Articles in Category: Company News

Continued from Part One.

Vedanta’s Aluminum Operation

Recently, India’s Environment Minister Jairam Ramesh cancelled the approval granted to the Odisha state-owned Orissa Mining Corporation (OMC) for mining bauxite from the Niyamgiri hills in that district, on the grounds that it would affect the environment and ultimately the large tribal population there.

VAL has often claimed that it had set up the refinery on an express assurance by the government that it would ultimately allow VAL to mine bauxite, a crucial raw material for aluminum, from a captive mine.

Now, VAL finds its plans going awry.

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One cannot miss the irony of the fact behind the headline. An international diversified metals and mining company built from the ground up by an Indian, finding it tough to do business in India.

The Indian story of Vedanta Resources, whose resources and assets are spread across India, Zambia, Namibia, South Africa, Australia, Liberia and Ireland, is not unfolding the way it was perhaps scripted in the minds of its chairman, Anil Agarwal.

Agarwal’s story is a typical rags-to-riches tale. From a scrap dealer in a dusty town in Northern India over three decades ago, Agarwal today heads a nearly US $11 billion (in revenue) group, headquartered in London, and part of the FTSE 100 index – the only Indian company to enjoy that distinction today.

Vedanta Group companies are into every kind of geological extraction and metal business – coal, gas, bauxite, aluminum, oil, zinc, copper, and iron ore.

Pretty good show for a scrap metal dealer.

But Agarwal may be a tad disappointed with the way his company’s India story has been unfolding, and occasionally interviews and statements in the Indian press reflect that sometimes.

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"aluminum buyers" drinking champagne

Source: visualphotos.com

You wouldn’t guess from the busy halls of Aluminum 2012, held at Dusseldorf’s vast Messe exhibition center this week, that there was anything amiss with the European aluminum industry.

Aluminum producers are busy entertaining clients, businessmen consuming palpitation-inducing amounts of coffee and brash signage extolling producers’ commitment to the environment, as if anyone really takes any notice.

But dig a little deeper, eavesdrop on some of those conversations and a different picture emerges. One of stagnant growth, extreme caution hampering firms’ expansion plans, a lack of confidence in where markets are going and too many sellers chasing too few buyers.

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Coking coal

Source: sinochen.com.au

The litany of woes for Indian steel manufacturers continues to grow.

Despite local consumption bucking the global pattern (steel prices around the world are down, and continue to go south because of low demand), Indian steel companies are an unhappy lot; and this one story does not seem to be veering towards a happy ending any time soon.

Along with a short supply of local iron ore and the dumping of cheaper steel in the Indian market, steelmakers now have to contend with pricing issues. First, it was the cost of iron ore and now, it is the cost of another crucial raw material – coking coal.

The prices of coking coal have dropped by half this quarter, but are expected to rise in the last quarter of the year, leaving many steel companies now wondering about the kind of impact this will likely have on their financials.

Want the current coking coal and iron ore prices from China?

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South Africa mining strikes map

Source: Kitco News via Forbes

The heads of four top platinum producing companies have picked the absolute worst time to skip town.

The WSJ blog The Source reported that the CEOs of Anglo American Platinum, Lonmin, Aquarius Platinum and Impala Holdings – an exclusive club of the top platinum producers on the planet – have stepped down, with replacements already in place or on the way.

This may seem bad timing, only because after seven weeks of labor unrest, as many as 75,000 miners, or 15 percent of the mining sector workforce, are already out on strike, while a national truckers’ stoppage is squeezing fuel suppliers.

So far about 50 people have been killed and the strikes are spreading from the original flash point of Lonmin’s Marikana platinum mine that we covered last month. Needless to say, supply- and other risk management should be on the collective minds of these companies’ leaders.

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Finally, Chinese steelmakers may be facing up to reality and following their Western brethren in cutting capacity.

Reuters reports that China’s Baoshan Iron & Steel Co. (Baosteel), the country’s biggest listed steelmaker, said it has suspended production at a loss-making plant in Luojing district, Shanghai, in a sign of the intense pressure on the sector as steel prices trade near three-year lows.

To be fair, Luojing has a lot counting against it. The plant bought by Baosteel in 2008 for $2.22 billion was producing 3 million tons per year of steel plates used for shipbuilding, oil rigs and construction, but with sales falling, prices have collapsed.

In addition, the Loujing plant was costly to run because of its technology – the furnaces use the Corex smelting process of gasifying non-coking coal to produce pig iron.

Baosteel has been losing 100 million yuan per month at the plant, but others are expected to follow with Angang Steel also said to be under pressure. Baosteel posted a 53 percent drop in profits during the first half of this year with the second half not expected to be any better.

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Short-term dampeners notwithstanding, one of India’s prime Public Sector Units, Steel Authority of India (SAIL), has decided to embark on an ambitious expansion plan.

Spread over the next five years, the expansion will take up approximately US $12.2 billion, which translates into an approximately 33 percent jump in the company’s planned expenditure compared to the previous five-year plan.

On Saturday, SAIL Chairman C.S. Verma told his shareholders at the annual general body meeting that in FY 2013, his company would be spending about US $2.25 billion. Most of it will be used in capital expenditure, which essentially means setting up more units, optimizing operations, modernization, and so on.

The chairman seemed pretty confident that India’s steel story was poised to grow, driven by the increased investment in infrastructure because of its rapid pace of urbanization.

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India is all set to fire a fresh salvo against China in the battle for rare earths (RE), a group of 17 elements that are used in virtually all equipment that run on modern technology.

By the end of this year, India will make a new mark on the RE global production map when it starts operation on a 10,000-ton monazite processing plant in the eastern state of Odisha.

Monazite is a reddish-brown phosphate mineral, and is an important ore for thorium, lanthanum, and cerium. India has rich deposits of monazite, valued for its relative hardness and density. Along with other rare earth elements, it is used in the manufacture of computer and television screens. Sometimes, because of the presence of thorium within monazite, it can be radioactive.

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Beginning Tuesday, Sept. 4, the September editions of the Monthly MMI® reports will be released on metalminer.com throughout the week.

If you’re not yet familiar with our Monthly MMIs, here’s the rundown:

  • 10 original MMI® Indexes covering markets from aluminum to rare earths
  • Exclusive, previously unpublished MetalMiner analysis and commentary
  • Full, historical charts of MMI® trends
  • We publish the GOES (grain-oriented electrical steel) MMI® the 3rd week of the month.
  • Advance data available for MetalMiner IndX℠ subscribers.

If you have not already done so, be sure to sign up for MetalMiner’s new e-newsletter, GUNPOWDER. The next edition comes out tomorrow – Saturday, September 1, 2012.

Like a phoenix rising out of the ashes, the re-envisioned, revived GUNPOWDER will be emailed bi-weekly to update you on “all things metal” and “all things MetalMiner.” From the top-read stories on our site to the latest available download to a list of the big market movers for the week (via MetalMiner IndX℠ data), we promise to inform your metal sourcing intelligence.

Another added bonus to becoming a subscriber? Personal notes from our team. In this week’s newsletter, you can look forward to reading Managing Editor Lisa Reisman’s reflections on the recent conflict minerals ruling by the SEC.

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