SAIL plans to set up Rs 60,000 crore steel project in Jharkhand

NEW DELHI: State-owned SAIL is mulling over setting up a steel project, at an estimated cost of Rs 60,000 crore, in Jharkhand.

The plant, which is expected to be built on the space belonging to a closed fertiliser mill in Sindri, Dhanbad district, would help the company raise its annual steel production to 60 million tonnes by 2020.

The steelmaker recently applied to the ministry of chemical and fertilisers for setting up the 12 million- tonne/per annum plant, government officials said.

“The integrated steel project would come up in two phases,” one of the officials said.

As per the proposal, the PSU would also set up a 1.15 million-tonne coal or gas-based urea plant at the site. The loss-making fertiliser mill in Sindri had been lying shut since March 2002.

The plan to utilise the land bank of closed fertiliser and cement mills for setting up steel mills is in line with a strategy outlined by Steel Secretary Atul Chaturvedi.

Former fertiliser secretary Chaturvedi said that in order to avoid problems relating to land acquisition, public as well as private sector firms should seek land belonging to closed mills, especially ones located in the mineral-rich states of Jharkhand, Orissa and Chattisgarh.

Meanwhile, the government set up a high-level committee of state industry ministers to prepare guidelines on the creation of industrial sites, comprising waste and fallow land.

SAIL is currently in talks with South Korean steelmaker Posco to jointly set up two steel plants, entailing an estimated investment of Rs 15,000 crore, in the country.

It has also been approached by global firms like ArcelorMittal and Kobe Steel for possible business ventures.

 Source: PTI, May 16, 2010

Class Act: SAIL moves up to 2nd spot on the World Steel Dynamics list

New Delhi: World Steel Dynamics, a leading steel information services provider, has ranked state-owned steelmaker SAIL second in its list of world-class steelmakers, giving the company the right exposure ahead of its globalisation drive and its forthcoming public issue.

Korean steelmaker Posco is ranked first. The WSD ranking is based on a scores of 23 parameters that include size, expansion plan, adaptation of new technology and products, pricing power, raw material security, and labour and energy cost.

SAIL was ranked 17th in 2007. “The acknowledgement of SAIL being a world class company is a big achievement considering it did not even figure in the WSD list a few years ago,” SAIL chairman S K Roongta told ET.

SAIL has scored high on its strong balance sheet position, raw material security in terms of availability of iron ore mines, location in high growth markets, expansion plan and cost cutting efforts.

Its performance on several of these parameters is better than world’s largest steelmaker ArcelorMittal and number one POSCO. Four others Indian steel companies also feature for the first time among the top 32 world steel companies. These include, Rashtriya Ispat Nigam (earlier Visag steel plant)— rank 30, Essar Steel (20), Tata Corus (10) and JSW Steel (7).

Surprisingly, WSD’s ranking put ArcelorMittal on the 12th spot due to a drop in profit and its balance sheet, which was impacted during the meltdown. “The WSD ranking clearly brings out the point that steel companies in India and China would continue to perform better in wake of rising economic activities and a consistent increase in steel demand,” a steel analyst said.

The European and American markets are yet to fully recover from the shocks of financial meltdown that saw steel companies cutting production by almost 50%.

POSCO, with which SAIL has an alliance in India, got the numero uno position on the back of its investment in new technologies and skilled manpower.

SAIL had become the most profitable steel entity globally in the first half of 2009 before. That time it left steel biggies such as ArcelorMittal, POSCO, Bao Steel, Nippon far behind.

SAIL is currently in the midst of completing an ambitious expansion programme that involves investment of close to Rs 70,000 crore to increase hot metal capacity from 13 million tonne to 23.6 million tonne by 2012. This would put the company among the top three steel makers globally.

It is also expected to tap the market by September this year with a public offer involving sale of 10% equity. The company has been permitted to offload 20% equity involving the government offloading 10% stake in the company and the steel PSU issuing fresh equity shares in the same proportion (10%), in two phases.

The company is also looking to tap overseas market for building raw material security. It is scouting for acquisition opportunity of coking coal mines in Australia, Canada, Brazil and few African markets.

Source: The Economic Times: May 07, 2010

SAIL close to sealing deal with POSCO

The proposed joint venture between state-owned Steel Authority of India Ltd (SAIL) and the South Korean steelmaker POSCO is likely to be finalised by the month-end.

According to sources close to the development, a team of SAIL officials led by the Chairman, Mr S.K. Roongta, and the Steel Secretary, Mr Atul Chaturvedi, is set to visit South Korea to take forward the joint venture negotiations. “The deal between SAIL and POSCO is likely to be finalised within this month. There had been Government-level discussions as well when the South Korean President had visited India in January. Next week, a team of SAIL officials, Mr Roongta and the Steel Secretary are also going to South Korea to take the negotiations forward,” said an official close to the development.

The joint venture is likely to be for building a Rs 15,000-crore, 1.5-million-tonnes per annum steel plant on the land available in SAIL’s Bokaro Steel Plant. POSCO is likely to hold 74 per cent of the equity in the venture.

The proposed plant will utilise POSCO’s patented FINEX technology. This will enable the use of iron ore fines and thermal coal for the production of high-grade steel.

The SAIL Chairman, however, declined to fix a timeframe on the conclusion of the deal, but said things were moving ahead. “There are several things to be discussed and sorted out so I can’t really fix a timeline, but we are moving ahead. I’m sure it would be a win-win deal for both companies. POSCO has very good technology and operational practices and the joint venture would also help us bring those practices to our other plants. But, those details are yet to be negotiated,” Mr Roongta said.

Source: The Hindu Business Line: New Delhi, May 6

Jindal Steel plans coal-brick JV with Aussie co Rocklands

NEW DELHI: Naveen Jindal-led Jindal Steel and Power (JSPL) and Australian coal miner Rocklands Richfield (RCI) plan to form a 50:50 joint venture company to develop a coal-brick project at Raigarh in Chhattisgarh. The coal waste generated at JSPL’s existing coal handling and washing plant at Raigarh will be used to make bricks. In addition, both companies intend to jointly work towards developing two coking coal projects in Australia.

The estimated cost of the coal-brick project is $10 million for an installed capacity of six lakh tonne per year. The project will be financed through a mix of debt and equity, RCI said in a statement on Tuesday. Each company will have three directors on the board of the proposed JV, and the chairman will be a JSPL representative. While the Indian company will provide 50 acre of land close to its plant at Raigarh, RCI will act as a project manager during the construction phase and provide technical support.

“Jindal has become a strategic shareholder in RCI. This gives our company a very strong backing for its long-term development. The JV for the brick project will also bring RCI a new income source,” RCI chairman Benny Wu said. The project will become operational by April 2011. Recently, JSPL’s plan to take over RCI fell through after the Australian coal miner spurned the Indian firm’s proposal, calling it commercially unacceptable and not in the interests of shareholders. Currently, JSPL owns a 16.4% stake in South Perth-based RCI, which is listed on the Australian Securities Exchange.

RCI will also appoint a nominee of the Indian company on its board on the condition that Jindal continues to hold 14%, or more, of the total RCI shares, the company statement said. Further, RCI has agreed to consider the appointment of a second Jindal nominee to the board upon the latter reaching a 19% stake in RCI. Jindal will also provide technical support to RCI in its coke oven expansion project in China, it added.

Source : The Economic Times. 28/04/10

ArcelorMittal eyes stake in Ferro Alloys Corp

ArcelorMittal, the world’s largest steel maker, is eyeing another strategic buy in India.

Six months after it bought equity in speciality steel producer Uttam Galva, the company is in talks with Delhi-based Ferro Alloys Corporation (Facor) for a strategic stake.

The promoters of Facor — the Saraf family — are planning to diversify into the power business and want to divest a part of their stake to raise funds. Facor is valued for its chrome ore mining complex in Orissa.

“ArcelorMittal has shown interest in the stake buy and the due diligence will start soon,” said an official familiar with the development.

The Facor stock closed at Rs 23.5 a share on the Bombay Stock Exchange today. At the current price, the company has a market capitalisation of Rs 435 crore. However, the deal is expected at Rs 35 a share, about 50 per cent premium to the current market price.

“We would like to dilute the promoter’s equity to raise funds for expansion in power business,” said Ashish Saraf, joint managing director in the company which has appointed Ernst & Young to do the valuation and look for a strategic partner.

The company needs Rs 2,500 crore for setting up a 500 Mw power plant.

Saraf declined to quantify the stake the promoters are willing to dilute, nor did he want to specify the target price.

“They (ArcelorMittal) may have shown interest but we are directly not in touch. Ernst and Young is yet to come back to us with the names of interested companies,” he said.

An ArcelorMittal spokesperson declined to comment.

Billionaire Laksmi N Mittal promoted ArcelorMittal signed a co-promotion agreement with Mumbai based Uttam Galva in September. It completed the buyout in March, paying an estimated Rs 500 crore for the 33.8 per cent stake in the company.

Following this, both ArcelorMittal and the current promoters of Uttam Galva are equal partners in the company.

“ArcelorMittal is finding it tough to start its green field project, so it is buying stakes in small ventures to get hold in the Indian market,” says Giriraj Daga, an analyst with Mumbai based brokerage Khandwala Securities. “Since ferroalloy is used as raw material for steel making, it would be valuable for any steel maker to have a strategic tie up,” he said.

Facor has the capacity to produce 65,000 tonne per annum (TPA) of Ferro Chrome and 2,50,000 TPA of Chrome Ore at its Plant in Orissa. It has also established a mining complex at Bhadrak in Orissa for the mining of Chrome Ore, the main raw material for the production of Ferro Chrome.

ArcelorMittal plans to build greenfield steel production capacity of 30 million tonne per annum in India. While Orissa and Jharkhand will have 12 million tonne capacity each, Karnataka will have a plant with a capacity of six million tonnes.

Source : Business Standard. 20/04/10



Location, control stalls Posco-SAIL JV

NEW DELHI: Differences over location and control have delayed the plans of Korean steel major Posco and country’s largest steel maker SAIL to jointly set up a steel plant in Jharkhand.

Both the partners are keen on a controlling stake in the joint venture steel plant. The two also have differences over the location of the proposed plant.

“A lot of issues needs to be discussed before the two sides reach a conclusive agreement on setting up joint venture steel plant,” a government official said.

A team of senior officials from SAIL and the steel ministry is expected to visit Korea early next month to resolve the differences.

Last month SAIL and Posco had started talks to set a up steel plant together near SAIL’s existing steel making facility at Bokaro in Jharkhand.Posco is understood to have proposed a 3 million tonne facility under the joint venture route with an investment of about Rs 12,000 crore.

It has sought majority partnership in the venture as it intends to bring its patented FINEX technology for the steel making facility and make all other investment related to the plant. SAIL would only provide land for the venture. “Land is an important asset for any industrial venture. SAIL has also build a lot of infrastructure around its Bokaro steel plant. If this needs to shared with a new project, SAIL will need to get a controlling stake,” said an official of steel ministry. SAIL is under the administrative control of the steel ministry. The other view is that the joint venture project should not interfere with existing expansion of Bokaro steel plant where capacity is intended to be increased from present 4.36 million tonne to 7.5 million tonne by 2011-12.

Steel minister Vir Bhardra Singh has also recently said Bokaro will becomes SAIL’s largest with total capacity of about 14 million tonne after completion of second phase of expansion.

A POSCO official said that the talks on the proposed steel plant were at initial stages of discussion and a lot of issues needed to sorted out.

It is expected that the two sides may agree on a middle path, setting up the project on a 50:50 joint venture. A joint task force will resolve the differences.

Apart from land and equity holding, a decision also needs to be taken on the transfer price of ore for the project.

“Whether iron ore for the project has to be supplied at the price at which SAIL plants get it or source it at spot prices,” said a SAIL official.

The two sides also needs to finalise the valuation of the infrastructure built by SAIL and valuation of its land to determine the extent of investment to be put in by SAIL.

The two sides also need to discuss manpower related issues and extent of downstream investment required by the project.

For Posco a joint venture with SAIL makes sense as its proposed project in Orissa is repeatedly getting delayed over land acquisition and iron ore mining lease related problems. For SAIL, the JV project could provide it access to the latest technology in steel making and fill its void in production of certain special grades of steel.

Source : Business Standard. 20/04/10


Steel demand likely to grow by 8-10 per cent in 2010-11

New Delhi: The domestic steel demand is estimated to grow at 8-10 per cent in the current financial year due to steady rise in demand from various sectors such as automobile and infrastructure.

Mr A Sai Prathap, Minister of State for Steel, said in a written reply to the Lok Sabha that the steel consumption in the country during the current year may grow in the range of 8-10 per cent. In 2009-10, the country witnessed steel consumption growing at 7.6 per cent to 56.32 million tonne (mt) as against 2008-09. For the current financial year, Mr Prathap expressed hope that the trend would follow.

According to Union Minister of Steel, Mr Virbhadra Singh, the crude steel production displayed a growth of 10.7 per cent over the 2008-09, in the previous fiscal, at 64.69 mt. Mr Singh said that during the last fiscal, imports surged by 23 per cent to 7.18 mt.

Source : IBEF.19/04/10

Tata Steel re-negotiating coal, ore prices with global suppliers

Stung by steep increases in raw material prices in international market, largely caused by the emergence of quarterly contracts in place of earlier annual contracts, Tata Steel is re-negotiating prices of coal and iron ore with some of the international suppliers.

“In the current fiscal, we’ll need two million tonnes (mt) of imported coal for India operation and another eight mt for Tata Steel Europe and the entire quantity is to be obtained from the single source,” the Tata Steel Managing Director, Mr H. M. Nerurkar, said here on Monday.

“An estimated 19-20 mt of iron ore, all imported, will be needed for Tata Steel Europe”.

Tata Steel’s India operations at Jamshedpur (seven million tonnes) met 55 per cent of coal requirement by way of imports. For iron ore, it was self-sufficient.

However, Tata Steel Europe (17 mt) depended entirely on imports for both coal and iron ore, he said.

The raw material prices, as he pointed out, had jumped 80-90 per cent. Coking coal prices increased from $125 to $220 a tonne and iron ore prices from $65 to $110 a tonne.

Asked if Tata Steel would also re-negotiate prices with its customers such as automobiles companies, construction and infrastructure firms, Mr Nerurkar said any advantage to be obtained on raw material prices would be passed on to the customers.

Global output

He conceded that the margin would be under pressure in the current fiscal, especially because the high raw material prices would be accompanied by idle capacity.

Globally, steel output this fiscal would reach the level of production prevalent in 2008. While China alone would account for 50 per cent of the production, the output of the rest of the world would still be at the 2001 level. India’s steel sector, however, was expected to grow 10 per cent in 2010-11, he said.

Mr Nerurkar refused to respond to the Steel Minister’s comment that domestic steel producers were forming a cartel, except saying in a free-market economy, there was hardly any scope for a cartel.

The work on Kalinganagar project in Orissa had started, slowly though, he said but pointed out that the progress in respect of projects in Chhattisgarh and Jharkhand was slow.

As of now, there was no proposal to expand the capacity of the Jamshedpur plant from the targeted 10 mt.

In 2009-10, the company achieved 18 per cent growth in sales at 6.17 mt driven by the rise in demand from automobiles, construction and infrastructure sector. “Our market share in automobiles is 42 per cent”, he said. The proper supply chain management also helped.

“Our major customers are located 1,500-2,000 km away from Jamshedpur and yet, the level of compliance was 95 per cent and in past six months, there was not a single delivery failure,” he added.

The orders worth Rs 13,000 crore had been placed out of the Rs 15,000-crore capital expenditure being undertaken in Jamshedpur plant to set up a blast furnace (3 mtpa), pellet plant (6 mtpa), two stamp-charged coke-oven batteries of 0.7 mtpa each , raw material handling facilities, thick slab casting and rolling mill of 2.4 mtpa and environment protection measures. All this would be completed in the 2011-12.

Source : The Hindu Business Line. 13/04/10


Cabinet nod to SAIL divestment

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) today approved disinvestment in Steel Authority of India Ltd (SAIL) to mop up an estimated Rs 16,000 crore.

This is in line with the government’s disinvestment plan to raise Rs 40,000 crore in 2010-11 and will be followed by disinvestment in other public-sector undertakings (PSUs) like Coal India Ltd, MMTC and Engineers India.

As part of the proposal, SAIL will raise an additional 10 per cent of the paid-up equity and the government on its part will disinvest 10 per cent of its holding in the PSU. “This will be done in two tranches. In each tranche, there will a 5 per cent follow-on public offer (FPO) and five per cent sale of the government equity,” Home Minister P Chidambaram said after the CCEA meeting.

As a result, after both tranches are completed, the government’s shareholding in SAIL will come down to 69 per cent, from 85.6 per cent at present, and public shareholding will rise to 31 per cent, from 14.2 per cent.

At current prices, it is expected that SAIL will get an additional capital of Rs 8,000 crore, while the government will get an equal amount. The proceeds from fresh issues of equity by SAIL will help in filling the resource gap for funding the steel Navratna’s capital expenditure emerging from increased pressure on steel prices and diminished margins.

SAIL is undertaking a Rs 70,000-crore expansion programme to raise its installed production capacity from 13.82 million tonnes per annum (mtpa) to 23.46 mtpa.

Himachal’s stake in SJVNL

CCEA has also approved the enhancement of equity stake of the Himachal Pradesh government in Satluj Jal Vidyut Nigam Ltd (SJVNL) from 25 per cent to 25.5 per cent. This is following the government’s decision in October last year of disinvesting 10 per cent paid-up equity in SJVNL out of Centre’s holding of 75 per cent.

The government is banking on proceeds from stake sales to meet its fiscal deficit target of 5.5 per cent of gross domestic product for 2010-11. Last year, the government had divested stake in NTPC, Oil India and NMDC and raised Rs 25,000 crore.

Other Decisions

  • Highway Projects: The government approved highway construction works worth over Rs 4,355 crore in various states, including Bihar and Rajasthan. Four-laning of Beawar-Pali section and Pali-Pindwara section of NH 14 in Rajasthan, at an estimated cost of Rs 1,102.10 crore and Rs 1,326.54 crore, respectively, was approved
  • Digitisation Of DD, AIR: The Rs 1,540-crore digitisation programme of the Ministry of Information and Broadcasting for state-owned broadcasters — Doordarshan and All India Radio (AIR) — in the 11th Plan, to help meet challenges posed by private operators was approved by the Cabinet Committee on Infrastructure

BLIL board reconstitution

CCEA approved the reconstitution of the board of Balmer Lawrie Investment Ltd (BLIL), following the transfer of administrative control of BLIL to the ministry of petroleum and natural gas. The reconstituted board will have five directors. While the director (finance) of Balmer Lawrie & Company Ltd (BL) will be the ex-officio director (finance) of BLIL, there will be two directors nominated by the petroleum ministry and two independent non-official directors appointed by the central government.

At present, the board of BLIL consists of three non-executive directors nominated by the government and two independent directors.

Source : Business Standard. 12/04/10



Cabinet nod for SAIL disinvestment

New Delhi: Steel Authority of India Ltd is set to shed 10 per cent of government equity in the company. Additionally, it will raise 10 per cent equity. The Cabinet Committee on Economic Affairs (CCEA) on Wednesday gave its approval for the proposal, which is to be put through in two tranches.

The further public offering (FPO) in both the tranches would comprise fresh issue of 5 per cent equity as well as the offer for sale of 5 per cent of government equity .

“The modalities are yet to be finalised, but the divestment process is likely to fetch Rs 16,000-17,000 crore. Both the tranches will be completed within this financial year,” the Steel Minister, Mr Virbhadra Singh, told reporters on Wednesday.

Of the total money to be raised, the Government and the company are expected to get Rs 8,000 crore each. The proceeds from the fresh issue of equity would be used to fund SAIL’s expansion plans.

Govt stake at 69%

The public holding in SAIL is set to increase after completion of the divestment process. The Government’s share will go down to 69 per cent from 85.82 per cent now.

The company is in the midst of increasing its installed hot metal production capacity from the existing 13.82 million tonnes per annum to 23.46 million tonnes per annum.

SAIL’s share price on the BSE tumbled to close at Rs 236.75, down 7.18 per cent from Tuesday’s close.

The Minister, however, allayed fears that the SAIL divestment would meet a similar fate as NMDC’s earlier in the year. The NMDC FPO got a muted response from retail shareholders. “There were very few shares of NMDC in the market at the time the FPO was made. But this is not the case with SAIL. It is a successful company in the midst of expansion; I’m sure the divestment will yield good results,” Mr Singh said. “The FPO price would not be at a discount. However, SAIL employees would be offered discount at a certain percentage,” he added.

Source : The Hindu Business News. 09/04/2010