VITAL INDUSTRY UPDATES – 21/04/2015

April 21, 2015 3:30 pm Published by

Coal, Railway Ministries, Odisha Govt sign MoU to form new joint venture

The Coal Ministry, Railway Ministry and Government of Odisha signed a memorandum of understanding on Monday to form a joint venture which identify and execute railway line projects for evacuation of coal in the State.

Coal India will hold 64 per cent stake in the joint venture while the Indian Railways will hold 26 per cent and the Odisha Government will hold 10 per cent.

“Speedier execution of projects through an independent corporation is the way forward. This is purely profit making venture which will help Coal India produce more and sell more coal,” said Minister for State (Independent Charge) Power, Coal and New and Renewable Energy, Piyush Goyal.

Coal Secretary, Anil Swarup added that the basic structure of the MoU will be used for similar collaboration with other states. Another MoU with Jharkhand is expected to be signed shortly.

“The new joint ventures will undertake the projects through project specific special purpose vehicles,” he added.

Steel industry’s 2014-15 Q4 earnings look bleak

The fourth quarter earnings of domestic steelmakers in 2014-15 are likely to be bleak as the industry continues to grapple with weak domestic demand and cheap imports.

Steel imports are expected to be at a record 9.31 million tonnes in 2014-15, surging 71 per cent over the previous fiscal year.

“Imports, coupled with subdued domestic steel demand growth, have worsened the weak steel pricing environment. Steel prices in India have declined by around 19 per cent in the past six months,” said Abhay Lijawala, Research Analyst at Deutsche Bank Market Research.

Industry officials estimate that the average realisation or the average price of steel has fallen by ₹1,500-2,500 a tonne due to weak global prices.

“Despite the fall, domestic steel prices are around 10-11 per cent higher than the landed cost of imported steel. Therefore, unless there are some import curbs, things won’t change much going forward,” said a senior official at a Mumbai-based steelmaker.

Cheap ore to blame

Indian steelmakers have been impacted indirectly due to the sharp fall in iron ore prices and depressed global steel rates. The two factors have made imports cheaper than the domestic product.

Ironically, larger companies such as SAIL and Tata Steel have not been able to capitalise on lower global iron ore prices as they rely on captive iron ore.

Kawaljeet Saluja of Kotak Institutional Equities expects non-integrated steel companies such as JSW Steel to benefit. The Sajjan Jindal-promoted company does not have captive iron ore and has benefited from cheaper iron ore imports.

The weakness in the domestic markets is expected to continue both on the iron ore side and in the prices of finished steel.

Saluja said in a recent report that with iron ore prices falling 21 per cent to $48 a tonne in the last month, the global market will remain oversupplied as four large miners will add over 200 million tonnes per annum of incremental supplies over the next 2-3 years.

He added that the slowdown in China will impact steel prices, which will create further room for price cuts from Indian steelmakers unless the government curbs steel imports by hiking import duty.

 

Third round of coal mine auction likely next month

 

The third round of coal block auction may get off the ground next month, a top official said today.

“The third round of coal mines auction may begin in May,” Coal Secretary Anil Swarup said here.

The government may come out with a notice inviting application for the mines for the next round of auction next week.

The ministry may put up 23 blocks this time. The government had earlier said the auction for the third round will begin later this month.

“Most of the clearances of the coal blocks (to be auctioned in the third lot) are there,” he had said.

Swarup had earlier tweeted that states will receive Rs 466 crore as first tranche while the Centre will not keep any revenue from this upfront payment by bidders.

The government has garnered over Rs 2 lakh crore by auctioning off 29 blocks in two phases, surpassing the presumptive loss of Rs 1.86 lakh crore estimate ..

Posco, SAIL in talks for setting up a steel plant: Government


Talks are on between South Korean steel major Posco and state-run domestic giant SAIL to set up an integrated steel plant, the government today said.

“SAIL and Posco recently discussed possible collaboration opportunities including setting up of an integrated steel plant,” Minister of Steel and Mines Narendra Singh Tomar told Lok Sabha in a written reply.

“The discussions are at a very preliminary stage,” he added.

 

On Posco’s USD 12 billion Odisha project, considered the largest FDI in India, Tomar in his reply said, “The Memorandum of Understanding (MoU) of Posco, for setting up of a mega steel plant at Jagatsinghpur in Odisha has not yet been renewed by the State Government.”

The steel maker’s proposed project in Odisha has been stalled for about a decade on account of regulatory hurdles, including delays in land acquisition.

 

With this project for producing 12 million tonne per annum (MTPA) steel stalled for long, Posco has been exploring other investment opportunities in India.

Sources said that Posco and SAIL are in talks to jointly set up a 3 million tonnes integrated plant in Jharkhand, after their initial talks could not materialise.

The world’s fourth largest steel firm’s CEO Kwon Oh-Joon, India CMD Gee Woong Sung and Korean Ambassador Joon-Gyu Lee had met Prime Minister Narendra Modi in January and are believed to have discussed new investment plans.

Earlier, negotiations between SAIL and Posco for steel plant at Bokaro had failed on the ownership issue. Posco was demanding a majority stake which SAIL had refused. As a result a pact between them for the project did not materialise.

Posco had entered into a pact with Odisha government on June 22, 2005 for setting up the plant.

Besides these delays, in a blow to the company, earlier this year the Centre said Posco would be have to participate in auction to procure iron ore mines to feed its facility instead of direct allotment assured earlier.

Earlier, Tomar had said the firm, which was assured Khandadhar iron-ore mine via dispensation route, will have to participate in the auction process to get a mining lease.

Posco was previously promised the Khandadhar iron ore mine by the state government for its mega steel plant, but the actual allocation never happened due to delays in regulatory approvals.

Although the company has an MoU with the Odisha government for assured allocation of mining leases, the passage of the Mines Bill has mandated the allocation of all mines through auction route only and the agreement with the state government is not binding.

 

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This post was written by Atlantic Admin