Tata Steel to raise Rs 10,000 crore for expansion

Tata Steel plans to raise Rs 10,000 crore of debt to finance expansion of its Jamshedpur plant and to part-pay debt at Corus Plc, its UK-based business. The company will invest a total of Rs 13,000 crore to expand its steel production capacity from 6.8 million tonnes to 10 million tonnes by September 2011. The company also plans to use Rs 2,200 crore to reduce debt at Corus.

The debt will be raised in two tranches — of Rs 4,000 crore and Rs 6,000 crore over the next two months.The first tranche of Rs 4,000 crore will be raised through a 15-year bond with an annualised coupon of 10.5

Source : Tata Steel to raise Rs 10,000 crore for expansion

Six million tonne greenfield project to be developed by SAIL

Steel Authority of India Ltd (SAIL) plans to set up an integrated greenfield steel plant with an annual capacity of 6 million tonne The company already which has five integrated steel plants under its umbrella.
For the proposed steel plant, the company is yet to identify the location. SAIL is having discussions with state governments where it can get land. This greenfield project will be implemented along with the brownfield expansions being executed by the company.
SAIL currently has surplus land at Bokaro and Durgapur, but that would not be sufficient for setting up the proposed 6 million tonne plant which would be expanded to 10 million tonne later.
Apart from this, the company is also augmenting the capacity of the Bhilai Steel Plant (BSP) to 7.5 million tonne from 5 million tonne and the capacity of Rourkela Steel Plant (RSP) will be taken up to 4.5 million tonne from 2 million tonne.

Source : Six million tonne greenfield project to be developed by SAIL

European steel makers fight to stick to annual iron ore pricing

Europe’s steel makers are in tough negotiations with powerful iron ore miners who are pushing to end a decades-old annual benchmark pricing system for the steel making ingredient in favour of a more flexible mechanism.

The world’s top three iron ore miners — Brazil’s Vale, BHP Billiton and Rio Tinto — are either in talks with their customers or have reached an agreement to supply ore priced on a quarterly basis.

But major steel makers including ArcelorMittal, the world’s biggest, as well as Germany’s Thyssenkrupp  said they still prefer the annual system as a fluctuating pricing scheme will force them to renegotiate regularly with their own customers.

Miners have not dislosed the price hike they obtained so far in this year’s talks but analysts estimate a rise of around 80-90 per cent in iron ore, which has more than doubled since September in the spot market. Below are some possible moves by steel makers to adjust their business model in a changing environment:

* Convince steel customers to adopt flexible pricing
Flat steel users such as engineering companies as well as automakers are expected to fight to maintain the current annual pricing system that would allow fixed costs.

Analysts say steel makers do not have the same bargaining power as miners due to the industry’s fragmented structure, compared with the three big miners controlling around 70 per cent of total sea-borne iron ore trade. “If you look at the balance of power between the various levels of value chain, then it looks like steel makers will have to absorb more volatility, brought by the quarterly pricing,” said Frederic Gits, head of EMEA Industrials at Fitch Ratings.

Austrian steelmaker Voestalpine said last week that its customers were extremely reluctant to adopt quarterly contracts as negotiating a price so often would make it very difficult to keep project costs within their orignial budgets.

Analysts say life could be particularly difficult for Germany’s largest steelmaker Thyssenkrupp, whose contracts are primarily on a long-term basis.

However, Thyssenkrupp produces high value-added, specialty products, some of which it develops jointly with its automaker customers, who may not be able to switch to another supplier and that could give Thyssen more bargaining power.

* Vertical integration
Self-sufficiency in key steelmaking raw materials iron ore and coking coal is set to be a top priority for steel makers globally with sky-rocketing prices for both resources.

ArcelorMittal is thought to be the best-positioned with 50 percent self-sufficiency in iron ore and a strategy to boost this to 75 per cent by 2014. In Europe, Thyssenkrupp looks vulnerable as it does not own any mines and has traditionally focused on investing in downstream such as production of high-tech steel.

Voestalpine has 25 per cent integration in iron ore, which it aims to raise to one-third of its total needs in the medium term. The company purchases its iron ore from various miners and is not dependant on one big supplier.

* Start using hedging tools to mitigate price risk
The conservative steel industry has traditionally been criticial of hedging instruments, saying the involvement of financial markets distort prices — an argument reflected in industry leader ArcelorMittal’s opposition to steel futures.

But analysts say with their raw material purchases based on a fluctuating period while their sales are tied up under annual contracts, the $500 billion industry may have to dive into hedging — whether they like it or not.

“Essentially somebody will need some sort of hedging mechanisms; whether it’s the automakers hedging their steel prices or whether it’s the steel producers hedging their input raw material prices — that’s not completely clear,” analyst Gavin Wood at Nomura said.

The financial community could be the obvious winner of such a move as banks, brokers and exchanges have invested heavily to introduce new hedging tools for steel and iron ore.

Source: http://www.business-standard.com/india/news/steel-makers-weigh-options-as-iron-ore-pricing-changes/392044/

India May Raise Export Tax on Iron Ore to 20%

India, the world’s third-largest iron ore exporter, is considering raising iron ore export taxes to 20 percent to increase local supplies and curb rising costs of the key steelmaking raw material.

The finance, mines and trade ministries will discuss the steel ministry’s proposal to the tax at a meeting today, Steel Secretary Atul Chaturvedi said in an interview in New Delhi.

“It’s my feeling the export tax will be raised to a uniform level of 20 percent,” Chaturvedi said. “If China can take steps to cool down prices, why can’t we?”

India in December imposed a 5 percent duty on exports of iron-ore fines and doubled the tax on lump ore to 10 percent. The measure slowed exports this year after overseas sales, mostly to mills in China, jumped 24.5 percent in the April to November period last year.

The mines ministry in December suspended operations in 60 illegal mines to curb unlawful mining in states such as Orissa and Karnataka, Mines Minister B. K. Handique told lawmakers this week in a written reply to Parliament questions.

“Illegal mining has been the trigger for revisiting the proposal because it is believed a large part of this iron ore finds its way to the export market,” Chaturvedi said.

Iron ore spot prices, trading at a 21 month-high, may drop about 30 percent in the coming weeks on concern China is taking steps to slow the pace of economic growth, UBS AG said.

Cash prices for 63 percent iron ore shipped from India to China, the biggest buyer, may drop to $130 a dry metric ton including freight, UBS Sydney-based analyst Tom Price said yesterday in a report. The ore traded at $186 on April 16, the highest since July 25, 2008, according to Metal Bulletin.

Cap Increases

The steel ministry will meet India’s biggest steelmakers today to discuss prices and may urge them to cap increases, Chaturvedi said. Prime Minister Manmohan Singh’s administration is trying to rein in inflation, which is at a 17-month high.

“If the rising trend continues and crosses a particular threshold, there will be a cause for concern,” he said.

Tata Steel Ltd., Steel Authority of India Ltd. and JSW Steel Ltd., India’s top three producers, increased prices in January, March and April as the government’s push to build more roads, ports and bridges boosted steel sales. Demand is also rising as carmakers, such as Volkswagen AG and Ford Motor Co., target buyers in India and China as disposable incomes rise in the world’s two fastest-growing major economies.

“Firm Prices”

“Demand is good right now and there can be a tendency of prices remaining strong,” Steel Authority Chairman S. K. Roongta said in an interview yesterday. “China will also be a major factor. Demand is good there and if they are not a major net exporter, the prices should remain firm.”

The sale of shares in Steel Authority, the nation’s second- largest producer, is unlikely before October as the government is planning to reorganize the board to meet regulatory requirements, Chaturvedi said.

The ministry is planning to reduce the numbers of members on the board to 18 from 24, Chaturvedi said. The government, which owns 85.8 percent of New Delhi-based Steel Authority, will sell a 10 percent stake, while the company will sell new shares equal to 10 percent of the enlarged capital. The sale will be made in two equal phases.

“We will complete the sale in the current financial year,” Chaturvedi said, referring to the first phase.

India plans to raise as much as 130 billion rupees ($2.9 billion) selling shares in Coal India Ltd. in July, in the nation’s biggest initial public offering, two government officials with direct knowledge of the sale said on April 20.

Source: http://www.businessweek.com/news/2010-04-22/india-may-raise-export-tax-on-iron-ore-to-20-update1-.html

Ministries differ over iron ore export duty

The Commerce and Steel Ministries do not seem to be seeing eye-to-eye on the issue of iron ore export duty.

The Steel Ministry had recently proposed a uniform 20 per cent export duty on iron ore.

At a press conference on Tuesday, the Commerce and Industry Minister, Mr Anand Sharma, said, "There will be no increase in the export duty on fines. There will be a marginal increase on lumps which we are in agreement with (other ministries)."

"The mining activity is done in poor, backward and tribal regions. Mining is a labour intensive industry. To take a wholesome, fair and balanced view, we had an Empowered Group of Ministers meeting chaired by the Finance Minister," he said.

This suggests the Government is rethinking imposing a uniform 20 per cent export duty on iron ore. There is currently a 10 per cent export duty on lumps and 5 per cent on fines.

India exports iron ore in lumps and fines. But it consumes only lumps as primary steel producers do not have the technology to use fines.

Mr Sharma said India produces about 225 million tonnes of iron ore annually, but the optimum level of domestic consumption was only 87 million tonnes. Therefore, there was a huge surplus of mined iron ore, both lumps and fines, but mainly fines, close to 140 million tonnes.

However, with both public and private sector companies expanding production capacity, domestic consumption of iron ore lumps would jump in the next two years.

The Steel Ministry has set a target of 124 mtpa production capacity by 2012-13, more than double the current production capacity of around 54 mtpa. Iron ore exports for 2008-09 was 106 million tonnes, of which about 85 per cent were fines.

Steel Ministry sources said there was lobbying against the proposal to levy a uniform 20 per cent export duty on iron ore.

Recently, domestic steel prices increased due to iron ore prices nearly doubling to $120-160 per tonne. This resulted in an increase in input costs for many industries. The hike in export duty of iron ore was seen as a move to increase domestic availability of the mineral, which would in turn help in controlling steel prices.

To discourage iron ore exports, the Steel Ministry had last month written to the Finance Minister, Mr Pranab Mukherjee, and the Prime Minister, Dr Manmohan Singh, seeking to double the export duty on iron ore.

However, Mr Sharma said, "I hope our industry will develop so that there is a value addition. But as of now, it is the iron ore lumps which are consumed by the primary steel manufacturers. The secondary steel manufacturers do not consume even lumps." 

Source:http://www.thehindubusinessline.com/2010/04/28/stories/2010042853000100.htm

Two sponge iron units served closure notice

Taking a tough stand against the polluting industries, the Orissa State Pollution Control Board (OSPCB) has served closure notice against two sponge iron units. These two units are Shiv Metalicks Private Ltd in Sundergarh district and Sree Metaliks Ltd in Keonjhar district.

The action has been under section 21 and 31A of the Air (Prevention & Control of Pollution) Act, 1981.

OSPCB has revoked the consent to operate permission granted to these units citing non-compliance of its direction pertaining to control of pollution.

“We have asked two polluting sponge iron units to stop operations and more sponge iron units are under scanner”, Bhagirathi Behera, director (environment) of the Orissa government told Business Standard.

Sources said, the problem of emission by Shiv Metalicks was observed by the regional officer of the OSPCB located at Rourkela during his visit to the sponge iron unit.

While there were public complains about pollution by Shiv Metalicks, the concentration of suspended particulate matter (SPM) in the ambient air quality measured near cooler discharge area was found to be far exceeding the prescribed standards of the board.

Similarly, the board officials from regional office located at Keonjhar observed that ESP attached with kiln number 7 of Sree Metaliks wasn’t operating despite the rotary kiln being in normal order. The total untreated flue gas was escaping to the atmosphere through the emergency cap of ABC stack.

Moreover, the board officials observed serious non-compliance to the consent conditions in February this year, contrary to the submission made by the company during a personal hearing earlier.

Based on the report of the team of OSPCB officials, the board has revoked the consent to operate the unit, sources added.

Source: http://www.business-standard.com/india/news/two-sponge-iron-units-served-closure-notice/392975/