Industry Updates Dated 27.07.2012

27th July,2012
Indian iron ore mining mess - SC cancels mining lease to 6 steel makers

The Hindu reported that the India’s Supreme Court on Thursday cancelled the mining licenses granted by the Mr Shibu Soren government in 2006 to following companies
1. Monnet Ispat and Energy Ltd
2. Jharkhand Ispat Ltd
3. Prakash Ispat Ltd
4. Adhunik Alloys and Power Ltd
5. Abhijeet Infrastructure Ltd
6. Ispat Industries Ltd (Now JSW Ispat Steel)

A two judge Bench comprising Justices RM Lodha and HL Gokhale dismissed the appeal filed by these companies and upheld a 2009 order of the Jharkhand High Court that the Government has the right to reserve mines for public sector undertakings, including SAIL.

The licences were granted in 2006 by the Mr Shibu Soren Government. They were then forwarded to the centre for confirmation because a 1969 Union Government notification laid down that mining in the Ghatkuri Hill was reserved for PSUs and that licences could not be given to private companies.

Subsequently, the Mr Madhu Koda Government withdrew these licences against which the companies moved the Jharkhand High Court.

The High Court ruled that the state is not only the owner of all mines and minerals but has the inherent right to reserve any area for the use of PSUs. The High court, therefore, upheld the Jharkhand Government order withdrawing the licences. The companies then moved the apex court against this order.
(Steel Guru)

Crack Down on Mining : Goa to cancel 40 License
The Goa government has decided to cancel licences of 40 mines, whose delay in filing of `J form' under the `Goa, Daman and Diu Mining Concession Act 1987' had been condoned by the previous Congress-led governments.

Chief Minister Manohar Parrikar today said in the state Legislative Assembly that all the 40 licences would be cancelled within two weeks. Deadline for filing J form was November 22, 1988. But some of the forms were filed as late as 2005.

J form is necessary for conversion of old mining concessions granted during the Portuguese rule into formal leases. Parrikar said that only Union Government had the power to condone the delay.

Goa has 90-odd mining leases.
(Economic Times)
Indonesia coal production reaches 150 million tonnes in H1

Production by Indonesia coal miners reached 150 million tonnes in the first half of this year which was equivalent to 45.2% of the country’s total target this year. Mr Thamrin Sihite director general of minerals and coal at the Energy Ministry said that total coal production was set at 332 million metric tons this year. He did not provide comparative figures for last year.

He said that around 120 million tons of the commodities were sold to overseas market such as China, India, Pakistan, Thailand and Sri Lanka. The remaining 30 million tons were sold in the domestic market. He said without elaborating on how to do so that “We need to boost production in the second half of this year.”

Mr Thamrin said that this coal production target was higher than the 132.35 million tons in 2004 and 290 million tons in 2011. Each year, 30% of coal must be sold in the domestic market with the rest to overseas market.

Mr Bob Kamandanu chairman of the Coal Mining Association said previously that coal production targets by Indonesia were set at 390 million tons this year, higher than the 332 million tons set by the government. The association takes into account the production by small coal companies, while the government does not include that data.

According to the Energy and Mineral Resources Ministry, Indonesia is the world second-biggest shipper of thermal coal with 20.8 billion tons of proven coal reserves.
(Steel Guru)
Indonesian coal swaps decline 4th day China prices slide

Ginga Petroleum Singapore Pte, Swap contracts fell for lower quality thermal coal from Indonesia declining for 4 day. Contracts for shipments to China also dropped.

The swap for sub bituminous coal with a calorific value of 4,900 kilocalories a kilogram for loading from Indonesia in the fourth quarter fell 25 cents to USD 62.60 per tonne on a net as received basis. The August contract was 10 cents higher at USD 60.50 on a net as received basis.

Ginga said that the swap for coal with a heating value of 5,500 kilocalories a kilogram for delivery to South China in the Q4 slid 40 cents to USD 84.10 per tonne on a net as received basis. The August contract fell 40 cents to USD 82.20 on a net as received basis.

According to IHS McCloskey, a Petersfield, UK based provider of coal data, the price of thermal coal at Australian port of Newcastle declined USD 4.10 to USD 81.15 per tonne in week ended July 20th 2012. That was the second week of declines and the lowest since week ended December 11th 2009

A commodity swap is a financial agreement whereby a floating price is exchanged for a fixed rate over a specified contract period. About 60% of Indonesia’s coal is classified as sub bituminous. Higher moisture levels and lower carbon content reduce the heating value compared with grades with a better quality stock. Sub bit coal has kilocalories of less than 6,100 per kilogram.
(Steel Guru)
Government creating artificial Iron ore shortage, alleges federation of Indian Mineral Industries
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.
(Economic Times)
Sesa Goa expects Iron ore production to drop by 24%
Sesa Goa, which part financed Sterlite's $10-billion takeover of Cairn India, expects iron ore production in the current fiscal year to fall by about 24% due to regulatory constraints and production caps, a senior executive said on Wednesday.

The Goa-based company, which is part of Vedanta Resources and also India's largest iron ore exporter , will most likely produce about 16-17 million tonne of iron ore this year. "This is much lower than our earlier estimate of 21 million tonne," managing director P K Mukherjee told ET. "This is mainly because of the production caps that have been suggested in Karnataka, which will greatly restrict our mine output."

The Central Empowered Committee , a panel appointed by the Supreme Court that had investigated into allegations of illegal mining in Karnataka and had recommended the current mining ban, recently suggested capping total production in the state at half the earlier gross output to lessen the impact on environment .

Under this directive, Sesa Goa can mine only 2.9 million tonne, compared to the earlier 6 million tonne for which it has the Environment Clearance. On July 23, Sesa said its profit fell 76% due to lower volumes and weak ore prices. The company said income from associate company , Cairn India, boosted its finances .

Sesa earned Rs 755 crore from Cairn India for its 20% share in the oil company. According to Mukherjee, the outlook for iron ore continues to remain weak. "Ore prices will likely fall by another $6-7 per tonne. That is our estimate. We have factored an average floor price of $120 per tonne, mainly as consumption is falling in China." The current average price of the ore, crucial for steelmaking is $127 per tonne.

A recent report by Emkay Global says iron ore prices fell broadly during the fortnight, with high grade ore losing 3% to $137.3, while 62% Fe grade ore losing 4.4% to end at $129.4. The more common 58% Fe grade ore declined moderately by 1.2% to $119.5/tonne. "Increased regulatory scrutiny and higher iron ore demand has impacted mining.

We estimate India's iron ore exports at 39 million tonne in FY13," Standard Chartered analysts Satish Kumar and Saurabh Prasad wrote in a recent report. Last fiscal year, ore exports stood at 55.2 million tonne. Weak demand and higher export levies have also affected price realisation for exporters like Sesa Goa. Realisations have been $30 lower, with $10 accounting for the levies.

Sesa Goa expects the process for according court approval to its merger with Sterlite Industries to start from September. "There may be some delay as we are anticipating opposition to the merger . But the court clearance may be in by December," said Mr Mukherjee . Sesa Goa will restart its production in Goa as the mandatory rehabilitation and resettlement plan for its mines in Chitradurga.
(Economic Times)
Set up Independent regulator for cement Industry: BAI
The Builders' Association of India has suggested setting up an independent regulator for the cement industry on the lines of Insurance Regulatory and Development Authority, following recent developments. The Regulator should have quasi-judicial authority, BAI trustee D L Desai said.

He told reporters here last evening that the Competition Commission of India's penalty of Rs 6,300 crore on 11 cement companies last month for violating provisions of the Competition Act, 2002 was a landmark judgement under the act.

He suggested CCI follow the trend set by its sister bodies like tribunals of Income tax, sales tax and Excise Departments and direct cement companies to deposit 50 per cent of the fine before accepting their petition. The BAI would oppose tooth and nail any petition from cement companies seeking a stay on recovery of the penalty.

The development in this case, Desai said, would be pathbreaking in fighting cartelisation in vital commodity sectors. According to him the fine of Rs. 6,400 crore was meagre compared to profits earned by the industry with an installed capacity of 320 million tonnes, with the present demand standing at 250 MT.

CCI's penalty on them was only 0.5 times their profits in 2009-10 and 2010-11, he said. He pointed out that even the Parliamentary Standing Committee headed by Shantha Kumar had concluded that price escalation in the cement sector was profit-driven and had recommended setting up a regulator. All free markets needed a regulator not only to regulate the sector but to expedite grievances of others, he said.
(Economic Times)
Kandla Port deploys floating crane 
To be dedicated to the Port & nation today 
Kandla Port has become the country’s first Major Port to handle Capesize vessels, that are capable of carrying 100,000 tonnes, at the outer anchorage of the Port, which has a draught of 16 m. The feat was achieved by a recently installed floating crane of SWL about 35 MT at KPT OTB. 
The crane is one of the two Liebherr floating cranes imported by Rishi Shipping from Germany. The second floating crane will commence operations in September. With these new additions, Kandla Port is finally ready in all aspects to handle gearless Panamax and Capesize vessels without any restrictions on length of the ship (LOA) and arrival draught. Vessels up to 300 m long and with draught of 16 m can now call at the Port. 
M/V Indus was the first vessel to be discharged by the new floating crane as part of trials on June 25. The vessel arrived with 90,133 tonnes of coal on a 14.9-m draught. The first parcel of 55,133 tonnes was discharged at the outer anchorage of Kandla Port while a second parcel of 35,000 tonnes was discharged at the New Mangalore Port. This was the first time a Capesize vessel discharged at two Major Ports. 
Earlier, Capesize vessels were being discharged only at three private ports, namely, Mundra, Krishnapatnam and Gangavaram. The Kandla Port is the latest addition to the league of ports capable of handling gearless Capesize vessels. 
Mr Vijay Chibber, Special Secretary and Financial Advisor to the government of India, Ministry of Shipping, and Dr U. S. Awasthi, Managing Director of IFFCO, will dedicate the floating crane to Kandla Port and to the nation on Friday (May 27). 
It was Dr P. D. Vaghela, the dynamic Chairman of Kandla Port Trust (KPT), who initiated the move to deploy floating cranes at the Port with a vision to handle gearless Panamax and Capesize vessels. Volumes at the Port are expected to surge through a combination of floating cranes, barges and barge jetties at Tuna, Bunder Basin and the IFFCO Jetty. 
The Chairman has also actively encouraged coastal movement between Kandla and captive barge jetties of cement companies. Barges of 3,000-ton dead weight, registered under the River Sea Act, will be commissioned to regularly transport imported coal from Kandla to Jakhau/Koteshwar and return with cement and clinker. These companies are expected to produce 30 million tonnes of clinker and cement annually, and dealing with such volumes will be extremely challenging for the trade and Kandla Port alike. The positioning of these cranes at Kandla OTB will complement and encourage coastal movement of coal, making Kandla a hub for the commodity, highlighted a KPT release. 
Mr B. K. Mansukhani of Rishi Shipping said that bigger vessels meant reduced freight, and added that freight also depended on the turnaround time of a vessel. Supramax vessels of 50,000 DWT were now discharging after berthing at Kandla Port in just 24-48 hours, he highlighted, with the Port achieving faster turnaround times in the process. 
Use of the floating cranes would enable Kandla Port to handle bigger vessels, substantially reducing freight and saving foreign exchange for the country, the release underscored.
(Exim India)

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