Industry Updates on 31.08.2012


INDUSTRY UPDATES
31st August,2012
STEEL, METALS AND MINING
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COAL
Inter- Ministerial Panel to decide Fate of 58 coal blocks next week
In the wake of controversies shrouding coal mines allocation, an inter-ministerial panel will decide next week the fate of 58 blocks which the private companies and PSUs failed to develop within allowed time. The government has already issued de-allocation notices to 35 government firms and 23 private companies which failed to develop the same allotted for captive use in the given time-frame.

"An Inter-Ministerial Group, headed by Additional Secretary, Coal, Zohra Chatterji will meet on Tuesday or Wednesday to decide on 58 blocks which were served de-allocation notices," a top Coal Ministry official told PTI. The official clarified that the blocks, barring a few, are different from those mentioned in the CAG report.

Government auditor CAG in its recent report tabled in Parliament stated that undue benefits to the tune of Rs 1.86 lakh crore were extended to private firms on account of allocation of 57 mines to them. There were media reports that the government may cancel over 50 blocks mentioned in the CAG report.

Coal Minister Sriprakash Jaiswal, however, said, "The blocks were allocated under a process... monitoring the process of blocks development is done regularly and it is wrong to say that these will be cancelled. IMG will review their progress and take a final view on it." Meanwhile, the government is likely to kick off the auction process of 54 identified coal blocks having a reserve of about 18.22 billion tonnes next year.

Jaiswal had earlier said that the credit rating firm CRISIL is likely to submit its report on the methodology of auction soon.
(Economic Times)
IRON ORE
China August Iron Ore Estimated to Drop 10% as Prices Fall
China’s iron ore output probably fell about 10 percent this month as tumbling prices squeezed out costly producers and steelmakers used cheaper imports, the China Metallurgical Mining Enterprise Association said.
Production will be about 115 million metric tons this month, little changed from July, Lei Pingxi, executive vice chairman of the association, said today in an interview in Suzhou at a Umetal conference. Output was 127.5 million tons in August last year, according to the National Bureau of Statistics.
The nation’s iron ore output had the steepest decline in July in four years, as the world’s largest metals consumer increased purchases from producers such as Brazil’s Vale SA (VALE3) and Rio Tinto Group. Prices tumbled 35 percent this year to $90.30 a dry ton yesterday, the lowest level since November 2009, according to a gauge compiled by The Steel Index Ltd.
“The competitiveness of Chinese iron ore mines is falling because of falling prices, higher construction costs and taxes,” Lei said. About 42 percent of China’s iron ore mines have production costs of greater than $100 a ton, he said.
China’s iron ore output in the three months to the end of August is about 5 percent lower than the previous three months, Lei said. The capacity use ratio at Chinese miners was 62 percent, according to researcher Umetal.com.
Supply, Demand
Global seaborne iron ore supply may rise 50 million tons in the second half this year from the first half, while demand may decline, Zhang Dianbo, the general manager of raw-material purchasing at China’s second-largest steelmaker Baosteel Group Corp., said at the conference.
Chinese steelmakers, overwhelmed by increasing capacity and sluggish demand, have struggled to remain profitable as steel prices dropped to an almost three-year low this month. Domestic mills had a combined loss of 1.9 billion yuan ($299 million) in July, with an average profit margin of just 0.03 percent in the seven months to July, Wang Xiaoqi, vice chairman of China Iron and Steel Association, said today.
Still, Chinese mills haven’t made significant production cuts, Umetal analyst Zhang Jiabin said. The steelmakers’ operating rate at Tangshan in Hebei province, China’s biggest region by output, is 91 percent, up from 78 percent in October, he said.
China’s ore contains about 20 percent iron, compared with more than 55 percent in Australian ore, making it more expensive to extract, Deutsche Bank AG estimates. China has about 1,500 iron ore producers nationwide, with 1,000 smaller mines accounting for about a third of output, Lei said.
Floor Price
Iron ore prices are well below recognized floor prices of $120 a ton, suggesting high-cost iron ore supply closures will not be far off, Australia & New Zealand Banking Group Ltd. (ANZ) said Aug. 28.
The recent plunge in prices prompted contract ore buyers to seek other ways to price the steelmaking raw material. The current pricing method, based on indexes, doesn’t reflect the needs of larger buyers and needs improvement, Baosteel’s Zhang said. The Shanghai-based company buys ore on a quarterly basis.
As much as 10 percent of globally traded ore is sold through public auctions, while the remaining 90 percent is bought at index prices that are determined by bids, he said.
Australia and Brazil accounted for 66.2 percent of China’s total ore imports in the first half, up from 64 percent last year as imports from India dwindled, Umetal said.
(Hellenic Shipping News)
Iron ore hits USD 90 mark’

iron ore price floor that miners have long been flagging could be a long way off, with prices of the steelmaking ingredient continuing to slump amid talk that China is subsidising high cost iron ore production.

The notion of a price floor at about USD 120 a tonne, where high-cost Chinese production should have become unprofitable, has previously been pushed by Rio chief Tom Albanese and Fortescue chief Nev Power and others.

In a note to clients written from a China research trip, ANZ commodities strategy chief Mark Pervan said a major problem for iron ore markets was that steel mills were not cutting production, despite falling steel prices, because of political and social drivers. ANZ believes the same thing is happening with iron ore production, with about 50 per cent of Chinese iron ore supply under water, but continuing to produce. He said that "We are unlikely to see the market bounce back until mine supply starts to wind down in the coming months.”

Macquarie analysts said that while big steel mills were cutting output, smaller mills that were yet to cut production could run down inventories after they finally started to do so, putting further pressure on prices.
(Steel Guru)
CEMENT
AGRICULTURE
Wheat falls on profit-taking but Russia worries continue to support
U.S. wheat fell on Thursday as traders locked in profits following its biggest daily climb since mid-July in the previous session, although concerns that Russia is poised to implement export curbs continued to support prices.
Soybeans slid, giving back a third of their gains from the day before, while corn dropped slightly.
"With the uncertain situation in Russia, traders are cautious and may take gains," said Graydon Chong, senior analyst at Rabobank.
The grain industry in the United States is also on alert for a naturally occurring toxin in corn that could present another challenge to farmers already hit by the worst drought in 56 years, although it is too early to tell how serious the problem might be.

Chicago Board Of Trade December wheat declined 0.36 percent to $9.02-1/2 a bushel after jumping 3.46 percent on Wednesday, its largest daily rise since July 16.
New-crop soybeans fell 0.53 percent to $17.43-1/2 a bushel after climbing 30-3/4 cents the day before, while December corn lost 0.18 percent to $8.12 a bushel, having closed up 2.26 percent.
EYES ON RUSSIA
Wheat jumped on Wednesday as traders readied for a meeting of Russian government officials that is expected to herald export curbs.
Russia recently cut is 2012/13 grain forecast to 75 million tonnes, with private forecasters pegging wheat output at 41.5 million tonnes, below levels after a severe drought in 2010 when Moscow halted exports for almost a year.
The U.S. Agriculture Department has already cut its forecast for Russian wheat exports this year to 8 million tonnes from 12 million.
Wheat was also supported as Saudi Arabia launched a tender to buy 550,000 tonnes of hard wheat (12.5 percent protein) from global suppliers for shipment during December to February.
"There has been some underlying support for wheat in the last few days amid a tender from Saudi Arabia, while the recent acquisition of wheat from Tunisia has buoyed the expectation of continued demand from North African countries," Chong said.
Tunisia's state grains agency purchased 150,000 tonnes of soft milling wheat in a tender for the same volume, European traders said.
TOXIN
Trace amounts of aflatoxin have shown up in some of the corn harvested in the U.S., with top U.S. dairy company Dean Foods in talks with state officials in Indiana and Iowa about testing milk for the carcinogenic byproduct of mold.
Any major outbreak has the potential to snarl the grain handling system in the U.S. Corn Belt and trigger a scramble - and price spike - for untainted corn which will already be in short supply this year due to the drought.
But with the corn harvest only 6 percent complete in the United States, the world's largest corn producer and exporter, it's too soon to know whether aflatoxin will be a significant issue.
Hurricane Isaac, since downgraded to a tropical storm, made landfall near New Orleans early on Wednesday, with updated weather maps forecasting heavy rain to spread inland over the next few days.
That is likely to stall the harvest of U.S. crops, though it will add valuable soil moisture ahead of the autumn seeding of winter wheat.
(Hellenic Shipping News)
FERTILISERS
ENERGY 
Govt may tap Iranian insurers to part-cover crude tankers 
IN the wake of domestic shippers terming the state-backed insurance provided by India as inadequate, the government is likely to negotiate with Iranian insurers to provide for a partial cover for tankers carrying crude. 
Although India, the third largest importer of Iranian crude, had got public sector insurers to provide for as much as $100 million of insurance per voyage, analysts point out that the figure is just a fraction of the $1-billion cover that the companies had prior to the European Union sanctions on Iran. 
The Europe-based Protection and Indemnity (P&I) Clubs, which used to provide third-party liability cover to 90 per cent of the world's fleet before the sanctions came into effect on July 1, have since stopped offering cover to ships hauling Iranian cargo. 
Apprising that the government may negotiate with Iranian insurers to provide partial coverage for voyages to/from Iran, Shipping Ministry sources said it could also ask the Finance Ministry to take up the matter with PSU insurers.
(Exim India)

SHIPPING, TRADE AND TRANSPORT
Baltic index slips on weaker capsize and panamax rates

Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Wednesday on lower rates for capesize and panamax vessels. The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, fell 6 points or 0.83 percent to 718 points.

The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, has fallen about 59 percent this year.
Mr Andy Jamison, shipping blogger and owner of the Virtual Shipbroker said that "Overall the sentiment is still bad across all sectors. Despite record scrappings, the order books remains very large and most of the world remains either in recession or on the cusp.”

"The entire industry should also be worried about the move away from coal as a energy source toward gas and natural solutions. This will no doubt continue to have huge consequences on dry bulk vessel demand into the mid and distant futures."

The Baltic's capesize index dipped 5 points or 0.42% to 1,177 points. Capesizes typically transport 150,000 tonne cargoes such as iron ore and coal.

Average earnings for capesizes, which have fallen about 88% so far this year, was up $21 to USD 3,296 on Wednesday.

RS Platou Markets analyst Frode Morkedal said in a note that "Brokers explained the increase in rates on tighter vessel supply as bad weather and typhoons led to delays, forcing the miners to pay up for prompt tonnage.”

(Steel Guru)

Inland waterways transport: Could provide long term cargo commitment for fertilizer transportation
So far, fertilizers have been transported both by rail and road. The good news is that the ministry of shipping is contemplating to transport them through inland waterways as well.
During a meeting recently taken by Secretary (Shipping), it was decided that IL&FS-IDC is set to carry out a feasibility report to examine the techno-commercial viability of transportation of fertilizers on national waterway-1 (NW-1) If the viability is established, IWT could provide long term cargo commitment through the route for fertilizer transportation.
It was decided during the meeting that the feasibility study, the cost of which would be jointly funded by IFFCO, Tata Chemicals Ltd and IWAI, would be completed by November, 2012.
It may be mentioned that the existing subsidy for transportation of fertilizers by IWT mode is at par with that by rail and road.

(India Fertiliser)

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