Industry Updates 30.07.2012


INDUSTRY UPDATES
30.07.2012
STEEL, METALS AND MINING
Orissa Mineral Development Corporation gets Moef NOD TO MINE AT Odisha
Orissa Mineral Development Corporation Limited (OMDC), a subsidiary of RINL, received a nod from ministry of environment and forests to mine three-million tonne of iron-ore and 2.4 lakh tonne of manganese from leases it already owns at Kolha Roida in Odisha.

Hindustan Steelworks Construction Limited (HSCL) is likely to get the job of contract mining at OMDC's Kohla Roida mine complex in Odisha.

When mining operations actually resume at the complex, it will greatly benefit RINL which does not have captive iron-ore mines. So long, the steel company has been dependent on sourcing iron ore through merchant purchases from state-owned mining major, NMDC Limited.

Incidentally, OMDC owns reserves of 200-million tonne of iron-ore and 40-million tonne of manganese in Odisha.

RINL got steel ministry approval to acquire 51% stake in OMDC in 2010. The latest development is likely to boost prospects of RINL, which is slated to hit the market as part of its forthcoming initial public offer.
(Economic Times)
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COAL
Chinese coal demand growth to fall in 2012

China's coal consumption rose 2.8% YoY to 1.97 billion tonnes in the first half of this year, but such a growth rate was still 6.6% points lower than the same period of 2011.

Meanwhile, coal prices continued to fall since November last year. The China Coal Price Index (CCPI), published by China National Coal Association (CNCA) and China Coal Transport and Distribution Association (CCTD), slid by 16.8 points to 186.2 points as of June 29 compared to the peak it hit in early November.

China's coal consumption will continue to increase in line with the development of the Chinese economy, which is expected to reach around 4 billion tonnes for the whole year of 2012. But the demand growth will slow from a year ago.
(Steel Guru)
Coal buyers see defaults as prices slip: Traders
Indian coal markets are seeing scattered defaults among end-user and trade buyers in part because of a 20 percent slide in prices this year, although the vast majority are honouring their contracts, Indian trader said. International coal prices have slumped to about $85 a tonne for South African cargoes from comfortably over $100 in December because of oversupply and tepid Asian demand.

The weakness of the rupee against the U.S. dollar, along with ever-tightening credit availability, is squeezing the trade middlemen who are holding high-priced imported coal inventories, traders have said."There are some defaults by smaller traders and also two cement makers," said a source at one of India's biggest coal importers, who declined to be identified.

South African producers, who supply India's traders and cement and sponge iron makers, said they had not experienced any direct Indian defaults but were wary of any indirect impact.

A default by any player on a cargo re-sold several times in a chain would have a ripple effect, producer sources said. "We've not had any direct problems. They really have performed well as far as we're concerned but I have heard that a minority of the smaller players have had issues," one producer said.

"Some buyers (end-users) are actually defaulting now on fixed price contracts because they are being offered so much coal, of various origins, which were defaulted on by China," said an Indian trader who sells to both the Indian and Chinese markets. "These distressed cargoes are being offered at huge discounts so the buyers just take them instead," he added.

"I have a cargo for China due to load in the next week which I've already agreed to drop the price on. I'm just hoping that it will be loaded and paid for," he added. The discounts offered vary on a case-by-case basis, depending on how desperate the seller is to shift the cargoes, said an Indian coal market player who confirmed hefty discounts were on offer.

"On a standard $90 per tonne FOB deal, traders may offer $6-7 per tonne discount," he said. India has 6 million to 7 million tonnes of thermal coal in inventories at its main ports, most of it imported at prices substantially higher than those at present.

Following a slew of defaults by Indian players in 2005, the industry has made strides to gain a reputation for meeting contracts, even when the market has plunged. Suppliers flocked to the Indian market after widespread defaulting and price re-negotiation in China earlier this year.

Problems in the Chinese coal market have undermined Indian traders in their efforts to rebuild their reputation for meeting. contract terms, Indian traders have said. Some have experienced direct defaults from Chinese buyers, while Chinese defaults have led to some Indian counterparties trying to escape from contracts, they said.

End-users who had enquired for prompt cargoes are now sidelined, buried under cheap offers and saying they will not return to the spot market until August or September, they said. "We have stockpiles of South African coal (in India) which were earmarked for customers but are just going to have to sit there. We'll be bleeding until Q4," the first Indian trader said
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(Economic Times)
Turkish coking coal imports up 45pct in May

According to the data provided by the Turkish Statistical Institute, in May this year Turkey's coking coal imports fell 4.2% compared to the previous month and were up 44.5% compared to May 2011 totaling 2.14 million tonnes.


In the first 5 months of 2012, Turkey's coking coal imports totaled 10.98 million tonnes increasing 17.2% compared to January to May 2011. Imports from Russia in the period in question amounted to 3.86 million tonnes rising by 1.3% while imports from Colombia in the first 5 months of the current year amounted to 2.8 million tonnes up 30.2% both compared to the same period of 2011
(Steel Guru)
IRON ORE
Sesa Goa to produce 10 Mt Iron ore from Liberia in Phase I
Vedanta group firm Sesa Goa is targetting to produce 10 million tonnes of iron ore in the first phase of production from Liberia's Western Clusters project on the back of higher-than-estimated reserves.

"Drilling is going on full swing, every where we are getting positive signs. By the end of 2013-14 financial year, we will make the first shipments. We have divided the project into two phases and in the first phase, production target is of 10 million tonnes (MT)," Sesa Goa Managing Director P K Mukherjee told PTI. The Goa-based iron ore miner had acquired 51 per cent stake in project in Liberia (in West Africa) last year for about USD 90 million (Rs 411 crore). This was the first overseas acquisition of the company.

Mukherjee added that the reserves at the Liberian project are likely to be three times higher than original estimates of one billion tonnes and the company would ramp up production from the project by up to 30 MT in the second phase. "The reserves are higher, may be three times more than original estimates... During the second phase, it (production) would get ramped up to 30 MT. The second phase production will begin 2-3 years after 2013-14, so by 2015-16 or 2016-17 it should happen," he said.

The iron ore miner, which had begun exploration of the asset during April-May this year, is planning to invest Rs 400-450 crore on the project this year.

The Sesa Goa MD, however, said that capital expenditure plan for the project is still underway and this year's money will largely be spent on payment to the local government, exploration, equipments and other related studies for the project. "This financial year, we are expecting total cash flow of Rs 400-450 crore (on the project) but that does not mean it is the total capex. The total capex will be much higher," he said, adding that a decision on capex will be taken by December.

Talking about Sesa Goa's plans to set up a steel mill in Jharkhand, Mukherjee said that the company is looking to sign a memorandum of understanding (MoU) for the project with the state government in a month's time. The company, which is planning to set up a steel plant of 1.5 MT per year capacity in the mineral-rich state, has started acquiring land for the project on its own, he said, though he did not reveal the investment plans for the project.

Sesa Goa already has a prospecting licence of an iron ore mine in West Singhbhum district of the state for carrying out mining operations.
(Economic times)
Government creating artificial Iron ore shortages: FIMI
The federation representing merchant miners in the country claims stocks at mine heads reveal that there is no real shortage of iron ore, a key steelmaking ingredient.

In a letter to the finance ministry, the Federation of Indian Mineral Industries, or FIMI, has accused the government, both at the state and centre, of creating an artificial barrier through high export duty and freight charges.

Exports are down 42 % in the last two years and has cost the country an opportunity loss of $8.3 billion in forex, claimed FIMI. It believes the 30% export duty was premature and counter productive, and holds it particularly responsibly for this "state-induced" supply crunch in iron ore.

In the two years since the last quarter of 2009-10 there has been a cumulative increase in railway freight of 126%, which translates into 40% of realisation on iron ore.

As on March 31, 2012, mine-head stocks added up to 123.5mt and production to another 169.66mt says FIMI quoting Indian Bureau of Mines, or IBM data, which functions under the ministry of mines and minerals. Supplies to steelmakers (other than SAIL and Tata Steel who have their own captive mines) totaled 64.63MT.

After accounting 57MT of exports in 2011-12, it still leaves the country with a 138.77mt of iron ore. "Where's the shortage?" asks FIMI, arguing for rollback on export duty on iron ore.

Its petition comes days after similar pleas from industry chambers Ficci and Assocham on behalf of the steel industry. A source in the industry said the mines ministry is ready to ask for easing the 30% export duty in the wake of falling exports.

FIMI instead wants a 30 % duty on the import of iron or pellets to protect the interest of merchant miners. Import of pellets are steadily on the rise from 122,331 tonne in April to 174,319 tonne in May (dipping to 73,278 tonne in April) this year.

This recent trend is forced by the shortage of available, usable iron ore in the country in lieu of regulatory moves by the states and courts to reform iron ore mining practices.

"This (imports) is even more serious in the current context of the depreciating rupee. In the last two years, the country has lost worth $ 8.3 billion in foreign exchange due to lower export of surplus iron ore fines,' claimed FIMI's chairman in his July 23 letter to finance secretary RS Gujral.

India's steel-making capacity is largely dependent on iron ore lumps. It doesn't have enough installed processing (beneficiation and pelletisation) capacity to use fines, and low-grade ore, also produced during mining. Much of this, like Goa's largely low-grade output, was being exported to China.

Roughly at 30-70, the lumps to fine ratio fall as mines grow older. Domestic requirement of fines (again excluding SAIL and Tata Steel) currently does not exceed 30 mt. Merchant miners argue restricting exports of fines only results in a pile up at mine heads, hindering production.
(Economic Times)
CEMENT
AGRICULTURE
Basmati exports surge to record 3.21 mt in 2011-12 
SPURRED by robust demand from the traditional markets in West Asia, Basmati exports surged 45 per cent to a record 3.21 million tonnes (mt) in 2011-12 from 2.18 mt in 2010-11.
A senior official of the Agriculture and Processed Food Products Export Development Authority (Apeda) apprised that in value terms exports rose 46 per cent to Rs 15,450 crore in 2011-12, as against Rs 10,578 crore in 2010-11. Besides, export growth surged 29 per cent in dollar terms to $3.22 billion, as against $2.49 billion last year, he said, adding that the lower growth in dollar terms was due to the weak rupee. 
A senior official of KRBL, the country's largest exporter, which owns the India Gate brand, said that exporters were harbouring hopes of sustaining the growth momentum on robust demand in the current fiscal. He also apprised that exports were currently at around 3,00,000 tonnes a month. 
Analysts foresee exports gathering pace in the wake of the government's recent moves to do away with the minimum export price (MEP) and resume direct shipments to Iran, the largest market, in addition to China's decision to import the Indian variety 
The Apeda official pointed out that Iran, Saudi Arabia and the UAE were the three large export markets in 2011-12. 
He also disclosed that non-Basmati rice exports had managed to keep pace with the aromatic rice, with shipments going past 5 mt till date. The government had allowed exports of non-Basmati rice in September 2011 following a bumper harvest.
Experts have estimated that output could touch 104.32 mt against the target of 102 mt, with African countries like Nigeria and Ghana being the major destinations for non-Basmati rice. 
A former official of the All-India Rice Exporters’ Association (AIREA) apprised that total rice shipments, including Basmati and non-Basmati, had touched 7.3 mt in 2011-12, making India the largest exporter
(Exim India)
PEC invites 2nd bid for export of 60,000 t of wheat 
STATE-run trading firm, PEC Ltd, has floated a second global tender for the export of 60,000 tonnes of wheat from government warehouses. 
Aimed at clearing surplus stocks of the grain, the move was in accordance with the Cabinet Committee on Economic Affairs’ (CCEA) decision to allow public trading firms to export 2 million tonnes of wheat from Food Corporation of India (FCI) godowns.
(Exim India)
FERTILISERS
ENERGY 
Govt revokes nod for import of crude oil thru Iranian ships 
THE Union government has revoked the permission granted to domestic oil companies to import crude from Iran on cost, insurance and freight (CIF) basis. 
Earlier, the government had granted the permission from July 1 onwards due to the inability of Indian ships to transport Iranian oil in the wake of the European insurers' decision to withdraw cover to ships on Iranian voyages. 
As CIF imports entail suppliers making the shipping arrangements, Indian companies could import oil through Iranian ships not insured by European insurers. 
The government subsequently decided to revoke the permission for CIF imports following a representation by domestic shipping companies that Indian insurance firms were willing to provide insurance to ships on Iranian voyages, which made it possible for Indian tankers to carry Iranian oil. 
As a result, oil firms will be able to import only on FOB basis, i.e. using Indian ships. 
It is learnt that the United India Insurance Company recently approved P&I cover of $ 50 million for Indian ships carrying Iranian cargo.
(Exim India)

Iran has billions to insure tankers

Iran has allocated billions of dollars to insure its oil tankers itself its latest effort get oil to the remaining buyers through the financing obstacles set by Western sanctions.The European Union imposed a ban on July 1st 2012 on insurance for tankers carrying Iranian oil, preventing EU insurers and reinsurers from covering tankers carrying Iran's crude anywhere in the world.

An unnamed official said that after the European Union imposed insurance sanctions on Iranian tankers the government has allocated billions of dollars for insuring Iranian tankers that export Iranian oil.A senior official from Iran's major tanker operator NITC said that it had secured insurance cover from privately owned Iranian provider Kish P&I, with USD 1 billion in insurance in the event of a collision or oil spill.

European insurers dominate the marine insurance sector and Iran's Asian crude buyers have struggled to find a way to replace them. As a result, Iran has seen its oil exports plummet from regular levels seen last year.Earlier this month, Iran said it would insure any foreign ships that enter its waters but no further detail was provided on how the scheme would work for foreign companies and how insurance would be paid in the event of an accident at sea.

Japan had completely halted Iranian crude imports in July because of the lack of cover but earlier this month industry sources said Japanese insurers were expanding their maritime coverage to allow more domestic tankers to transport Iranian crude.Last month India said that it would allow state refiners to import Iranian oil with Tehran arranging shipping and insurance. In May, Indian refiner MRPL secured coverage from an Iranian insurer becoming the first Indian firm known to do so.

Western countries have imposed sanctions on Iran in an effort to stop its nuclear program which they suspect is a cover to build nuclear weapons but which Tehran insists is peaceful.
(Steel Guru)
Mangalore refinery and petrochemicals faces Iranian Crude Import Constraints
State-owned Mangalore Refinery and Petrochemicals on Friday said it could not import the contracted volume of crude from Iran in July because of the economic sanctions imposed on that country by the US and the European Union.

The refiner, however, said it is hoping to resume imports from Iran soon through Indian vessels. "We had to import four cargoes this month, but we could manage only one," Managing Director PP Upadhya said. MRPL, a subsidiary of state-run ONGC, is India's biggest importer of Iranian crude.

Upadhya said the supply constraint is because of sanctions against Iranian vessels and Indian ships cannot transport crude because of impediments in getting the cargo insured. ONGC Chairman Sudhir Vasudeva said MRPL has no plans to stop imports of Iranian crude.

"We are considering alternatives (to ship crude from Iran)," Vasudeva, chairman of MRPL, said after announcing quarterly results. MRPL on Friday reported a net loss of Rs 1,521 crore in the three months to June because of inventory and foreign exchange losses.

It also blamed the refinery shutdown for about 10 days due to water crisis in the peak of summer for the loss.

Upadhya said MRPL has significantly reduced its long-term contract with Iran from 7.3 million tonne in 2011-12 to 5 million tonne this fiscal. "We, however, imported 6.2 million tonne of Iranian crude last year and as on last cargo, our total import this year is 1.2 million tonne," he said.
(Economic Times)

SHIPPING, TRADE AND TRANSPORT


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