miners wrangled a 72% boost to iron ore prices. Chinese steelmakers, disappointed with their inability to play a bigger part in price talks despite being the world's largest iron ore consumers, held out until June before finally accepting the same 19% increase.
Recently, a person familiar with the iron ore negotiations said that China began negotiations with global miners last week. Chinese steelmakers are expected to push for a decrease to prices in 2007 talks, which is an unlikely scenario according to analysts. Most analysts expect iron ore prices to rise between 5% and 10% in 2007, in large part because of continued heated demand from China. In the first nine months of 2006, China has imported 247.13 million metric tons of iron ore, up 24% from the same period of 2005.

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Bluescope Steel makes good start to 2006-07

Australia's largest steel maker Bluescope Steel Ltd. has made a good start to the year with net profit for the first four months of more than A$250 million. Chairman Graham Kraehe said all of Bluescope's reporting segments were profitable over the period. "The first four months trading for Bluescope has been encouraging, continuing the positive July performance," he told shareholders at the company's annual meeting in Sydney.

Kraehe told shareholders that Bluescope's Asian businesses are trading profitably, notwithstanding startup costs in China, India and Vietnam and a weaker Thai economy. The Australian coated products business has returned to profitability, the turnaround continues at Butler in the U.S. and all upstream steel making businesses have put in an excellent performance, he said. Kraehe said Bluescope continues to negotiate with OneSteel Ltd. and Smorgon Steel Ltd. after moving to interrupt their merger plans. Bluescope launched a lightning raid on Smorgon's share register spending A$320 million on a 19.9% stake and vowing to block the merger in its current form. Bluescope now has the largest downstream Asian presence of any steel company but Australian investors are yet to recognize the long-term value the company is building with this investment.

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China's steel demand to slow on tightening steps - NDRC

China's tightening measures will slow the pace of the country's steel demand growth, the National Development and Reform Commission said. "Growth in demand for steel is bound to slow down under the weight of macroeconomic tightening policies," China's top economic planning agency said. "New projects and projects under construction are under strict review and inspection," it said. Overall steel consumption rose 16.6% on year to 324.6 million metric tons in January-to-September.

By contrast, steel output reached 339.0 million tons during the same period, up 23.66%. "China's steel production capacity is still on the rise, with new steel projects put into operation, adding to the current oversupply situation," the NDRC added. China has been taking macroeconomic steps to prevent over investment in sectors such as steel and aluminium, on concerns of a supply glut and an ensuing drop in corporate profits and rise in bad loans. To ease the oversupply in the domestic market, the NDRC expects steel exports to continue to rise. China exported 28.6 metric million tons of rolled steel in the first nine months of this year, up 81%.

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