SAIL asked to submit specific proposal on FPO - Report

ET reported that the Indian government has asked the Steel Authority of India Limited to give a specific proposal for its proposed public offering and the PSU's board would discuss the same at a meeting later this month.

The report cited a senior government official as saying that once the specific proposal is submitted it would be taken up with the Finance Ministry as the government is likely to divest part of its holding at the time of public offer.

The official said that "We considered their proposal on FPO and have now asked the company to send us a specific proposal giving all details.”

Asked if the government could divest some of its stake in the company, the official said that "The FPO could be a mix of both, issue of fresh equity from the company and offloading of additional government stake."

Another government official said that "All in all, by undertaking both the measures, government's stake in the company could get reduced by 10%.”

SAIL has sought the steel ministry's approval for a Follow on Offer to part finance its INR 70,000 crore expansion program.

(Sourced from www.steelguru.com)

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Onyx Group to upgrade CHICO facilities

It is reported that the new owner of Sri Lanka’s former Ceylon Steel Corporation said will upgrade the facility to produce TMT steel and will turn around the debt laden steel producer in four years.

The Ceylon Steel Corporation was originally sold to South Korea’s Doosan Group and renamed Ceylon Heavy Industries and Construction Co. Last week the country’s biggest steel producer changed hands again with another load of debts. This time the buyer is a Sri Lankan businessman with steel and construction related interests in the United Arab Emirates.

The new owner Mr Nandana Lokuwithana bought the company at the invitation of the government.

The transfer will bring USD 65 million into the company over the next two and a half years to upgrade, increase capacity and pay off debts.

Mr Lokuwithana who is the Chairman of the Onyx Group based in the UAE said that “The total investment in the company will come to USD 65 million. We will make this investment over a period of two to two-and a half years. We are hoping to break even and show profits within four years.”

Mr Lokuwithana said that “Steel prices went up from about USD 600 per MT to about USD 1,200 at one point. So the company bought up stocks in case there was a shortage, but towards the end of the year, the prices crashed to about USD 350 to USD 400 per MT. So the company was left with a loss of about USD 24 million. But this tends to be the nature of the industry. It is now recovering again.”

The new management plans to upgrade and expand production facilities to ride the reconstruction and development wave that is expected to start from 2010. With large scale government infrastructure projects that are due to be rolled out, and private sector development activity, demand for steel in Sri Lanka is expected to increase rapidly from next year.

Mr Lokuwithana said that “We are expecting demand for steel to increase by 10% to 12% in 2010 and then continue to increase for a few years. So we are planning to increase output from about 90,000 MT now, to about 250,000 MT over the next two and a half years. Most of this, 70%, will be TMT steel. We will also set up a cut-and-bar plant.”

(Sourced from http://www.steelguru.com/news/index/2009/10/05/MTE0NjM5/Onyx_Group_to_upgrade_CHICO_facilities.html)

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SAIL DSP performance update

BL reported that Steel Authority of India Limited’s Durgapur Steel Plant hopes to achieve a production of 2.08 million tonnes in 2009-10 as compared with 1.79 million tonne in 2008-09. Till September however, the production was 0.89 million tonne representing 7.6% growth over the production in the same period of last year.

Mr Shyamsundar MD of DSP said that “In the first half, the production is low as always, as we undertake major repair work. Also the monsoon is a problem. In the second half, DSP, he sounded confident, would produce enough to be able to achieve the targeted production.”

The first phase of the DSP expansion program as he indicated should be over in 2011-12. The main components of the expansion program, estimated to cost INR 3,000 crore, would be achieving 100% production through the continuous casting route, setting up a one million tonnes per annum medium structural facility, bloom-cum-round caster and de bottlenecking of coke oven plant, raw material handling facility and steel melting shop.

The production capacity, following the expansion, will rise to 2.12 million tonne. Mr Shyamsundar said that “Our capacity will not increase significantly but we’ll be more efficient. Also, the share of finished production will rise to 64% from less than 50% now.” He added that the orders for the new plants to be set up would be finalized within the next two months.

Mr Shyamsundar said that in the second phase, the plan was to revamp the blast furnace. However we’re yet to decide whether to rebuild the existing blast furnace or go for a Greenfield one.

(Sourced from www.steelguru.com)

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ArcelorMittal may abandon Jharkhand and Orissa steel project - FT

Reuters, citing a Financial Times interview, reported that ArcelorMittal is close to pulling out of a USD 20 billion plan to build two steel plants in India due to difficulties buying land.

Mr LN Mittal chairman & CEO of ArcelorMittal an interview with the FT said that delays in persuading farmers and others to sell land for the development in the states of Jharkhand and Orissa were holding up the project.

The FT reported Mr Mittal as saying that “If we cannot make progress in these two sites we will have to abandon the idea of starting the projects there and look for other places in India for our expansion.”

Mr Mittal told the FT he is still committed to building at least one steel plant in India, but that dropping his plan for two plants producing together 24 million tonnes of steel a year by about 2015 would delay his plans for a sizeable presence in India by several years.

(Sourced from www.steelguru.com)

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India can do without low grade Chinese equipment - BHEL

With the government admitting the Eleventh Plan power generation target won’t be met, the country’s biggest manufacturer of power equipment Bharat Heavy Electricals Ltd has invited criticism.

Outgoing CMD Mr K RAVI KUMAR in an interview defended the company and lambasted Chinese suppliers for poor quality.

Q. What has been your experience as chairman, especially since BHEL has faced criticism for the shortfall in power generation targets?

A - Today three out of four companies are lifting equipment from BHEL. 75% of the power generated in the country comes from sets manufactured by BHEL. We have made a great contribution to the country not only in power generation and transmission but also in areas like transportation. Besides sub critical, we are also doing supercritical and advanced class gas turbines. Any set is judged by its efficiency and the auxiliary power consumption.
In terms of technical parameters, our bids are the best in the world.

Of course, there are problems in managing growth. We are growing at 30% per annum. Second, people must realize this sector has not been very good in the Eighth and the Ninth Plan. Growth has been very good for all power sector companies for the last seven to eight years, but you cannot ramp up capacity in a day. Even brownfield expansion takes a minimum of three years.

We wanted to double the capacity from 10,000 MW to 15,000 MW and further to 20,000 MW. We are already reaching 15,000 MW and we have placed orders for reaching 20,000 Mw. These machines are imported from Italy, Germany and Japan. Manufacturing of equipment does not cost much, compared to the turnover that you get. Today, for us to increase capacity from 10,000 MW to 20,000 MW it costs around INR 4,200 crore, whereas we are expecting a turnover of close to INR 30,000 crore this year.

A lot of time was wasted initially in thinking whether this capacity will be actually used or there will be a dip in demand. But I was clear that this (new planned capacity) could be written off in five years. We have tied up all the technologies, including with Siemens and Alstom for supercritical technology. So, one is organic expansion, second is technology tie ups and the third important thing is supply chain management. We had difficulties in procuring castings and forgings, but now we are thinking of an agreement with Sheffield in UK for this.

Q. Are joint ventures and tie-ups the way forward for BHEL?

A - Technology transfers are the first choice for us. If not, then joint ventures and tie-ups.

Q. You have a current order book of Rs 130,000 crore, a huge number. Does it act as a dampener for new orders, as new clients will worry that the delays, which you’re known for, will get worse?

A - The first 10 months of any order is only engineering. Our deliveries are 40-42 months, typically. So, the execution capability is also there. But you have to manage growth, which is not easy with the talent crunch. This quarter, we have grown at 25%. Managing \growth is a big issue and is a great challenge for the company.

(Sourced from www.steelguru.com)

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