Essar Steel commissions 6 mtpa pellet plant in Odisha

OUR BUREAU, THE HINDU BUSINESS LINE
MUMBAI, NOV 27:
Essar Steel has commissioned a six million tonne per annum (mtpa) pellet plant at Paradeep along with iron ore beneficiation facility at Dabuna (both in Odisha). A slurry pipeline of 253 km has also been put in place to transfer beneficiated iron ore to the pellet plant, said the company in a statement on Thursday.

Essar Steel had invested Rs. 6,000 crore in setting up this integrated complex which was executed by its group company Essar Projects.

The company plans to increase the pellet capacity at Paradeep by another six mtpa soon with corresponding rise in beneficiation plant, taking the annual pellet production capacity in Odisha complex to 12 mtpa.

Pellets are a critical raw material and finds use in all iron making processes including blast furnace, Corex and DRI (direct reduced iron).

With the commissioning of the integrated plant, Essar Steel has become the largest pellet producer in India with an annual production capacity of 14 mtpa which includes eight mtpa at Vizag and rest in Paradeep.

Captive infrastructure

The Odisha pellet complex is backed by infrastructure that includes a 120 MW power plant and a captive berth at Paradeep port. This apart, the pellet plant is connected by a 9.5 km conveyor belt to the fully mechanised berth at Paradeep port operated by Essar Ports.

A major portion of iron ore produced in Odisha is in the form of fines which can be used in iron making only after converting into pellets.

'India lagging behind in exploiting bauxite reserves'

OUR BUREAU, THE HINDU BUSINESS LINE
VISAKAHAPATNAM, NOV 27:
India is lagging behind in exploiting its bauxite reserves and in aluminium production due to certain "misplaced concerns" over ecological issues and due to other factors, according to several experts in the field.

They were speaking here at the inaugural of the three-day international seminar on bauxite mining and aluminium production organised by the International Bauxite, Alumina and Aluminium Society (IBAAS) in association with several other organisations. Over 200 delegates, several from abroad, attended the seminar.

Vedanta Resources CEO Tom Albanese in his key-note address said India was lagging behind in exploiting its bauxite reserves, though the country had quality bauxite ore in Andhra Pradesh and Odisha in the eastern ghats. He blamed it on certain negative propaganda and misplaced concerns over ecological issues. Even though technologies were available for sustained exploitation of the reserves and development of the industry in an eco-friendly fashion, these notions were persisting to the detriment of the growth of the industry. The industry should make sustained efforts to dispel these notions.

He said raw material security was the key factor worrying those seeking to invest in the aluminium sector and steps should be taken to address the concerns.

H. Mahadevan, the president (projects) of Anrak, said that red tapism and "misplaced commotion over red mud and other so-called ecological issues" were impeding the aluminium refinery projects and bauxite mining in the eastern ghats.

He said there would always be "a certain degree of ecological disturbance engendered by any sort of mining, but as long as there is no long-term ecological degradation, the activity should not stopped on that count and it should be carried out withl long-term and sustainable safeguards and precautions."

Describing aluminium as a green metal, he said it had definitively been proven that there would not be any long-term eco degradation in the area under bauxite mining and "in fact usually in the area where bauxite reserves are found there is not much greenery and the groundwater level is also negligible. After mining the greenery improves in the area and groundwater level also increases."

He also said aluminium can be recycled infinitely, and with low energy consumption, and "therefore it will not be lost to the posterity." He said of the ten projects sanctioned in the Eastern Ghats, "only one is fully operational and two are partly operational and the rest are languishing due to various reasons. It is regrettable."

He said it was also the responsibility of the industry to dispel these concerns about ecological issues and enlist the co-operation of the local communities to undertake bauxite minining on a long-term basis and in a sustained manner. He emphasised the need for value-addition and setting up the most modern refineries.

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Iron-Ore Giant Vale Sees Rebound as Glut Squeezes Mines

By Juan Pablo Spinetto and Peter Millard  Nov 27, 2014
Bloomberg
Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE)

The steelmaking raw material, which has slumped 49 percent this year to $68.49 a dry metric ton, will return to an average range of $85 to $90 next year, Vale Chief Executive Officer Murilo Ferreira said in an interview yesterday.

The company isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.

“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”

Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 22 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.

The raw material slid below $70 on Nov. 25 for the first time since June 2009 amid concern slower Chinese growth will curb demand from the biggest iron-ore consumer. The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimates.

Price Struggle

“China mines produced about one-third of the country’s iron ore needs and any significant decline in output would be welcomed by the global industry, which has struggled with much lower pricing,” Bloomberg Intelligence analysts Kenneth Hoffman and Yi Zhu wrote in a Nov. 21 report.

About 140 million tons of export supply growth is forecast for next year, including 30 million tons from Vale, Citigroup Inc. said Nov. 11. The bank sees prices collapsing to less than $60 next year as output climbs and demand remains weak.

Shares of Vale dropped 4 percent to 19.75 reais in Sao Paulo yesterday after slumping to an eight-year low on Nov. 18. The stock lost 40 percent during 2014, the worst performer among the world’s top mining companies.

Pressing Ahead

While iron-ore prices may “eventually” surpass $100 next year, they won’t trade at that level on a sustainable basis, Ferreira said. The company had said as late as July that prices of $110 were sustainable in the longer term.

“Supply came in faster than we expected and the world’s demand was less exuberant than what we expected,” said Ferreira, who in May will cap four years at the helm of the world’s largest iron-ore producer.

“Several” iron-ore producers can’t sustain operations for a prolonged period of time with iron ore below $90 a ton, Ferreira also said in the interview. The company is concluding most of its ventures with the exception of Serra Sul S11D in Brazil, which will have the industry’s lowest cost, he said.

“We are not considering delaying any project,” he said. “We finished some in 2013, some others in 2014 and a few more in 2015. We have only S11D remaining and that one is untouchable.”

A lighter project load, currency depreciation and better negotiating conditions with suppliers will allow the company to present next week a lower budget plan for 2015 compared with this year, Ferreira said, declining to discuss specific targets. The miner is working to announce “a good deal” before the end of the year, the executive said, declining to give details when asked about possible assets divestment.

Vale is scheduled to discuss its strategy, including next year’s budget and output targets as well as project updates, at meetings with investors in New York and London on Dec. 2 and Dec. 5, respectively.

**

Shortage of 81 mn tonnes of domestic coal for power sector

For the ongoing fiscal the country's coal demand has been assessed to be 787.03 mn tonnes
Press Trust of India  |  New Delhi  November 27, 2014
There is an overall shortfall of about 81 million tonnes of domestic coal that is needed for the power sector, the government said on Thursday.

"There is an overall shortage of approximately 81 million tonnes of indigenous coal for power sector," Coal Piyush Goyal said in a written reply to the Lok Sabha.

The coal requirement of plants designed on indigenous coal is 554 MT, while the total availability is only 473 MT, he said.

Goyal added that in order to ensure adequate availability of fuel to power utilities, Coal India Ltd has been asked to enhance production of domestic coal and the power utilities have also been advised to augment import of coal to meet the shortfall in domestic availability of coal.

He said that in the ongoing fiscal the country's coal demand has been assessed to be 787.03 MT, while the supplies from indigenous sources has been planned at 643.75 MT, leaving a gap of 143.28 MT to be met through imports.

With a view to monitoring coal supplies to the power sector, an inter-ministerial sub-group consisting of representatives from the ministries like power and coal has been formed.

"The sub-group takes various operational decisions for meeting any contingent situations relating to power sector, including critical coal stock position," Goyal said.

CME Group to Start New Iron-Ore Futures Contract From December

By James Poole  Nov 24, 2014
Bloomberg
CME Group Inc., the world’s largest futures market operator, will start trading iron ore with 58 percent content from next month, it said in a statement.

The cash-settled contract will have January 2015 as the first listed month with a size of 500 dry metric tons and pricing based on ore delivered to China, it said.

Iron ore derivatives with 62 percent content already trade on the Singapore Exchange, the Dalian Commodity Exchange and the CME. The steel-making raw material capped the fifth straight weekly drop on Nov. 21 with prices trading near the lowest since 2009 on concern that slowing growth in China will hurt demand as rising low-cost supply deepens a global surplus.

“It’s obvious the bourse wants to fill in a blank in exchange-traded ore derivatives, since Dalian and Singapore only offer products related to 62% ore,” Wu Yichao, general manager at investment firm Beijing Liaosu Development Trading Ltd., said from Beijing. “Its success won’t be a given since most investors looking to hedge or speculate perhaps still prefer the benchmark 62% in line with most physical supply.”

The Singapore Exchange plans to start two cash-settled contracts for 58 percent ore delivered to China in early 2015, the bourse said on Oct. 24.

“The commodities boom in Asia has created an increased need for risk management,” said William Knottenbelt, Senior Managing Director, International at the CME.

Ore with 62 percent content delivered to Qingdao lost 6.8 percent last week, dropping to $70.20 on Nov. 19, the lowest level since June 2009, data from Metal Bulletin Ltd. showed. The price retreated 0.9 percent to $70.31 a dry ton on Nov. 21.

Prices collapsed 48 percent this year as surging low-cost output from Rio Tinto Group in Australia and Vale SA in Brazil spurred the glut. Data from Asia’s largest economy last week showed a drop in new-home prices and rising bad loans. The slump bears out a September forecast from Tom Albanese, former head of Rio Tinto, who said prices would remain weak for a sustained period.

BHP Targets Further Spending Cuts as Iron Prices Tumble

By David Stringer and James Paton  Nov 24, 2014
Bloomberg
BHP Billiton Ltd. (BHP) reassured investors that billions of dollars of planned capital spending and cost cuts will help allow the world’s biggest miner to maintain dividends as iron ore and crude oil prices plunge.

Capital outlays will drop to $13 billion in fiscal 2016, down more than 40 percent from 2012, the company said today. BHP also increased its annual target for productivity gains by 2017 by $500 million.

“We are able to drive productivity both in capital and in our operations at a pace that we can more than counteract the impact of price and ensure that our dividend is covered,” Chief Executive Officer Andrew Mackenzie said today in an interview in Sydney. The dividend, its credit rating and select investments had priority over buybacks, he said.

The tumbling commodity markets meant investors were seeking assurances over dividend payments and the prospect for additional returns, Sydney-based UBS AG analyst Glyn Lawcock said before the briefing.

“They are having to really ramp up their productivity drive a lot faster than I believe they were willing to do,” Evan Lucas, markets strategist at IG Ltd. in Melbourne, said by phone. “They were already looking for a good amount of cost savings, so it shows how much pressure that price is having.”

Spending on projects and exploration will be trimmed to $14.2 billion in the 12 months to June, from a previous company estimate of $14.8 billion. The producer allocated $22.7 billion in fiscal 2012, according its 2012 annual report.

Efforts to lower costs in its iron ore unit have “barely scratched the surface,” Mackenzie told investors and analysts earlier today at a presentation in Sydney.

Biggest Miners

The biggest miners are trimming spending after a decade-long $623 billion investment spree was followed by asset writedowns and management clear-outs. Rio Tinto Group, the second biggest miner, is targeting a further $1 billion in savings by the end of next year, after stripping out $3.2 billion of expenses since 2012, it said in August.

BHP rose 3.8 percent to close at A$32.90 in Sydney, the most in almost three years, as Asian miners surged following China’s decision to cut interest rates for the first time since 2012.

“We always felt that certain interventions would come forward to maintain a decent level of growth in China, so this is pretty much along the lines that we predicted,” Mackenzie said in the interview. He wouldn’t be drawn on whether further rate cuts may be implemented.

The producer raised its full-year dividend for the 12 months through June by 4 percent to $1.21 a share, it said in an August filing. Over the past decade, BHP had returned a total of $64 billion to shareholders through dividends and buybacks, the company said in August.

Investment Assurances

“We will strike the right balance between investment in high-return opportunities and returning cash to shareholders,” Mackenzie said today in a statement.

Oil has dropped about 30 percent from a June peak as the U.S. pumps at the fastest rate in more than three decades, while iron ore is trading around five-year lows as BHP.

Each $1 dollar fall in the price of iron ore cuts net profit after tax by $135 million, while a similar fall in the oil price has a $50 million impact, according to filings.

“In almost any circumstances we can see, we are very comfortable and very confident in our ability to continue to meet that basic commitment we have to our shareholders,” Chief Financial Officer Peter Beaven told investors.

BHP will seek to continue to “run a strong balance sheet, to make sure that we selectively invest for good and importantly keep that progressive dividend intact,” he said.

Trimming Spending

Rio CEO Sam Walsh said in August that the world’s second-largest mining company is on its way to becoming a “cash machine” for investors as an 18-month cost-cutting drive starts to bear fruit.

Iron ore fell on Nov. 19 to the lowest level since June 2009 and has declined 48 percent this year as the biggest exporters, including BHP and Vale SA, have raised output just as demand from China has waned.

BHP said today it’s seeking to raise output at its copper unit, including at Escondida, the world’s biggest copper mine. Constraints on power and water supplies in several countries will probably lead to a significant supply deficit by 2018, the producer said.

Output at the Olympic Dam copper mine in South Australia will increase by about 50,000 metric tons a year in the 12 months through June 2018, it said in the statement.

Dean Dalle Valle, currently president of the coal division will switch roles with Mike Henry, HSE, Marketing and Technology President, next year, the company said.

**

Richest Woman in Asia-Pacific Buys Iron as BHP Says Era Ends

By Jasmine Ng and David Stringer  Nov 21, 2014
Bloomberg
Gina Rinehart, the Asia-Pacific’s richest woman, is set to start exports in September from her new A$10 billion ($8.6 billion) iron ore mine undeterred by prices trading near five-year lows and forecast to extend losses.

“We don’t like the ore price going down, but we’re in the lower quartile” of production costs, Rinehart, chairman of Hancock Prospecting Pty, said yesterday in an interview at the Roy Hill mine in Australia’s iron-rich Pilbara region.

She was talking just hours after Andrew Mackenzie, chief executive officer of BHP Billiton Ltd. (BHP), called an end to the era of “massive expansions of iron ore.” BHP and rivals Rio Tinto Group (RIO) and Vale SA (VALE5) are flooding the global market, spurring a surplus after a $120 billion spending spree to boost the capacity of their mines from Australia to Brazil.

“I don’t think next year would be ideal to be adding new supply,” Daniel Morgan, a Sydney-based analyst at UBS AG, said in a Nov. 17. phone interview. “The market is pretty well supplied for the next few years.”

BHP stock lost 4.7 percent in Sydney this week for the biggest weekly loss since March, while Rio shares fell 6.1 percent. Fortescue Metals Group (FMG) Ltd., the country’s third-biggest shipper, retreated 54 percent this year.

The largest producers are targeting record shipments, betting the increase will offset the plunging prices and force less competitive mines to close, including production in China, the largest buyer of seaborne supplies.

‘Last People Standing’

“Our view is that there’s a sustainable long-term iron ore demand,” Barry Fitzgerald, CEO of Roy Hill Holdings Pty, told reporters. “The market economics will always demonstrate ultimately the high-cost producers will need to exit the market and therefore leave us among the other low-cost producers as one of the last people standing.”

Rinehart, who also owns stakes in iron ore mines operated by Rio Tinto, sold 30 percent of Roy Hill to a group including South Korea’s Posco, Japan’s Marubeni Corp. and Taiwan’s China Steel Corp. The overseas partners will take a share of production from Roy Hill, according to the company website.

“It’s probably been a long-held goal to get something she controls into the market,” UBS’s Morgan said. “She’s obviously got a high exposure to the iron ore market through her other business interests. This is the first time she gets to control an asset.”

Roy Hill

More than 2 million metric tons of iron ore has already been stockpiled at Roy Hill, Rinehart earlier told reporters. Project construction is 67 percent complete, Roy Hill Holdings said in a statement.

“Given we’re already an aggressively scheduled, fast-scheduled project, major project, really complicated project, and to be ahead of schedule has been fantastic,” said Rinehart, whose net worth is valued at $14.6 billion, according to the Bloomberg Billionaires Index.

While sticking with iron ore, Rinehart’s Hancock Prospecting is also diversifying. Unit Hope Dairies Ltd. last week announced a A$500 million expansion into infant formula, with plans for a farm and dairy herd in Queensland, with shipments to be sent to China.

BHP Billiton, which last approved spending on an iron ore expansion in 2011, is shifting investment into copper and petroleum, CEO Mackenzie told reporters yesterday after a shareholder meeting in Adelaide, South Australia.

Bear Market

Ore with 62 percent content delivered to Qingdao in China rose 1.1 percent to $70.97 a dry ton yesterday, data by Metal Bulletin Ltd. showed. The steel-making ingredient retreated 47 percent this year after entering a bear market in March.

Prices will average $65 a ton next year, dropping into the $50s in the third quarter, as global supply increases and demand remains weak, Citigroup Inc. said in a Nov. 11 report.

Roy Hill’s break-even cost is at $56 in terms of ore landed in China with 62 percent content, UBS said in a Sept. 12 report, with figures confirmed by Morgan on Nov. 17. Rio’s break-even cost is $45, BHP’s is $49 and Vale is at $67, according to UBS.

Marubeni isn’t concerned about a writedown on Roy Hill as the mine has a cash cost that’s “well below $50 a ton” in Australia, Chief Financial Officer Yukihiko Matsumura said on Nov. 6. China Steel, which holds a 2.5 percent stake, doesn’t have any plan to change that as of now, Executive Vice President Lin Horng-nan said on Nov. 18. Posco had no immediate comment.

The slowdown hasn’t discouraged Vale, the biggest exporter, which is investing $37 billion on iron ore mining and logistics projects, seeking to boost its output capacity to about 450 million tons by 2018.

Vale’s View

In the long term, the market won’t be oversupplied all the time, Claudio Alves, global director of ferrous marketing and sales at Vale, said Nov. 7.

The global seaborne market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, according to Goldman Sachs Group Inc. The bank declared the “end of the Iron Age” in a September report as a Chinese-led demand surge over the past decade that had brought record profits for producers came to an end.

“The decline next year will be driven mainly by new supply, largely coming from the majors in Western Australia,” Gerard Burg, senior Asia economist at National Australia Bank Ltd. in Melbourne, said by phone on Nov. 17. “Given the lower cost base of those production, we expect that trend to continue.”