Author Archives: TC Malhotra

Government-owned Indian Rare Earths Ltd. (IREL) has applied for approval from the Odisha state government for rare earth mining on a coastal stretch, reports Business Standard.

All rare earth prices tracked by the MetalMiner IndX℠ did not move on the weekly Rare Earths MMI® price index this week.

The newspaper report quoted chairman-cum-managing director of IREL, R.N. Patraas, saying that they have submitted an application to the Odisha government seeking a prospective license for rare earth mining in the coastal areas of Bramhagiri in Puri district.

According to the report, the company seeks mining rights on an area of more than 2,500 hectares.

The Atomic Minerals Directorate for Exploration and Research (AMDER) in Hyderabad, in the south Indian state of Andhra Pradesh, which falls under India’s Department for Atomic Energy (DAE), has conducted surveys that show large deposits of rare earth minerals in the coastal stretch of Puri.

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The government-controlled Orissa Mineral Development Corporation Limited (OMDC) has announced a plan to raise its iron ore and manganese ore production capacity to 10 million tons per year and one million tons per year, respectively, by 2015-16, reports Business Line.

OMDC, a subsidiary of Rashtriya Ispat Nigam Limited (RINL), has six mining leases with estimated reserves of 206 million tons of iron ore and 44 million tons of manganese ore.

Government-owned Eastern Investments Ltd. (EIL) is the holding company of OMDC, while RINL is the holding company of EIL.

In January 2011, RINL acquired a 51-percent stake in EIL, a holding company for OMDC and Bisra Stone Lime Corporation (BSLC), both mining companies holding iron ore, limestone, dolomite and manganese ore reserves.

Reports suggest that the iron ore output in India’s top-producing eastern state Odisha has slipped by 18 percent. Even still, the high and low prices of iron ore 58% fines from India have ranged between $130 and $135 per dry metric ton for the past several weeks, according to the MetalMiner IndX℠.

The iron ore production in the state declined nearly one-fifth to 60 million metric tons during 2011-12 against 73 million tons reported in the previous financial year.

Odisha produced about 75 million tons in 2010-11, a third of the country’s annual output of about 218 million tons.

A clampdown on iron ore mines has brought down the country’s total output for 2011-12. According to latest figures compiled by the Indian Bureau of Mines (IBM), as against 208 million tons produced during 2010-11, the output for 2011-12 stood at 169.6 million tons.

According to IBM figures, Karnataka has seen the highest drop in production. As against 37 million tons, produced last year, the state’s output was only 13 million tons.

Maharashtra, which has a minor contribution, produced 1.4 million tons, but Chhattisgarh produced 30 million tons, recording a growth of 5 percent against the previous year. Goa produced 34 million tons, against 36 million tons in the year before.

Meanwhile, India had produced 2.8 million tons of manganese ore and imported 1.3 million tons in 2010-11. Exports were at a little over 800,000 tons.

The shortage of iron ore in India started after a decision by the Indian Supreme Court last August. The Court had banned mining operations in Karnataka following the recommendations of the Central Empowered Committee.

However, in April this year, the court partially lifted the ban and it is believed that iron ore production by privately owned miners in Karnataka will likely resume by July 2012.

Karnataka accounts for a quarter of India’s iron ore output. The state produces 16 million tons of iron and steel in a year, which is a little less than 25 percent of the country’s total production.

Until last year, India had an iron ore surplus reversed, but now the country has slipped into deficit.

Recently, India has also registered a decrease in exports of iron ore, having exported 117.3 million tons in 2009-10. Exports had dipped by over 36 percent to 56 million tons in the April-February period last fiscal year against the prior year.

 

The Indian federal government has plans to launch its first auction of a shale gas block by the end of 2013, reports The Economic Times.

According to the report, the auction of shale gas will be on terms that are likely to be remarkably different from those offered in bid rounds for oil and gas blocks.

Reports suggest that apart from going in for the open acreage system for auction of the shale gas blocks in various parts of the country, the federal government is likely to allow 100 percent participation of foreign companies in the proposed auction.

The ET report says that the Directorate General of Hydrocarbons (DGH), the technical arm of the Indian Petroleum and Natural Gas Ministry, has proposed to offer areas for exploration of gas trapped in sedimentary rocks — shale gas — on royalty and production-linked payments to the government.

It is believed that under the proposed new shale gas policy, the Ministry for Petroleum and Natural Gas will hold consultations with other ministries such as Law and Justice, Finance, Environment and some others before finalizing a model contract.

Media reports suggest that the contractor will be exempted from payment on shale oil and no cost recovery will be initiated.

However, bidders would be asked to quote a percentage of output they are willing to share with the government at different production slabs.

The DGH has identified six basins under Phase 1 — Cambay, Gondwana, Assam, KG onshore, Cauvery onshore and Indo-Gangetic basins.

The DGH has said in its note that preliminary estimates suggest that fairly thick sequences with high shale gas potential are present in the oil, gas and coal sedimentary basins such as Cambay, Gondwana, Krisha-Godawari on land and Cauvery on land.

ONGC and the Central Mine Planning and Design Institute (CMPDI) are in the process of identifying 11 more basins for shale gas.

Currently, India offers oil and gas blocks under the New Exploration Licensing Policy (NELP). So far, India has completed nine rounds of NELP; the federal government, through international competitive bidding, has awarded 249 oil and gas blocks.

NELP was introduced by India’s government in 1997-98 to provide an equal platform to both public and private sector companies in exploration and production of hydrocarbons with the DGH as a nodal agency for its implementation.

Bidders are facing problems for clearance in various ministries for the blocks offered under NELP.

According to sources in the Petroleum Ministry, out of the 194 blocks under operation, 79 blocks were having clearance issues. Out of this, 74 blocks have been taken up with the Ministry of Defense.

Under NELP, companies share profit with the government only after recovering all their investment. However, DGH proposed a fiscal regime for shale gas and oil on lines that exist in coal bed methane (CBM) contracts where the government gets royalty and production-linked payment.

Shale oil and gas are unconventional hydrocarbons reserves found in non-porous rock and require fracking technology to extract them from shale.

Some surveys and studies have put recoverable reserves of shale gas between 6 trillion and 63 trillion cubic feet.

TC Malhotra contributes to MetalMiner from New Delhi.

Following up on yesterday’s MetalMiner piece, Ratan Tata, Tata Steel’s chairman, has predicted a challenging year for his company’s profit growth ahead with the negative impact of its European operations, reports The Hindu.

According to the report, the company is increasingly looking at Asia, Africa and Latin America where the real growth will most likely be, Chairman Ratan Tata said in the company’s annual report, referring to the fall in steel consumption in European countries.

For Tata Steel, sales volume in Europe remained flat through the year at around 3.5 million metric tons per quarter. For Tata Steel, while India contributes 27 percent of the revenue, the UK accounts for 26 percent and the European Union (excluding the UK) 29 percent.

“Steel plants are being closed or moth-balled to conserve costs and to control over-supply,” Tata was quoted as saying in the company’s annual report, referring to the steel consumption slump in the West.

“By contrast, the demand for steel is still buoyant in Asia and Africa where growth rates and investment levels are higher than the West and where new sources of iron ore and coking coal are being developed,” he was quoted as saying.

Tata said that by 2014, Tata Steel would have a global capacity of 33.5 million tons adding another three million tons on full implementation of the Odisha project. The 2.9 million-ton expansion project in Jamshedpur is likely to go on-stream within this fiscal year, taking Jamshedpur’s capacity to 9.7 million tons. Tata Steel’s new 6 million-ton-per-year plant in Odisha is under construction.

According to the company’s website, Tata Steel was established in Jamshedpur, India, in 1907. In the past few years, Tata Steel has invested in Corus (UK, renamed Tata Steel Europe), Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings (Singapore). With these, the company has created a manufacturing and marketing network in Europe, South East Asia and the Pacific-Rim countries. It has the capacity to produce over 30 million tons of crude steel every year.

Tata Steel has also set up joint ventures for the development of limestone mines in Thailand, the procurement of low-ash coal from Australia and coking coal from Mozambique, and the setting up of a deep-sea port in Orissa in India. The company is exploring opportunities in the titanium dioxide business in Tamil Nadu, India, and will soon be producing high-carbon ferrochrome from its plant in South Africa.

Tata Steel Europe is Europe’s second-largest steel maker with major operations in the UK and continental Europe.

 

A panel of experts has recommended capping iron ore mining in the Goa state to between 20 and 25 million metric tons a year for the next five years, nearly half of what the state currently produces and exports, reports Business Line.

According to BL, the panel, headed by renowned scientist Raghunath Mashelkar, in its Goa Vision 2035 report, advised that the cap on mining should be between 20-25 million tons a year, exclusive of the mining dumps.

Goa Vision 2035, prepared by the Golden Jubilee Development Council and presented to the Goa state government, would be kept open for public comments for two months.

A sub-group on environment and sustainable development led by ecologist Madhav Gadgil recommended the mining threshold. Reports suggest that the development council said the cap should be imposed from 2012-2017, and reviewable thereafter.

The 20-25 million-ton threshold is based on a detailed TERI exercise that covered mining in the state, but showed adverse impact on air quality, agricultural output, loss of land and water pollution.

Goa, the country’s biggest exporter of iron ore, has projected a 30 percent reduction in exports this year after several mines faced stringent regulations. According to Business Line, the state has shipped 43.5 million tons of ore during the last fiscal year, much less than compared to the 54 million tons exports in the earlier financial year.

It is widely believed that India’s iron ore exports are set to fall to a new low this financial year, because of shortages of the iron ore in the key Indian states of Karnataka, Odisha and Goa. Analysts say high export duty and differential railway freight is also a reason for low iron exports this financial year.

Available figures suggest that compared to 2011-12, which witnessed a year-on-year decline of 38.5 percent in exports at about 60 million metric tons, the current year (2012-13) may see an all-time low of 45-50 million tons.

As MetalMiner has reported before, iron ore exports from Karnataka have been stopped since July 2010. The state government had imposed a ban following large-scale illegal export.

Market observers believe that Odisha, which accounts for a nearly a third of the country’s iron ore output, is also likely to see a slump in production and export this year.

Meanwhile, reports say that the Goa state government has ordered a ban on transportation of iron ore during the current monsoon season (from July to September). The ban has affected the business of steel mills and iron ore companies in Goa state as well as in other parts of the country.

Realizing the effect of the ban on its business activities, Sesa Goa Limited, a subsidiary of Vedanta group (now officially subsumed into Sesa Sterlite) has urged the state government to lift the ban on transportation of iron ore during the monsoon.

Sesa Goa decided to shut down operations at its two plants in Goa because of the ban. A company spokesman was quoted by media reports as saying that the pig iron plant and metallurgical coke plant situated in Amona village of Bicholim Taluka are slated to be shut down.

The company said the plants are being stopped as they are not able to get iron ore from Sesa’s own Codli mines in South Goa after the district collector stopped transportation of iron ore.

Asian giants China and India have shown signs of slowing economies as both countries have registered lower growth in car sales.

India’s industry body, the Society of Indian Automobile Manufacturers (SIAM) has reported a lowered car sales growth forecast, down to 9 to 11 percent for this fiscal year; however, it has said that utility vehicles continue to be the superstars of India’s car market with growth projections set as high as 29-31 percent for 2012-13, reports The Hindu.

According to the report, SIAM says that the passenger car segment is now likely to grow by 9-11 percent in 2012-13, instead of 10-12 percent projected three months earlier.

S. Sandilya, president of SIAM, told media at a press conference in New Delhi that during the April-June 2012 period, passenger car sales increased 5.22 percent to 4,90,802 units, as against 4,66,452 units in the year-ago period.

However, Sandilya said if there is no further hike in fuel prices and interest rates, the passenger car segment is likely to see higher growth.

Higher bank interest rates for vehicle loans and high fuel prices have affected car sales in India during last few months.

According to a statement issued by SIAM, the overall commercial vehicles segment registered growth of 6 percent in April-June 2012 as compared to the same period last year when the segment registered a growth rate of 14 percent. While medium & heavy commercial vehicles registered negative growth, down nearly 12 percent, light commercial vehicles grew at 20 percent.

Three-wheeler sales recorded marginal growth at 0.83 percent in April-June 2012 against 4.92 percent during April-June 2011. Passenger carriers grew by 5.66 percent during April-June 2012 and goods carriers registered a 15 percent fall during this period, according to the SIAM statement.

From April-June 2012, overall automobile exports registered a 1.2 percent decline. Passenger vehicles, commercial vehicles and two-wheelers grew by 14 percent, 8 percent and 2.63 percent respectively in April–June 2012, the SIAM statement read.

Meanwhile, reports suggest that China’s automobile sales growth has also lost further momentum as that country has also shown slower growth in its economy.

Citing a statement issued by the China Association of Automobile Manufacturers (CAAM), Reuters reported that overall sales in China, including those of passenger cars and commercial vehicles, grew 2.9 percent in the first half from a year earlier to 9.6 million vehicles.

Reuters quoted Kevin Wale, GM’s China head, as saying that General Motors, China’s largest foreign automaker, boosted vehicle sales 10 percent to 213,495 units, led by demand for its Buick sedans and Wuling minivans.

Demand from consumers in China’s interior provinces will help sales growth remain steady in the second half of the year, Kevin Wale was quoted as saying.

According to Reuters, CAAM expects vehicle sales in 2012 to grow 5-8 percent, maintaining the association’s forecast for the year.

Reports suggest that Chinese economy slowed to the lowest rate in three years and Indian GDP fell to the slowest growth rate in two years.

TC Malhotra contributes to MetalMiner from New Delhi.

JSW Steel, India’s largest private sector steel manufacturer in terms of installed capacity, plans to raise crude steel production 20 percent to 22 percent — to about 9 million metric tons — during 2012-13, reports Business Standard.

According to the report, for the year ended March 31, the company has recorded steel production of 7.43 million tons and 7.82 million tons of sales, against a revised guidance of 7.5 million tons and 7.8 million tons, respectively. The company has set a guidance of producing 8.5 million tons and selling 9 million tons of steel in 2012-13.

The company’s performance stands despite severe iron ore shortages in the south Indian state of Karnataka. The iron ore shortage happened mainly because last year the Supreme Court of India banned illegal mining activities in Karnataka.

However, even though the ban has been partially lifted since last April, the company is still facing shortages of its key raw material, iron ore.

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In an attempt to earn higher profits, iron ore miners in the south Indian state of Karnataka new seek new opportunities for exports, this time in the form of pellets according to the Business Standard.

As the Indian federal government has waived the entire 15 per cent duty on export of iron ore pellets, not surprisingly, many miners have begun to consider the possibility of diversifying into the manufacturing and export of pellets. The news story suggests that domestic steel plants also face supply problems of iron ore lumps even as some steel manufacturers have started buying pellets from overseas sources of supply.

Until last year, Karnataka, a leading state for steel and iron ore miners had led India to an iron ore surplus only to have that lead now reversed. Steel mills and iron ore miners in Karnataka state as well as in the other parts of the country, not only face a shortage of iron ore but they have also suffered from lost profits. As a result, steel mills and iron ore miners have pursued other options to increase their profits. The primary method obtaining profits involves making and exporting pellets.

Reports suggest that the production of iron ore in key Indian states has declined and the country has produced only 208 million tons of iron ore in 2010-11 compared with 218.5 million tons in 2009-10. Subsequently, India has also registered a decrease in exports of iron ore. India, the third-largest global exporter of iron ore in the world, had exported 117.3 million tons in 2009-10. The exports had dipped by over 36 percent to 56 million tons in the April-February period last fiscal year against the prior year.

The shortage of iron ore came as a result of a decision by the Supreme Court of India last August to ban the illegal mining activities in the southern state of Karnataka. The Court had banned mining operations in the state following the recommendations of the Central Empowered Committee. However, in April of this year, the court partially lifted the ban and some believe that privately owned iron ore miners in Karnataka state will likely resume operations by July 2012. The southern state of Karnataka accounts for a quarter of India’s iron ore output. The state produces 16 million tons of iron and steel in a year, or a little less than 25 percent of the country’s total production. Regarding pellets, Karnataka state currently contributes about 36 per cent of the national production of pellets.

Pellet production capacity in India will likely reach 70 million tons (mt) this year and 90 million mt by 2014. Pellet capacity has increased both from green field and brown field projects undertaken by existing pellet plants and integrated steel mills. Available figures suggest that global pellet production last year hit  400 million mt and in 2010, 388 million mt. According to the Business Standard seven pellet-making plants operate in Karnataka state with an installed capacity of 15.4 million mt. India’s export of pellets in 2010 stood at 3.7 million mt. However, export of pellets from India will likely increase considerably with the waiver of duty on the export of iron ore pellets.

Market observers like the notion of zero duty on pellet exports because it will motivate more companies to set up plants in the country. Some now believe that companies will look to set up bigger pellet plants to sell raw materials internationally.

 

Indian steel companies are trying to quickly sign long-term contracts to import coal at prevailing rates because they think that the coal prices in the international market may increase soon, according to a Business Standard article.

According to the reports, currently coking coal prices in international markets are down by some $10-$15 per ton to $220 a ton, as supplies from Australia have improved recently.

Citing commodity and currency analysts, the report says that Indian steel producers already have agreements for coal in overseas countries. A few steelmakers have even acquired coal blocks in other third-world countries to secure the primary fuel for their steel mills.

On the domestic front, the state-owned Coal India Limited (CIL) is the only source for coal supply for steel mills, power producers and other industries.

Power companies are the biggest consumers of coal in India and these companies are already facing huge fuel shortages. India is the third-largest producer of coal, but the CIL is unable to fulfill the demand — the coal miner is under pressure because of a huge demand/supply gap which has only increased on a year-to-year basis over the last several years.

According to rating agency ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited), the domestic demand-supply gap of coal may considerably widen in the medium- to long term.

As per India’s Annual Plan 2011-12, the total indigenous coal supply is planned at 559 million metric tons as against the estimated demand of 696 million tons.

However, at present, Coal India produces 436 million tons of the fuel and plans to enhance this capacity to 464 million tons by the end of the current financial year (2012-13).

It is believed that the gap in demand and supply from domestic sources would exceed 200 million tons by 2017, at the end of a five-year plan period.

Reports suggest that India could import about 114 million tons of coal in 2011-12. India bought about 82 million tons of coal in 2010-11.

Against the overall coal import target of 142 million tons this year, the power sector has been given a target of 55 million tons, and the steel sector 30 million tons.

India imports coal from Indonesia, Australia and South Africa. Until recently, Indonesia was the preferred choice for coal imports by the Indian firms, but as the new coal policy in Indonesia has revised prices, the Indian companies are trying to find other sources.

Now most Indian steel and power companies are looking toward Australia and South Africa for their coal imports. After recovering from flood situations and strike problems, Australia is offering attractive coal prices.

Reports suggest that India currently imports some 30 million tons of coking coal every year, but forecasts suggest that during 2012 and into 2013 imports would top 35 million tons.

TC Malhotra contributes to MetalMiner from New Delhi.

Indian steel companies are likely to start importing iron ore pellets to meet their raw material requirement for their plants as domestic iron ore production is declining, reports Business Standard.

According to the report, the iron ore output in India’s top producing eastern state Odisha has slipped by 18 percent.

The report further stated that the iron ore production in the state came down by nearly one-fifth to 60 million metric tons during 2011-12 against 73 million tons reported in the previous financial year.

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