Industry updates on 19th April, 2013

Industry Updates on 19.04.2013

JSW Steel, Sesa Goa shares to benefit from SC mining order beginning FY15
Shares of metal companies with mining interest in the state of Karnataka were in action today after the Supreme Court allowed permission to resume operations in category A & B iron oremines.

The apex court has directed 63 mines in category A & B to be reopened for mining. Karnataka's category B mine operations will restart, subject to rehabilitation work.

Meanwhile the court has cancelled all category C mining leases in Karnataka and has directed that no more mining leases will be granted in Karnataka.

According to analysts, while the decision to allow iron ore mining is a positive step, the category B mines will start contributing from FY15. It also needs to be seen whether the iron mines will be able to meet the steel industry demand as category C mines are banned from carrying out mining activity.

"The contribution of the category B mines would be quite minimal in FY14. Second half of FY15 is where we expect most of the volumes to come in. Looking at the category A mines, they were allowed mining in September, but till now only 7 to 8 mines have been able to work of the 18 allowed," said Tarang Bhanushali, Research Analyst, IIFL.

"The procedure would be elongated and hence output from these mines would come only in FY15 and it would be quite minimal in FY14," he added.

Hopes of bonus boost wheat
After witnessing a continuous fall in recent past, dara wheat variety recovered marginally while flour went further down on slack demand on Thursday.
According to the market sources, expectations of a bonus on wheat mainly pushed dara price upwards.
Radhey Shyam, a trade expert, told Business Line that only need-based buying is taking place in the market and wheat prices may continue to rule around current levels for the next few days.
About one lakh bags of dara wheat arrived at the Karnal grain market terminal and procurement was done by the government agencies.
In the physical market, dara wheat price improved by Rs 10 a quintal and quoted at Rs 1,420-1,425.
Mill delivery was at Rs 1,420 while delivery at the chakki was at Rs 1,425.
In the National Capital, a benchmark for the country, wheat mill quality traded at Rs 1,435-1,440, down Rs 5.
Indian iron ore mining mess - SC grants partial relief to miners and steel mills in Karnataka
The Supreme Court bench headed by Justice Aftab Alam pronounced an order, accepting a number of recommendations of the court appointed Central Empowered Committee on green matters given in its various reports from 2011 to February 2013, with following highlights

1. Confirmed its earlier order permitting mining activities in 18 category A mines

2. Lifted the omnibus ban on category B iron ore mines in Bellary, Chitradurga and Tumkur districts of Karnataka and permitted 81 lease owners, who had committed minor violations, to resume mining after compliance of stringent conditions laid down by the courts.

3. The operation of the seven leases placed in B category situated on or nearby the Karnataka-Andhra Pradesh inter-state boundary will remain suspended until finalization of the inter state boundary dispute, whereupon the question of commencement of operations in respect of the aforesaid seven leases will be examined afresh by the CEC.

4. Cancelled all leases for iron ore extraction in 49 category C mines in Bellary, Tumkur and Chitradurga districts. The proceeds from the sale of iron ore extracted from category C mines would stand forfeited and would go to special purpose vehicle constituted for the reclamation and rehabilitation of the mining area devastated by illegal mining.

5. The court vacated its earlier order restraining issuance of fresh mining leases. It said “This court’s order dated 02.11.2012 placing an embargo on grant of fresh mining leases need not be continued any further. Grant of fresh mining leases and consideration of pending applications be dealt with in accordance with law, the directions contained in the present order as well as the spirit thereof.
NSSMC receives orders for steel pipe pile in Australia

Nippon Steel & Sumitomo Metal Corporation and its steel pipe pile joint corporation in Vietnam, Nippon Steel & Sumikin Pipe Vietnam Company Limited have recently received orders for large volumes of steel pipe pile with inner ribs for the INPEX operated ICHTHYS LNG PROJECT which is currently under construction in Darwin, Australia.

Received through a joint effort with METAL ONE CORPORATION, the order covers 18,000 tons. This volume is the biggest for NPV equal to FORMOSA HA TINH STEEL PROJECT in Viet Nam.

NPV, founded through capital participation of 51% by NSSMC, 10% by VIETNAM STEEL CORPORATION, 20% by METAL ONE and 4.75% each by Sumitomo Corporation, Marubeni-Itochu Steel Inc, Hanwa Company, Limited and Nippon Steel Trading Corporation Limited has successfully been operating its plant since the commencement in May 2011. It has already acquired certifications of JIS, ISO9000, ISO14000 and OHSAS18001, an international occupational safety management system and is expected to further enhance its operation system.

In the construction of this project, pillars of the buildings are driven direct into the foundation piles for combination, and a special type of steel pipe piles with projections in the upper inner surface are required. NSSMC have many experiences and records about this special type of steel pipe piles.

So, NSSMC transferred technology to NPV include quality control. NPV’s total capabilities including the procurement of materials from NSSMC have been highly valued.

As conventional method to build foundation for plant, concrete footing process is essential after piling several piles with small diameter. This connecting method
a) Eliminates the need to make a footing

b) Reduces waste soil by utilizing a small number of large diameter piles.

Meanwhile, these characteristics are well-suited to the Australian market which has strict environment regulations and high labor costs.
New World Resources to lower coal production targets for 2013
Czech coal miner NWR said that it would have to revise its full year guidance because a difficult trading environment had hit its operating performance.

It said it would disclose the new target in a timely manner.

Coking and thermal coal production volumes in the first quarter came to 2.1 million tonnes while sales reached 1.0 million tonnes and 1.03 million tonnes respectively. Coking coal sales for Q2 comprised 39% of mid vol hard coking coal, 52% semi soft coking coal and 9% PCI. Coke production was 168,000 tonnes and sales 149,000 tonnes.

The company achieved an average agreed price of coking coal for deliveries in the second quarter of EUR 104 per tonne, a 3.0% increase from the previous quarter. An average price of EUR 60 per tonne was achieved for thermal coal. The average agreed price for coke deliveries in the second quarter of 2013 was EUR 246 per tonne

NWR is cutting back production of all coal because it doesn’t want to increase the unsold inventory of thermal coal it already has sitting around. As per analyst’s, NWR is sitting on a stockpile of some 1.27 million tonnes of it or 25% of all the thermal coal the company expects to produce this year. t currently sells for around EUR 60 per tonne but costs EUR 80 per tonne to pull out of the ground,

NWR had set a coal production target for 2013 at 10 million tonnes to 11 million tonnes. It was also targeting sales of 9.5 million tonnes to 10.5 million tonnes, split equally between coking and thermal coal.

Chinese domestic steel scrap market will rebound later this year - Mr Yan Qiping

Mr Yan Qiping former secretary general of China Association of Metalscrap Utilization wrote recently that the scrap market will rebound as steel industry sees a new round of rise and the trend of development momentum will be demonstrated later this year.

At the same time, he also said that it is not easy for the iron and steel scrap market to reverse rapidly from falling trend, for it involves many factors. However, insufficient inventory in some small steel mills and the demand to replenish it will lead to scrap price slightly rises. While major steel mills of the inventory are enough, they give priority to consume inventory.

He said that “It is beyond dispute that decline in iron and steel scrap application market will gradually stop and the overall slump of development trend will be reversed in 2013.”

In 2013, as the adjustments of national institutions and functions of the government, the advancement of the people's happiness project, the beginning of the Chinese dream and the urbanization will definitely drive the recovery of iron and steel scrap market, he argues. As a result, the domestic iron and steel scrap resources will be tight this year.

He believes that not only self-produced scrap of iron and steel enterprise will continue to grow; unsold iron and steel scrap in 2012 also will replenish the market, which will promote the gradual recovery of iron and steel scrap market.

He said frankly that apart from time, this recovery and reversal needs more attention and hard work.
FMG iron ore shipments in Q1 surge by 60pct QoQ

Fortescue Metals Ltd remains on track to meet its full year iron ore production guidance, after posting a strong lift in first quarter production.

In the three months to march 31, Fortescue's total iron shipments came in at 20.2 million tonnes, a marked 60% lift on the 12.6 million tonnes shipped in the previous corresponding quarter.

Fortescue mined a record 25.3 wet metric tonnes of iron ore in the quarter as its Christmas Creek mine ramped up and operations began at Firetail.

Fortescue said its direct costs averaged USD 43.61 per tonne in the March quarter, an improvement on USD 50.48 in the previous quarter.

Fortescue confirmed its Firetail ore processing facility was on track to ramp up to 20 million tonnes per annum in May, allowing an overall ramp up of Fortescue’s production capacity to 115 million tonne per annum.

It said "Market conditions in China remain strong during the March 2013 quarter supporting Fortescue's confidence in the development of the economy now and into the future. Despite steel inventories being at seasonal high levels, current daily production of steel in China of more than two million tonnes per day is matching demand.”

The miner maintained its production and shipping guidance of between 82 and 84 million tonnes for the full year.

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