INDIA INDUSTRY UPDATES 17.03.2012

INDUSTRY UPDATES

DATE: 17.03.2012


STEEL, METALS AND MINING

Increase in excise to 12 per cent as announced in the Budget on Friday will push up steel prices by up to Rs 1,000 per tonne, leading firms said.







"The hike in excise duty rates is going to increase cost. Two per cent increase in excise duty means costs will go up by Rs 500 to Rs 1,000 per tonne. It will be passed to consumers," Jindal Steel and Power's CFO Sushil Maroo told PTI. Budget at ET: Budget 2012
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He, however, declined to put a time frame on increasing the steel prices. "Price increase will be decided later, it has just been announced. The extent of hike will depend on the market conditions," Maroo said. In the Budget for 2012-13, Finance Minister Pranab Mukherjee today announced hike in excise and service tax rates by 2 per cent to 12 per cent each. The increase in excise rates will become effective from midnight.






Officials of other leading producers, JSW Steel, RINL and Essar Steel also confirmed the hike. "Certainly, this (increase in excise and service tax rates) will have impact on prices, but the extent will depend on the absorbing capacity of the market," Rashtriya Ispat Nigam Ltd (RINL) Chairman A P Choudhary said. According to a JSW Steel official, price hike could be up to Rs 1,000 per tonne as the increase in excise and service tax rates will be levied ex-factory prices, while an Essar Steel official said the price hike will be to the tune of extent in duty increase.






However, largest domestic steel producer SAIL said that the move will be revenue neutral for the company. "For excise duty, generally cenvat is available to us. So, it will be almost revenue neutral," a SAIL spokesperson said. Steel prices are currently hovering in the range of Rs 36,000-37,000 per tonne. Overall, Finance Minister Pranab Mukherjee announced a slew of measures for the steel sector, including various tax incentives during the next fiscal.






He enhanced the basic customs duty on non-alloy, flat- rolled steel from five per cent to 7.5 per cent. This was a long-pending demand of the steel makers, and would discourage imports and protect the domestic industry. Besides, the Finance Minister has reduced import duty to 2.5 per cent on plant and machinery imports for iron ore beneficiation and pelletisation plants.


(Economic Times)


COAL


Budget 2012: Coal India officials unhappy with announcements


Coal India officials are unhappy with the Budget announcements for the coal sector as the proposed exemptions on mining will help the state-run miner save only about Rs 60-80 crore. The company imports equipment worth Rs 600-900 crore every year.


However, Coal India has readied another expression of interest for importing coal on a long-term basis. The company was awaiting commitments from consumers before going ahead with it. Now that the government has announced exemption on import of mining equipment, it may once again ask for expression of interest from overseas suppliers.






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"Nevertheless, importing coal will be a loss-making proposition since the price of international coal is almost three times higher than the price at which Coal India sells under the fuel-supply agreement," said Rajesh Agarwal, head at Research at Eastern Financiers Ltd.






"This would mean that the company will be buying at a higher price and selling at a lower price, taking a hit on its earnings. The other option is to divert some coal from its e-auction segment, but this will also impact earnings," Agarwal added.






The government has also stipulated that the company will have to sign fuel supply agreements with power plants that have signed power purchase agreements with distribution companies. This will require Coal India to sign FSA for supply of 504 million tonnes (mt) of coal during 2012-13. The company may be able to supply about 464 mt, leading to a shortfall of 40 mt. This is slated to rise to about 61 mt by 2016-17.






"To supply enough coal to meet FSA requirement, Coal India would either have to increase its production target or go for imports. With the kind of cash the company has at its disposal, one would not be surprised if the management plans for acquisition," an analyst said. Adding, "But the moot question remains whether increasing production only would solve the issue, since major hindrance is the availability of rakes. With shortage of rakes, even if the production is increased it would not help. As far as costs are concerned, it would depend upon the ramp up in production that is made."






Although Coal India has acquired coal blocks in Mozambique, production from the mine will take another two-three years.






IRON ORE


Goa government rules out ban on Iron ore Export


Goa Chief Minister Manohar Parrikar ruled out the possibility of clamping a ban on exports of iron ore from the state. "In Goa, the exports are hallmark of the mining industry. The recommendations by the M B Shah Commission to ban the exports cannot be accepted," Parrikar told reporters here.






The chief Minister was reacting to the reported recommendations of Justice Commission which investigated into the illegal mining activity in Goa and recommended a ban on the exports. The Commission has submitted its interim report to the Union Mines Ministry in Delhi on Thursday.






Parrikar said "Goa cannot survive if exports of iron ore are banned from the state. The Shah Commission members have wrongly interpreted Goa's situation, probably because the members on the Commission were not Goans." "Mining is a 60-year old business in the state," the Chief Minister said adding not even one kilogram of iron ore from Goa can be converted into steel because it is of low grade.






"Even setting up of steel industry is not suitable in the state due to logistic issues," he said, adding the legal mining industry would be provided all the required protection in the state. The state's mining industry has been on tenterhooks after the Shah Commission has submitted its report.






Goa Mineral Ore Exporters' Association, an umbrella orgnisation of the exporters, has said they are ready to clarify all the issues raised in the Commission's report. GMOEA Secretary Glenn Kalavampara said the issues are mostly technical.






"The Mines Ministry is in the know of the ground-level situation. But even if it wants clarifications, we are ready to provide," Kalavampara said, adding the Association had asked for an audience with the Shah Commission but it was not given till the end.


(Economic Times)


Budget 2012: Mining of Iron ore likely to become cheaper


Mining of iron ore is likely to become cheaper as customs duty on imported plant and machinery used in the industry has been cut from 7.5% to 2.5%. It will also promote usage of low grade ore found mostly in Goa, as the customs duty cut will enable beneficiation plants that improve the quality of iron ore fines. The duty cut will also facilitate setting up of more iron ore pellet plants.






The customs duty on on hot rolled coils - the base grade category of steel - has been raised, which will help local steel players as import of finished steel will become costlier.






In the Budget presented on Friday, the finance minister proposed a reduction in the import duty on iron ore mining machinery to 2.5% from 7.5%. He also suggested a raise in customs duty on hot rolled coils to 7% from 5%. Also, the duty cut on coating material for electrical steel from 7.5% to 2.5% will encourage production of electrical steels which are used to manufacture energy-saving equipment.






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The proposals will benefit local steel companies such as SAIL, Tata Steel, JSW Steel and Essar Steel. The proposals will also benefit mining companies like Sesa Goa and NMDC. Steps taken by the FM will also encourage processing and use of low grade iron ore by domestic steel and mining companies.






The metals and mining industry will also benefit indirectly through the reduction in power charges as coal imported by utilities will be exempt from customs duty. Commenting on the budget proposals, C S Verma, chairman, SAIL said: "Infrastructure sector has been given due thrust in the budget.






This will help the steel industry. Increase in customs duty for flat carbon steel and reduction in import duty for equipment required in mining &minerals sector are also positive for the steel industry." Dilip Oommen CEO & MD, Essar Steel India termed the budget as 'reasonable' for iron & steel sector. Apart from the boost due to duty hike on flat rolled steel and duty cut on imported mining equipment for beneficiation and pelletisation of iron ore, our allied sector, mining, will also benefit considerably from reduction in basic customs duty on machinery and instruments for surveying and prospecting from 10% to 2.5%."






Manoj Agarwal, MD of Adhunik Metaliks, said: "The budget will give a good boost to the steel sector. The proposed tax free bonds of Rs 10,000 crore for the power sector would push growth. The FM has taken a positive step by addressing the issue of supply chain bottlenecks in coal sector."






Vishal Agarwal, MD of Visa Steel said the increase in Export Tax on Chrome Ore and Chrome Concentrates from Rs 3,000 to 30% ad valorem is a positive step. "However, the domestic pricing of Chrome Ore and Chrome Concentrates is abnormally high inspite of the Export Tax. Hence, the increase in export tax needs to have the desired effect on domestic prices," he said.


(Economic Times)


Budget update - Iron ore miners disappointed


To encourage value addition by conversion of low grade iron ore into pellets and augment overall ore supplies, the finance minister announced reduction of basic customs duty from 7.5% to 2.5% on imported plant and machinery for setting up of pellet plants and ore beneficiation ones.






The industry feels the duty reduction would not make much difference.






Mr RK Sharma secretary general, Federation of Indian Mineral Industries said “More than importing machinery, the big cost for companies is towards water and power. More, there are no new mining leases being allotted in various states.”






Mr Sharma said there was a huge difference between the price of pellets and iron ore. He said “It would not make economic sense for many steel mills to use pellets rather than ore directly. Hence, not many are interested enough to invest in one.”






He said the sector had wanted news on reduction of the export duty from 30%, but was disappointed to find the minister hadn’t touched the subject.






A company setting up a 4 million tonne per annum capacity pellet plant requires an investment of INR 1,200 crore, which includes an import content of INR 100 crore to INR 150 crore. Mr Vinod Nowal director & CEO of JSW Steel said “With a customs duty of 2.5% for machinery, the units will not save much more than INR 5 crore.”






Presently, India has a capacity of 18 million tonnes of pellets annually, of which 2.5 million tonnes are exported.


(Steel Guru)










CEMENT


AGRICULTURE


Suspension of export registrations triggers fall in cotton prices


THE government has suspended issuing new cotton export registration certificates (RC) "until further orders", following its decision to withdraw the export ban on the natural fibre on March 5. The move led to a crash in prices, that had risen following the Directorate-General of Foreign Trade’s (DGFT) notification announcing the cancellation of the ban.


According to the notification, a Group of Ministers would meet soon to assess the supply-balance situation afresh and take a view on whether to allow fresh registrations for exports. DGFT also made it clear that contracts already registered with it so far, but not yet shipped, would be expeditiously scrutinised to ensure that the papers are in order and revalidated. Legally, an RC is valid for 30 days from the date of issue.


The statement stressed that the government would give priority to those consignments which have been handed over to the Customs Department. The Union Commerce Secretary, Dr Rahul Khullar, said that RCs issued in January and February would be scrutinised to detect cases of ‘fictitious’ export transactions.


Expressing doubts on the possibility of speculative trading, Dr Khullar pointed out that the government had decided to scrutinise and revalidate the RCs because of the huge bunching of the certificates in January and February. He also clarified that no new RCs would be issued till the matter was resolved.


(Exim India)


FERTILISERS


ENERGY


SHIPPING, TRADE AND TRANSPORT


INDUSTRY UPDATES




STEEL, METALS AND MINING


Union Budget 2012: Steel companies demand cut in Export duties


Iron ore export duties are likely to stay at 30 percent despite calls from miners for them to be cut, as the government tries to encourage retention of supplies of the steel-making raw material for domestic use. The steel industry has called for coal imports to be exempt from customs duty. The state-run mining monopoly, Coal India , could be given some incentives to boost production.


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The government in the Budget for the current fiscal had raised the export duty on iron ore, both fines and lumps, to 20 per cent from five per cent and 15 per cent, respectively and fully-exempted exports of iron ore pellets from any duty.


Notwithstanding lower growth of domestic steel consumption during the first three quarters of the current fiscal, the Economic Survey said the overall performance of the sector is "optimistic".






India's steel consumption was a little less than 70 million tonnes last fiscal. According to World Steel Association, global steel consumption is estimated to slow down to 6.5 per cent for 2011 and 5.4 per cent in 2012.






Raw material security, infrastructure, quality of coking coal and uncertainties in land acquisition have emerged as bottlenecks to setting up new steel plants, the survey added.






India emerged as the fourth largest producer of crude steel in the world during January-November 2011 after China, Japan, and the USA. Its crude steel production grew at a compounded annual growth rate of 8.4 per cent during 2006-07 to 2010-11.


(Economic Times)


COAL


IRON ORE


CEMENT


Union Budget 2012-13: Cement companies seek uniform duties


Cement manufactures have asked the government to rationalize excise duty from 10% to 6-8% in the Union Budget 2012. Cement Manufacturers' Association (CMA), the apex body of cement manufacturers in India has asked the government to encourage cement industry and bring it at par with other core and infrastructure industries.






Cement makers have also requested the government to bring to an end the existing anomaly, where duty on import of inputs is higher than on finished product.






ASSOCHAM has demanded that benefits of section 80-IA of the Act should also be extended to Cement Industry.


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FIICI said that there is surplus capacity of cement in the country and cement market is on bearish trend therefore excise duty rate should be reduced for the growth of cement industry.






FIICI has demanded that cement be categorized as "Declared Goods" under Section 14 of Central Sales Tax Act so that it is put on an equal footing with other core sector goods.






CMA has requested the goverment to provide a level playing field by levying basic customs duty on cement imports into India.






Alternatively, it has also asked import duties on goods required for manufacture of cement be abolished and freely allowed without levy of duty.


(Economic Times)


AGRICULTURE


Edible oil cost more as palm oil hits 9 month high


Branded cooking oil prices will rise on Monday (March 12) -- the fourth time in five months -- after palm oil prices hit a nine-month high due to a smaller soyabean crop in South America and hopes of a strengthening US economy.






Palm oil is India's most popular oil, with a 45% share of the edible oil market. Companies expect prices to cool post-July when peak palm oil harvest begins across Malaysia and Indonesia and goes on till December. Currently, consumer pack prices range from Rs 65 to Rs 75 a litre.






Since November, companies have raised retail prices by Rs 6-8 a litre owing to volatility in prices in the international market and rupee fluctuation.






"An immediate price increase of Rs 1-1.50 a litre on consumer packs will take place from Monday," said Angshu Mallick, chief operating officer, Adani Wilmar, which owns India's largest selling cooking oil brand Fortune. He said a drop in the South America soyabean crop by 10-15% would ensure prices would remain firm.


The company crushes a million tonne of soyabean annually and exports 1-1.2 million tonne soya meal, apart from handling 8-10 lakh tonne of refined palm oil.






Companies said there was a good demand in the physical market from oil millers and the market was expected to remain bullish this year. "Edible oil prices might see a correction after two months. With palmolein and soya prices increasing, both bulk and consumer pack prices will increase by Rs 2 to Rs 4 a litre," said an official from Ruchi Soya. The company, the third largest player in the refined oil business, sells under the brand name Nutrela Soyumm (soyabean oil) and Ruchi Gold (palmolein oil).






Analysts forecast palm oil prices to touch around 3,700 ringgit to 4,000 ringgit ($1,229-$1,329 ) per tonne by June from the present 3,350 ringgit ($1,116) a tonne owing to stocking by Middle-East countries and demand from India. After hitting a record high of Rs 2,912 a quintal on Friday, soybean futures for April delivery on National Commodity and Derivatives Exchange was down by 0.87% to Rs 2,856 a quintal on Saturday.






"Constraints of storage and finance ensure that companies have a stock of the imported edible oil for 30 days. Hence, companies had to immediately pass the price hike to consumers. Edible oil prices will further increase by 10% till June and from July till December, we should see them correct," said Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil consultancy firm. He added that a shortfall of soya crop by over 21 million tonne across the US and South America, firm crude prices and a drop in palm oil output in Malaysia as peak season closes were attributing to current firm edible oil prices.






However, analysts expect a correction in the coming months when mustard peak arrivals begin. "Indian prices are 20% higher and may see a correction in March end and beginning April when mustard arrivals peak," said Ahmedabad-based Paradign Commodities head Biren Vakil. According to second advance estimates, the oil seeds crop for 2011-12 is projected to drop by 6% to 30.53 million tonne owing to uneven rains in the kharif season and low pre-winter rains in the northern region. Analysts expect mustard production to be at 65-67 lakh tonne compared to 70 lakh tonne in 2011.






India's total edible oil imports are estimated at 6 million tonne while annual domestic consumption stands at about 13 million tonne.


(Economic times)






FERTILISERS


Fertiliser subsidy payments of Rs. 11,000 crore pending


The subsidy payments to the tune of about Rs 11,100 crore for imported urea and phosphatic and potassic fertilisers are pending due to shortfall in budget provisions, Parliament was informed.






In a written reply to Lok Sabha, Minister of State for Chemicals and Fertilisers Srikant Jena said: "...due to shortfall in availability of the budget provision, payments for imported urea and subsidy for imported P&K fertilisers have been temporarily delayed".






Jena further said that a part of the total outstanding claims of about Rs 11,100 crore for imported fertilisers is expected to be met out of the additional budget allocation for the year 2011-12 and the balance would be settled in the next fiscal.






On the issue of fertilisers availability for the upcoming kharif season starting June, Jena said that there is no shortage.






"Government has taken necessary steps to ensure adequate availability of fertilisers in the ensuing kharif season and there is no likelihood of shortage of fertilisers resulting in food inflation," he added.


(Economic Times)


Economic Survey 2011-12 : Domestic Fertiliser output to increase marginally


The domestic production of key fertilisers increased only marginally this fiscal due to insufficient supply of raw materials, while imports of major crop nutrients declined.






According to Economic Survey 2011-12 released today, the output of urea, di-ammonium phosphate (DAP) and complex fertilisers has increased by 3-4 lakh tonnes, while imports have fallen by up to 61 per cent.


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Urea production is estimated at 22.28 million tonnes in 2011-12 from 21.88 million tonnes in 2010-11, while its import is pegged lower at 5.64 million tonnes against 6.61 million tonnes in the same period.






DAP production is expected at 3.94 million tonnes in the current fiscal compared to 3.53 million tonnes in the last fiscal, whereas import of the soil nutrient is expected to decline to 5.3 million tonnes against 7.41 million tonnes.






In the case of complex fertilisers, the output is estimated at 9.06 million tonnes in 2011-12 fiscal against 8.72 million tonnes in the previous financial year.






The import of muriate of potash (MoP) is expected to decline by nearly 61 per cent to 2.49 million tonnes compared to 6.35 million tonnes in the last fiscal.






"Availability of raw materials/intermediates has been a major bottleneck towards increase in production," the document that is considered a guide to Budget said.






The import of MoP could not materialise uptill July 2011 of this fiscal due to substantial increase in global prices and cartelisation by the international producers, forcing the domestic companies to declare a potash import holiday.






The contracting of the important soil nutrient could only take place in August 2011 after global suppliers agreed to provide MoP at affordable price.


(Economic Times)


ENERGY


Oil ministry monitoring Iranian Oil imports, says no plan to cut supply


Oil Ministry is closely monitoring oil imports by refiners, but it has no plans to order a reduction in Iranian supplies despite reports that the Obama administration may impose sanctions against India on June 28 because the country continues to buy significant quantity of oil from Teheran, government officials said.






Western countries led by the US have announced sanctions against Iran as they oppose the country's nuclear programme, but India, which imports 80% of the oil it consume, has adopted an independent strategy, based on its own concerns of energy security.






"We follow UN sanctions. We do not participate in sanctions called by any individual country," a government official who did not want to be identified told ET. A spokesman for the oil ministry declined comment.






According to officials, the government has directed state refiners to diversify its crude oil sourcing to reduce dependence on politically volatile countries such as Syria and Iran and sourcing cheaper crude oil from South America and Africa, which are heavier and could be processed in a complex refinery.






Earlier, a Bloomberg report said Obama administration is worried that the White House may impose sanctions against India as the country has not cut purchases of Iranian oil. The penalties against India may be imposed as early as June 28, the report said. Oil minister Jaipal Reddy has said in the past that the government will not interfere with commercial decisions of state-run oil companies.






Some state firms are themselves looking for alternative sources of crude oil, but not under any kind of government pressure, oil ministry officials say. State-run MRPL is the largest buyer of Iranian crude oil among Indian refiners. It buys about 7.5 million tonnes a year, but is actively exploring opportunities to reduce its dependence on Iran, company executives say. "We are expanding our refinery capacity and consciously looking for heavier grades of crude oil from Africa and Venezuela," the executive said.


(Economic Times)


SHIPPING, TRADE AND TRANSPORT


Paradip port trust, posco to set up committee on paradip port


Posco-India and Paradip Port Trust (PPT) authorities today decided to set up a six-member joint committee to study possibility of the steel major using the existing port facility at Paradip. A delegation of the Posco-India, which had proposed to set up a 12mtpa greenfield steel mill near the port town at an investment of Rs 52,000 crore, met the officials of the PPT including its Chairman G Jagannath Rao to discuss the project.






Earlier, Rao had proposed the steel major to use Paradip Port which is barely 12 km away from the company's proposed captive port at Jatadhar. "The proposed committee comprising three members from each side will study whether PPT could meet Posco's requirement," Rao told reporters after the meeting.






Claiming that Paradip Port had been fully equiped to meet requirement of Posco, Rao said that the team would undertake survey work from April 2 and submit its report within seven days from completion of the study on April 14.


The PPT's proposal to Posco-India came after questions were raised on the establishment of a captive port by the steel major at Jatadhar, barely 12 km from the existing Paradip Port.






Both PPT and Posco-India explored the possibilities of using Paradip Port after the state government asked the steel major to prepare a detailed project report (DPR) for its proposed captive port near Paradip Port as per the suggestions made by Central Water and Power Research Station (CWPRS).






"The state government will evaluate Posco-India's port DPR and ensure that the suggestions made by CWPRS are properly implemented," Commerce and Transport Minister Sanjeev Kumar Sahoo had recently told the assembly.






A technical study was conducted by CWPRS, Pune, to assess any adverse impact of Posco-India's proposed port on the existing major port at Paradip, the minister had stated adding the government would examine the company's DPR while initiating process for clearances from various agencies and departments.


PPT authorities, Ministry of Shipping, Road Transport and National Highways in 2006 had indicated that Posco-India's proposed captive port at Jatadhar could affect the prospect of the existing port at Paradip.






CWPRS was engaged to conduct a technical study on the matter relating to the possible impact, the minister said.


(Economic Times)


New Mangalore Port handles largest coal parcel size


The bulk carrier m.v. CMB Pomerol, owned by Panama-based Pacific Bridge Shipping Corporation, last week facilitated the handling of the largest parcel size of coal ever at New Mangalore Port (NMP).


The vessel carried 89,794 tonnes of the commodity.


According to an official release, the entire consignment, imported from South Africa for Jindal Steel (JSW) Ltd, was discharged at the Port’s deep-draught berth using mobile harbour cranes. The vessel has since sailed out.


Wilhelmsen Ship Services was the vessel agent and Delta Infra Logistics Ltd the stevedore.


Coal traffic at NMP has been showing an upward trend, increasing 30.5 per cent to 3.40 million tonnes in the current financial year till February, from 2.61 million tonnes in the corresponding period of the previous year.


(Exim India)

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