Monthly Archives: June 2011

Japan: July-Sept crude steel demand seen up by 1.5%

Friday, July 01,

Japanese demand for crude steel in July-September will be just 1.5 percent higher than the previous three months despite a robust recovery in the manufacturing sector as inventory levels remain high, the trade ministry said on Thursday.   

A government survey of domestic steel users, such as carmakers and electric appliance makers, in combination with high inventory levels point to total demand for crude steel of 26.92 million tonnes for the period, the second quarter of the 2011/12 financial year, the ministry said

That would be down 1.6 percent from the same period a year ago.  

“Japanese carmakers are planning big production increases during the period as their damaged supply chains have come back online, but the level of inventories is very high,” Masaki Koito, director of the ministry’s Iron and Steel Division, said at a news conference.   

The government expects demand for steel products to grow 7.1 percent in July-September compared to three months earlier, pulled higher by a 27 percent jump in demand from the car sector.   

But domestic inventories of steel products are estimated to stay at around 5.56 million tonnes at the end of June, slightly below the end-May level of 5.63 million tonnes, Koito said.

Source: Reuters

 

Indian Railways withdraw surcharge on freight of iron ore and coal

Thursday, June 30,

Indian Railways have withdrawn the busy route surcharge of 7% on Iron Ore and 5 % on coal effective from 1st July to 30th September.

 

Impact on freight:

 

With the withdrawal of the additional surcharge, consumers will now have to pay less by Rs 150-200/MT on freight charges.

 

In April, Indian Railways had decided to levy a surcharge of up to 7% w.e.f. April 1 to earn a higher freight earning during busy season. However, container traffic had been exempted from any such charge.

 

Railway considers the entire year barring July-September of every year as busy period due to monsoons season and loading of iron ore and coal declines during this period.

 

China: Spot Iron ore back to mid-March quotes

Thursday, June 30,

Bleak steel demand in China is weighing on the spot iron ore prices which fell to their lowest in more than three months on Wednesday and are also bound for a second consecutive month of losses.

Offers for Fe 63.5/63 of Indian cargo lie at $175/MT i.e. back to the quotes seen in mid-March.

The most-active October rebar contract on the Shanghai Futures Exchange rose 27 yuan to close at 4,753 yuan a tonne. Despite the gain, Shanghai rebar fell 2.5 percent for all of June, more than three times its losses in May.

“It’s a modest rebound, there’s nothing much else to it. Actual physical trading of steel and iron ore remains thin,” said a Shanghai-based trader.

“The prices are more or less within market expectations. We believe prices will continue to fall in a slow pace because of weak Chinese demand,” said an iron ore trader in Beijing.

 

 

Indian Environment Ministry clears six coal Blocks

 Thursday, June 30,

Indian Environment ministry allowed mining in six coal blocks in Orissa. The blocks are linked to Orissa Ultra Mega power project (UMPP), NTPC and Orissa power Generation Corporation (OPGC).

Out of the six coal blocks, three coal blocks Meenakshi A & B and Meenakshi Dipside have been allocated to the 4000 MW UMPP at Sundergardh in Orissa .The two Manoharpur blocks have been linked to OPGC 1320 MW and the Dulanga block has been allocated to NTPC 1600 MW.

These blocks were previously classified as being in restricted forest area or “no-go” mining zones. Now all the six blocks will be consider by Forest Advisory Committee (FOC) as GO area. The ministry has allowed these mines into the mining zone after NTPC and OPGC have submitted their revised mining plans. These projects will use the super critical technology which will result in lowering down of the carbon dioxide emission by 5-8 percent.

 

Steel prices may not change next quarter; festival demand key

Thursday, June 30,

Steel prices in the July-September period may remain the same as in the current quarter, with raw material costs continuing to bite, but festival demand afterwards will determine whether consumers will pay higher prices, Tata Steel Ltd executives said on Tuesday.

“Coal remains at a similar level. So if we want to maintain the same margins we need to roll over the prices (to the next quarter),” managing director H.M. Nerurkar told reporters.

Steel prices have remained firm this year in India as coking coal and iron ore prices, ingredients that constitute as much as 70% of the total cost of steel making, have remained high, prompting steel makers to raise prices despite high interest rates slowing consumer demand.

 

Prices of TMT steel bars of 8mm thickness from Steel Authority of India Ltd in Kolkata were quoted at Rs. 47,000 per tonne in April, up 8.3% from Rs. 43,400 in January, the company’s website showed.

The key factor for steel prices will be festival season demand in October, said Koushik Chatterjee, Tata Steel group financial officer. “That is when we will see if the market is supporting the prices.”

He didn’t elaborate on whether steel firms would raise prices if festival demand is robust.

Nerurkar said interest rate increases—10 times since March 2010—have hurt demand, mainly in the consumer goods sector, but there was still a chance it may rebound.

“To some extent, it’s the consumables like automobiles and other things that depend a lot on loans (where demand has been hurt),” Nerurkar said. “That’s the initial shock. After some time, people do get used to a particular thing and they start to take it in their stride.”

He said the construction sector had also taken a hit, but government spending on infrastructure was supporting it.

In case demand remains slack even in the festival season, steel firms may have to trim production, he said.

 

 

Source: The Live Mint

 

Markets looking grim for Re-bar & Ingot; Producers see limited downside

Wednesday, June 29,

Manufacturers for steel products are a worried lot these days, with demand for finished products falling because monsoon has left the manufacturers in a spot of bother. RBI is continuing to focus on bringing the inflation down to more acceptable levels of 6.5%, and to achieve that target it is increasing interest rates every month, thereby making funds more costly for the industry. In last 10 meetings the central bank has increased interest rates by 250bps. More over the recent hike in diesel cost has only eroded the margin as the hike in transportation cost cannot be passed on to the consumers. 

The margins for the Re-bar industry has shrunk to unsustainably low levels, if we look at the difference in Ingot prices and TMT (12mm) for the Raipur market the difference has shrunk to Rs 2,500/MT from the previous comfort levels of Rs3,200/MT. Few manufacturers say that selling at such low margins will cannot sustain as at these prices mean that they are actually bleeding money.

One of the leading manufacturer of TMT in the region said that “We were running on only 50% of the installed capacity and are not even able to sell 30% of the produce. Buyers are negotiating like never before. Frankly it will be better for us to reduce the production even from these levels instead of selling TMT at such huge loss” 

For Hyderabad market producers are expecting TMT prices to grind lower to Rs 31,000/MT as Ingot have corrected today. The major problem in market is not the price but lack of buyer’s participation. Prices have become irrelevant as buyers are not coming forward to buy Re-bar.

In Mandi Gobindgarh the condition is not different; manufacturers across all the categories are finding it difficult to sustain business. Rolling mills are not buying ingot as they are not able to pass on the production and there’s no point in keeping stock piles in the monsoon season. Ingot is offered at Rs 30,000/MT in the market but the rolling mills are expecting the prices to fall further and ingot will come down to Rs 29,000/MT. But Ingot manufacturers believe the prices will not fall below these levels and they see Rs 30,000/MT as the base level for ingot. 

As per the manufacturers the steel prices in India have bottomed out and there’s no room for further price corrections during the monsoon season.

 

Spot iron ore prices in China remain at 3 month-low

Wednesday, June 29,

Spot iron ore prices remain at three-month lows. Quotes for Indian ore with 63.5/63 percent iron content are unchanged at $175-$177/MT (CNF CHINA)

According to traders in China, global miners like BHP Billiton and Rio Tinto are selling more cargoes on the spot market with Chinese steel mills opting to buy at spot rates as the material is cheaper than on long-term contracts.

Exports of iron ore from Orissa’s Paradip Port in eastern India fell by 13.6 percent in the first quarter of 2011 ending in June due to stringent rules imposed by the local government and a four-fold increase in the export tax, an official said on Tuesday.

“Steel mills are waiting for the market to hit bottom. Many of them only have 20 days inventory of iron ore. They want to increase it to 30 to 45 days, but money is a big problem for them because of the tight monetary policy,” said an iron ore trader in China’s eastern Shandong province.

Prices in iron ore forward swaps market extended losses on Tuesday reflecting investor expectations of further decline in spot prices.

 

 

 

 

Indian power generators are facing dreadful crisis of coal

 Wednesday, June 29,

Indian power companies are reducing their production capacity because of coal supply crisis. Group of ministers discussed the problem in this year & they tried to resolve it but they reached on no decision. In that meeting, they highlighted the future coal shortages particularly for all those projects, which are specially made in the five-year period.

About 80,000 megawatts (MW) of capacity is currently under construction in India. Most of the capacity are depending upon coal. In addition, more projects will have to start construction if the power ministry is to meet its target on time and of adding 100,000 MW of capacity in the next five years.

Domestic coal production is facing problem because of the difficulty in environmental approval like acquiring land and convincing people move on other mining site from their previous site.

If power generators will cope up with all these problems then they can easily increase their production capacity.

 

 

 

India: Higher freight rates on iron ore pellets makes export non-competitive

Tuesday, June 28,

The government had recently removed all custom duties to promote export of value added products like pellet. But domestic freight by the Railways is 28 to 30 per cent of the FoB price in international market. 

Total logistic cost for Iron ore pellets in India is around 11 to 13 per cent compared with 8 to 10 per cent internationally. This has led to spiraling of road rates in iron ore and pellet producing areas to nearly Rs 2,500/MT for even short distance of 400 km. 

These road rates are nearly equal to the rail freight rate of Rs 2,635/MT, making the movement of commodities very expensive.

Industry body like ASSOCHAM has said that freight rates for iron ore pellets being moved for export should be at par with that for domestic movement. 

The domestic freight should not cross threshold limit of 10 to 13 per cent of the product Freight on board(FoB) value maximum. “The policy of Railways to have specific freight rate for movement of pellets by combining basic freight rate with surcharge defies logic,” said ASSOCHAM secretary general D.S. Rawat. 

“This has made exports non-competitive”, Rawat added. 

 

Source: The economic Times

 

 

Demand for Australian Iron Ore to remain strong- Rio Tinto

Wednesday, June 29,

Rio Tinto, the Australian mining giant said on Tuesday there are no signs of demand tapering off for its iron ore despite a recent weakening in spot prices of iron ore.

 

“We’ve got healthy queues at both of our shipping areas,” said Rio Tinto iron ore chief executive Sam Walsh. Spot iron ore prices have fallen a “smidgen” in recent weeks, but this is a normal market fluctuation.

 

Alongside strong consumption in China, Rio Tinto is also seeing good demand in other Asian markets such as Japan, South Korea and Taiwan, Walsh added.

 

Earlier this month Rio Tinto said that it is quickening the pace of its expansions in the Pilbara region of Western Australia, after being encouraged by strong demand for the steel-making ingredient.

 

The miner now expects to achieve the desired 50% capacity increase to 333 million metric tons a year in the first half of 2015, six months earlier than previously forecast.