SAIL, POSCO Sign FINEX Steel JV

New Plant Expected To Use Low-Cost Technology

Steel Authority of India Ltd and the Korean steelmaker, POSCO, have signed a joint venture for steel production using its FINEX technology in order to bring down the cost of production. The two companies are looking at building a 5-million tonne plant in Jharkhand, India.

FINEX uses non-coking coal fines and iron ore fines, to produce iron which will be capable of making high-grade steel. This would then be processed by SAIL to make specialised steel. The cost of production is expected to be lower as it avoids the high cost of converting coal into coke.

Indian Steel Producers Increase Their Prices

Major Indian steel producers SAIL, JSW and Essar have increased prices of their products by up to Rs 2,500 ($55) a tonne due to rising input costs

Steel Authority of India Chairman S K Roongta announced on the sidelines of the SAIL Open Golf Tournament in New Delhi on Friday that his company was to increase its prices and private steel makers JSW Steel and Essar Steel later confirmed their price rise.

JSW Steel Director of Sales and Marketing, Jayant Acharya, said his company will review the rates again in mid-April to fix the prices for the next month.

"It is a preliminary review. We are partly offsetting the rise in raw material cost pressure," he said.

An Essar Steel spokesperson said, "The price increase is in the same range as of other steel producers. It is mainly due to steep rise in raw material prices."



The increase in prices by the companies is effective from April 1.

SAIL Signs Shipping Joint Venture Agreement

SAIL, Shipping Corp of India JV To Ship Imported Raw Materials

Steel Authority of India Ltd (SAIL) is to form a joint venture company with the Shipping Corporation of India (SCI) that will cater to the growing raw material import needs of the steel maker.

"SAIL is keenly focused on ensuring its long-term raw material security and will continue to give thrust on logistics facilities and creation of infrastructure for smooth flow of raw materials and movement of finished products," the company's Chairman S.K. Roongta said.

The two state-run companies entered into an agreement on Monday to set up the JV in which both will have equal stake. The agreement was signed by SAIL Director (Finance) Mr. Soiles Bhattacharya and SCI Director (Technical & Off-shore Services) Mr. U.C. Grover in the presence of SAIL Chairman Mr. S.K. Roongta and SCI Chairman Mr. S. Hajara. Mr. Roongta said that SAIL is keenly focused on ensuring its long-term raw material security and will continue to give thrust on logistics facilities and creation of infrastructure for smooth flow of raw materials and movement of finished products.

The JV will ship around one million tonnes a year of raw materials used by the steel company with the prospect of an expansion in capacity later.

The deal enables SAIL, India's largest public-sector steel producer, to have control over part of its coking coal supply chain and mitigate the risks existing in avolatile shipping market.

SAIL currently imports around 10 million tonnes coking coal each year, a major input for steel making. The company expects its requirement of imported coking coal to increase as it plans to double its hot metal production capacity in the coming years from the current level of around 14 million tonnes.

SCI, India's largest shipping company, will bring its expertise in the shipping arena to the JV. It is already in the process of acquiring new vessels, according to a statement issued by SAIL.

Indian Steel Prices Set To Rise

Indian steel prices look set to rise next month as rising raw material prices look set to take effect. JSW, Tata and SAIL all look set to increase their prices by about 10-20% according to some industry sources.

Coking coal prices have risen by over 50% over the past few months. BHP Billiton recently agreed a 55% rise with the major Japanese steelmakers for the April-June quarter.

Seshagiri Rao, Joint MD and group CFO of JSW Steel, told the Times Of India that adecision will be taken next month. "We are keeping a watch on the international pricing scenario. We will revisit our pricing structure next month." Mr Rao has also been quoted as saying: "Cost pressures are very strong at the moment. Prices are not affordable... in the short-term we have to pass through this cycle."

SAIL Looking For Overseas Coal Blocks

Steel Authority of India is in talks to acquire coking coal blocks in Australia, New Zealand, Mozambique and Indonesia to achieve its production targets, according to Chairman, Mr S.K. Roongta.

Speaking on the sidelines of “Global Steel 2020”, the Fifth International Conference on Steel and Steelmaking Raw Materials, he said “We are not looking at iron ore blocks but at coking coal blocks. We could acquire these blocks either on our own or through International Coal Ventures Pvt Ltd.”

SAIL’s aim is to secure around 40 per cent of its coking coal requirements through these acquisitions.

SAIL's steel production is expected to increase from 14 mtpa last year to 56 mtpa in 2020.

India Set To Discuss SAIL Sell-off

India’s cabinet looks set to discuss the sell-off of 20 per cent of its stake in the Steel Authority of India (SAIL) in the next 10 days.

The proposal involves the government offloading a 10 per cent stake in the company and SAIL coming out with a public offer in the same proportion. The government at present holds a little over 85 per cent of SAIL. Other ministries in the government will get an opportunity to comment on the proposals before the cabinet meets.

SAIL’s expansion plans involve investment of over Rs 700 billion to raise hot metal capacity from 15 million tonnes to 23 million tonnes by 2013 and to 26 million tonnes by 2015. The company proposes to borrow Rs 60 billion this year to help fund this year’s Rs 100 billion capital expenditure programme.

SAIL Rules Out Price Reduction

The state-owned steel major Steel Authority of India (SAIL) today ruled out any reduction in domestic steel prices in the near-term, citing the firming global price trend and the rising input costs.

"As of now, the international prices are firm; scrap and coke prices are ruling high. So, I don't see any possibility of lowering the prices in the near-term...Iron ore prices have gone up...Putting some pressure on cost," SAIL Chairman S K Roongta told reporters here today.

Domestic steel firms, including SAIL and Tata Steel, had increased prices of their different products by up to Rs 4,500 a tonne in the past two months, raising inflationary concerns and prompting the government to term the price hike as speculative.

However, Steel Secretary Atul Chaturvedi had hoped otherwise and was anticipating some correction in the steel prices this month.

Terming the "Rs 8,000-10,000 a tonne" hike in the price of long steel products--used mainly by infrastructure and construction firms--in the past few months as "not warranted by market conditions," he said it got corrected by 3,000-4,000 a tonne recently.

"As far as SAIL is concerned we have not increased our long steel prices to the extent of the increase in the market price. So, we didn't have to rollback," Roongta said.

But, he maintained that SAIL will cut prices "as and when market conditions demand it".

On any likely increase in its input cost pressure next fiscal, SAIL chief Roongta said: "There is a possibility that long-term prices (of coking coal) may go up in the long-term."

"We don't import coke, but we import large quantities of coal. As of now, we have long-term contracts (till) March, but the new contracts have to be negotiated," he added.

Roongta further said the rise in input cost will hit steel producers without captive mining reserves. "Basically, iron ore prices are moving up. Since we have captive iron ore mines it will not hit us, but it will impact those producers who do not have backward integration towards mining."

"Also ferro-alloys like ferro-manganese, ferro-silicon, copper, zinc prices have moved up," he added.

Iron ore, coking coal along with the ferro-alloys are key input in making steel. Domestic steel prices are hovering in the range of Rs 26,000-35,000 tonne.

Source: Business Standard

SAIL Looking To Raise Steel Prices In Jan

After cutting steel prices in the past two months, state-run Steel Authority of India Limited (SAIL) today said it is looking to hike the rates next month following a recovery in demand.

"We may increase steel prices in January as market is improving," Steel Authority of India Limited chairman S K Roongta told PTI.

He, however, did not give any price range of the proposed hike.

The steel maker had reduced prices of its flat steel products by up to Rs 2,000 a tonne in the past two months, mainly on falling international demand.

Flat steel products are primarily used by the white goods and auto industry. SAIL had not altered the prices of its long steel products utilised by construction companies.

The firm had reduced prices of flat steel products by up to Rs 500 per tonne in the first week of this month after cutting the rates by up to Rs 1,500 in the last month.

The price structure of the company generally acts as a benchmark for the domestic steel companies. SAIL offers its products in the range of Rs 29,000-40,000 a tonne.

Steel prices have globally recovered by about $50 a tonne to about $450 per tonne after falling by around $150-200 per tonne in the last two months due to fear of overcapacity in Chinese steel mills.

Import of cheap steel products had been pushing pressure on the domestic steel players to maintain a low price line.

Source: Business Standard

Jharkhand Renews SAIL Iron Ore Lease

In a big setback for private steel companies, the Jharkhand government has written to Steel Authority of India Ltd (SAIL), agreeing to renew the Buddhaburu lease — part of the Chiria iron ore belt — having reserves of 810 million tonnes.

SAIL Chairman S K Roongta said there were a number of breakthroughs in the long dialogue with the Jharkhand government, with the help of the central government. Apart from the Buddhaburu lease, another lease of 200 million tonnes would also be renewed, he said, while discussions would be held for the remaining one billion tonnes of Chiria reserves, linked to the public sector steel major’s new project.

SAIL wants to erect a new steel unit of 12-million tonne capacity in Jharkhand. Typically, a 12-million tonne unit would require 600 million tonnes of iron ore.

Chiria is Asia’s largest iron ore belt, with two billion tonnes of reserves.

Roongta said earlier the Jharkhand government had refused to transfer the lease to SAIL after IISCO got merged with the company. The leases were actually held by IISCO.

However, nine leases have now been transferred to SAIL. Roongta said the other lease, which was very small, would also be transferred.

The settlement would be a big blow for private companies eyeing Chiria. The world’s largest steel maker, ArcelorMittal, signed an agreement with the Jharkhand government in 2005 to set up a mega steel unit and was assured of supply from Chiria by the state government.

In addition, JSW Steel, Tata Steel and Essar Steel were all eyeing the disputed leases of Chiria after they were cancelled by the Jharkhand government.

In the interim, most of the private companies bagged prospecting licences (PLs). JSW Steel, Tata Steel and Essar Steel bagged PLs for the Ankua block, part of Chiria but not under the SAIL lease area. ArcelorMittal was allocated a mining lease for the Karampada iron ore deposit, with estimated reserves of 65 million tonnes, much below its requirement.

While Chiria would take care of SAIL’s iron ore needs, for coking coal the company is eyeing acquisitions in Australia, New Zealand and Mozambique. It wants 30-40 per cent assured supply for coking coal.

SAIL would be adding nine million tonnes of production capacity to its existing 13 million tonnes by 2012. The cost of expansion would be Rs 60,000 crore for capacity as well as value addition.

Source: Business Standard

Breakthrough Elusive In Chiria Iron Ore Dispute

A breakthrough in the three-year old dispute over ownership of Chiria mines between SAIL and the Jharkhand government remained elusive as a high-level meeting ended inconclusively today.

"The meeting remained inconclusive. The Jharkhand government is of the view that iron ore requirement projected by SAIL can be less while SAIL is justifying its demand. Therefore, no decision could be reached today," a senior government official told PTI after a meeting between Jharkhand Chief Secretary Sheo Basant and SAIL Chairman S K Roongta.

However, the Jharkhand government has agreed to process the immediate requirement of the steel major so that its Rs 70,000 crore expansion programme to take its capacity to 23 million tonnes is not hurt, the official added.

State-owned SAIL and Jharkhand government have locked horns over ownership of Chiria mines in the state.

SAIL is eyeing the control of Chiria mines, which is home to over 2 billion tonnes of high grade iron ore, to feed its expanded capacity of 23 million tonnes, which is scheduled to go on stream by 2010.

Another official said SAIL's demand for entire two billion tonnes of iron ore was termed excessive by Jharkhand.

Source: Business Standard

SAIL, RINL Seek Own Shipping Arrangements

India's steel ministry is set to ask the country's cabinet to approve of Steel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL) making their own shipping arrangements to import raw materials. This would mean they could bypass Transchart, the centralised state-run ship chartering arm attached to the shipping ministry. Public sector enterprises had to go through Transchart because a five-decade-old policy mandated support to domestic shipowners.

Both SAIL and RINL are facing procedural problems at Transchart, which has been without a chief since previous chief controller of chartering, T.V. Shanbhag, quit in March 2005, two logistics executives at the state-owned steel makers said on condition of anonymity.

If the cabinet allows it, steel will be the second commodity to skirt Transchart—after oil, an unnamed shipping ministry official said.

Meanwhile, SAIL and state-run Shipping Corp. of India Ltd (SCI) have decided to induct two more partners into a joint venture (JV) company they are setting up to provide shipping services to the steel maker. These two will hold at least 51% stake in the new venture to ensure it functions outside of government control.

“The moment both SAIL and SCI hold 51% stake in the company, it becomes another PSU (public sector unit). We don’t want that to happen,” said U.C. Grover, SCI’s technical and offshore services director. The new JV is being structured like a private company so it can negotiate and buy ships without going through the cumbersome auction process typically followed at state-owned firms.

The move to exempt the steel producers from Transchart requirements is seen as a big blow to the local shipping industry, at a time they are asking the government for a cargo support policy to see them through the rough times brought on by a global credit crunch, inter-bank credit issues and a sharp fall in global trade volumes.
“A cargo reservation policy that would direct PSUs to set aside a predetermined quantity of cargo to be transported exclusively on Indian registered ships would provide them minimum level of employment during these unprecedented times,” industry lobby group Indian National Shipowners’ Association wrote in a letter to the Prime Minister in January.

Such a move would not only protect shipowners from payment defaults, a key concern in the current scenario, but would also get them assured business.

SAIL imports about 11 million tonnes (mt) of coking coal a year, which is used to fire steel plants, while RINL buys around 5mt.

Under the rules that mandate PSUs go through Transchart, Indian ships get first preference provided they match the lowest rates quoted by foreign shipowners.
In 2005, following a proposal from the petroleum ministry, the cabinet granted an exception to Indian Oil Corp. Ltd to make its own arrangements to import crude oil for one year. This was later regularized in 2007. Similar exceptions were subsequently made for public sector oil refiners Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd.

Meanwhile, Deloitte Touche Tohmatsu India Pvt. Ltd, consultants hired by SAIL and SCI to advise them on the new JV and prepare a project report, has suggested that the two partners could be a port and a foreign shipping company. It has also suggested that the new firm could start operations with an initial fleet of eight dry bulk carriers.

SourcE: Livemint

SAIL Hit By Higher Coking Coal Prices

Steel Authority of India's (SAIL) Q3 standalone net profit came in at Rs 843.34 crore (Rs8.433 billion) compared with Rs 1934.66 crore (Rs19.347 billion) in the same quarter last financial year. Standalone net sales were up at Rs 8856 crore (Rs88.56 billion) against Rs 9533.30 crore (Rs95.33 billion) year-on-year.

Commenting on the company's results S K Roongta, CMD, SAIL, said its Q3 profit after tax (PAT) was impacted due to high coking coal prices. Q3 sales volume were lower by 20%. Mr Roongta said the product mix has improved and 40% of total production is now in value added products.



Here are excerpts of SK Roongta's comments at the company's press conference.

"Our profit before tax (PBT) for Q3 has been Rs 1,257 crores and profit after tax (PAT) at Rs 843 crore while we have maintained making profits but certainly there is decline in both PBT and PAT.

PAT declined by 56% year on year (YoY) and by 58% if compared with Q2. This has to be seen in context that there was significant downturn in the steel sector within India as well as globally. There is more than 24% decline in the global steel production in the month of December and there has been negative growth for the calendar year 2008 as a whole of 1.2% as compared to 2007.

The biggest factor that impacted our bottomline is very high cost of our inputs especially imported coking coal as well as domestic coking coal. We had to absorb the higher coking coal prices. Last year at this time the coking coal prices were ruling at USD 96, while in the current year the prices went upto USD 300.

Added to that there was adverse exchange variation; Rupee depreciated vis-�-vis dollar which further pushed up the cost of coking coal and this impact has been very severe. There was also downturn in sales. October was a month when virtually sales came to a standstill with most of the steel companies although it picked up in November-December but our overall sales in physical terms has been 20% less in Q3 as compared to Q3 of last year although in value terms negative growth is only 7.5% which also impacted our margins.

We took several internal actions to cushion the adverse impact of high input costs as well as fall in sales- especially with improvement in product mix we increased our share of finished steel in our production. We went for more value added products and now more than 40% of our total production is in value added products. The cumulative impact of these two factors alone gave us about Rs 400 cr additionally. We improved our domestic coal utilization and we changed our blend, reducing the imported component which is much costlier and we have also been able to reduce our energy consumption in the current year by about 4%.

So, while we could ward off some of the adverse effects of high input costs but the cost pressures were so high that the entire impact could not be neutralized.

We have been able to contain our employee cost in the Q3 of this year to the same level as was in Q3 of last year, this is a significant achievement. This has also helped in cushioning of the adverse impact of higher input costs."

SAIL Chairman Suggests Indian Steel Prices Unlikely To Fall Further

Steel prices in India are unlikely to fall further despite a shrinking of demand on account of a general slowing down of the country's economy.

According to SAIL chairman S K Roongta, the net margins of most steel companies has shrunk to their lowest levels and any further cut in steel prices without any fall in raw material prices would render companies sick.

"No one is making net margin on sale of steel products. Steel prices could only fall further if there is a drastic reduction in long-term contract price of coking coal and iron ore. In fact the prices would also stabilise after conclusion of these long term contracts," Mr Roongta told India's Economic Times newspaper in an exclusive interview.

He said that there was further scope for a fall in coking coal prices below the $100 per tonne mark to around the $80 mark. "If this is to happen for coking coal supplies under a long-term contact, companies would also have to revise steel prices," said Mr Roongta. The coking coal price on the spot market is currently hovering around $160 mark while long term contracts are around $100 a tonne.

Steel prices in the country have fallen by over 40% since September.

On the global front, the SAIL chairman said that steel consumption has already fallen by about 10%. The forecast for India, though, is more positive with no negative growth steel consumption during the calendar year 2009. "Some steel products such as galvanised sheets and coated products may be affected during the year due to their dependence on export market," Mr Roongta said.

He said that housing and capital goods sector would remain sluggish for the next six months keeping steel demand low and putting its pricing under pressure. "Government has an important role to boost demand by initiating new projects on the infrastructure sector," he said.

For SAIL, he said, that the company remained committed to complete its expansion programme and providing assured supply of steel to consumers.

Source: Economic Times

SAIL To Pay Treble For Australian Coking Coal

Steel Authority of India Limited has agreed for a threefold increase in prices of imported coking coal from Australia, a move that is likely to increase the input cost and put pressure on its bottom line.

This comes on top of PSU assuring the government to hold the price line for three months till the first week of August at a time when international prices have firmed up.

"In view of the soaring international prices, which have almost trebled, SAIL has settled its annual contract with Australian miners at about USD 300 per tonne (FOB) of coking coal from July 1," a source said.

Previously, the steel major used to procure Australian coking coal for about USD 98 a tonne. In 2007-08, it imported about 10 mn tons of coking coal and procured 4 million tons from domestic market.

SAIL Chairman S K Roongta had earlier said that the company may have to import 12 mn tons of coking coal this year as its total requirement would increase to about 15.7 mn tons.

In a bid to help SAIL reduce its heavy dependence on coking coal imports, the Steel Ministry had recently sought the Coal Ministry's intervention in expediting the proposed strategic partnership between SAIL and BCCL for developing the Kapuria coal block in Jharkhand.

In view of its expansion plans and to reduce costly coking coal imports, SAIL has been into regular talks with Coal India's subsidiary Bharat Coking Coal Limited (BCCL) for floating a joint venture to develop the Kapuria coal block, which has an estimated reserves of about 150 mn tons.

Source: Economic Times