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Saturday, November 5, 2011

China credit squeeze hits coal price

Saturday, 05 Nov 2011

According to producer and traders, Chinese private traders' struggle to open letters of credit during the past three weeks has been the primary cause of the 8% fall in coal prices seen since the start of October.

They said coal prices will not recover until China resumes buying in force. Thermal coal benchmark prices have lost nearly USD 10 a tonne since the start of October since China which had been almost single handedly absorbing the world surplus spot coal, stepped out of the market.

They said a similar pattern has developed in coking coal, iron ore and base metals buying.

Chinese coal importers often private companies who act as agents for a group of state utilities have continued to enquire for spot cargoes and have told suppliers they should be able to start buying again within a week or two.

China has been raising interest rates and banks' reserve requirement ratio to fight inflation. Premier Mr Wen Jiabao said on Tuesday it will remain the government's top priority.

Chinese importers said that a few of them have asked to delay shipments because of high stockpiles. The spot coal tonnage traded globally which drives the benchmark prices is a tiny portion of annual seaborne trade in excess of 750 million tonnes and but China buying this year of cargoes which had nowhere else to go has been a huge price influence without China, prices would have slipped a lot sooner.

China September coal imports were a record 19.1 million tonnes including over 900,000 tonnes from South Africa. October and November imports are expected to show a steep fall.

1. All imports hit

Mr Colin Hamilton Macquarie analyst said "Credit restrictions are affecting everything that is imported. He said that restrictions were more severe earlier in October but the situation is starting to ease now.”

He added that "The last couple of weeks have been tough for credit, they've really screwed it down banks are telling their clients they don't have enough cash for them to allow new LCs to be opened and without that, they can't buy, one major coal trader who supplies the Chinese market. It's starting to ease up now, but in another week or so we'll know if that is the case because buying will resume."

According to another supplier of large volumes to China importers want the coal and are mostly managing to open LCs just in time for shipment.

He said that "A month ago the were opening LCs 45 days prior to shipment and now its about 10 days prior quite tight timing but it's working and nobody's asked us to delay yet."

2. Shadow Banks Pressured

One major South African exporter said "This seems purely a credit issue, the shadow banks are having their wings clipped and people who are intermediaries for state end users need credit and at lease some of the coal bought and due to be shipped soon was financed by shadow banks."

He said that "Shadow banks lend at a higher rate of interest and then pass that on at an even higher rate and this sector is under pressure."

Companies which have been regular suppliers of South African, Colombian, Indonesian and Australian coal to China this year said the hiatus in Chinese buying did not seem to be a straight exercise to bring prices down before swooping in to buy on a large-scale.

One said "If they wanted to play price games then they'd say they couldn't open older LCs at higher prices but could open a new lower-priced LC and that's not happening."

However, the fall in prices which kicked in swiftly as soon as importers began to feel the credit squeeze is likely to be an accidental benefit for the importers.

Any cooling in Chinese commodity spot buying tends to give the suppliers who have grown to depend upon it a nasty shock but sellers are interpreting the current slowdown as temporary, citing steady enquiries for thermal, coking coal and iron ore.

Producers and traders said coking coal prices have also started to soften in the past month but the outlook is positive.

A UK based coking coal physical trader said "When the market sentiment changes coking coal will be one of the first commodities to see a strong price increase coking coal is in very short supply."

A European steel derivatives trader said "I don't think coking coal prices are going to have the same drop as iron ore prices did, I think that train has run its course."

(sourced from Vancouversun)

Vale SA looking to sell Colombia coal mine and port - Report

Saturday, 05 Nov 2011

Reuters citing potential buyers reported that Brazilian mining company Vale SA is looking to sell its Colombian coal mine and Rio Cordoba port.

Vale acquired the assets in April 2009 for USD 306 million and is looking to unload them as it views the assets as small and high-cost mines. A sales process began more than a month ago and a banker has been appointed by Vale.

A Vale spokesman said the company does not comment on rumors.

(sourced from Reuters)

Demand slump threatens more pain for Bulk Vessels - Vistaar

Saturday, 05 November 11

The market continued to fall with BDI dropping below 2,000 points by around 10 pct and closing at 1817 points. The cape index also continued to drop and was down by 13.56 pct and closed at 2,829 points. Panamax and Supramax dropped and closed at 1,866 points (down by 3.76 points) and 1,452 points (6.02 pct) respectively.

Handy size index dropped by 5.60 pct and closed at 742 points.

Very less interest in short period and for Supramax delivery N. China for trips via Indonesia were reported around US$ 9,000-10,000 per day, said Capt. Reddy, Director of Vistaar. The freight rate from Indonesia to India likely to remain soft next week. According to Capt. Reddy, 2012 also not a good year for bulk vessels and freight market.

“Global shipping is experiencing a downturn that's even worse than during the 2008 financial crisis, China's transportation minister said, as reported by Reuters.

The average charter rates was at Cape/US$ 23,374 per day , Panamax/US$ 14,925 per day , Supramax/US$ 15,183 per day and Handy size/US$ 10,565 per day.

The Supramax index in the feast (S6 route) was down by 13.60 pct and closed at US$ 10,442 per day (last week US$ 12,086 per day). The EC India/China (S7 route) was also down by11.76 pct and closed at US$ 8,949 per day (last week US$ 10,142 per day). The S6 and S& route likely to remain soft next week.

The futures for three years (2011-2013) was at around Cape/US$ 15,000 per day, Panamax/US$ 13,000 per day, Supramax/US$ 13,000 per day , Handy size/US$ 10,500 per day.

The congestion in EC Australia decreased to 89 vessels this week (last week 100 vessels). The vessels waiting at main coal loading ports were at Hay point/4, DBCT/7, Gladstone/12, Abbot Point/Nil, New Castle/45, Port Kembla/10 vessels. On the WC Australia iron ore vessels waiting was at 45 vessels (last week 37 vessels).

The Brent crude oil prices was up and closed at US$ 112.45 per barrel (last week US$ 110.05 per barrel). Bunker prices also remained firm and closed at 695.50 pmt (last week US$ 692.00 pmt) for IFO 380 cst ex Singapore on 4th Nov 2011.

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Jiangxi Coal Goup to issue CNY 600 million in notes

Saturday, 05 Nov 2011

China Knowledge reported that Jiangxi Coal Group Corp a state owned coal producer in China will issue CNY 600 million worth of medium term notes with a maturity of three years on November 9.

The company said in a statement that the notes will be issued at face value and the coupon rate be determined during the process of book building. Both value date and payment due date is November 11 and the to-be-issued notes tradable on November 14.

The company will use CNY 200 million of the proceeds to replenish its working capital and the remaining CNY 400 million for project investment.

China Chengxin International Credit Rating Co Ltd has rated the issuer and notes AA and AA respectively. China CITIC Bank Corp has been hired as lead underwriter for the offering.

(Sourced from China Knowledge)

Berau starts to explore binungan site - Insider Stories

Saturday, 05 November 11

Insider Stories reported that, coal miner PT Berau Coal, a 90% owned subsidiary of PT Berau Coal Energy Tbk (BRAU), is busy to hold exploration in Block 1 Binungan mine site (Prapatan) with a target production of 500,000 tons.

The output expansion is intended to underpin BRAU's annual production of 23 million tons. BRAU is now 85% controlled by Bumi Plc, a London-based company that was founded by Nathaniel Rothschild.

Public Relations Manager Berau Coal Bintoro Prabowo said the company started a mining construction at Prapatan last month.

"Reserves at Binungan site is estimated about 10 million tons. We expect to produce 500,000 tons of coal next year," he said as quoted by Bisnis Indonesia today.

Berau Coal produced 17.3 million tons last year, 20.3 million tons this year, and 23 million tons next year.

source: Insider Stories &

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Friday, November 4, 2011

Tata Said to Consider Bidding for Australian Coal Miner New Hope

Friday, Nov 4, 2011

Tata Group, India’s largest business entity, may bid for New Hope Corp., the Australian company valued at A$4.9 billion ($5.1 billion), to secure thermal-coal mines, three people familiar with the plan said.

Tata Steel Ltd. (TATA), India’s largest producer of the alloy, and Tata Power Ltd. may jointly make an offer for Ipswich, Queensland-based New Hope, said the people, declining to be identified because discussions are at an early stage. Both Tata Steel and Tata Power require coal to run their plants.

New Hope, which operates the Acland coal mine and an export terminal, is profiting as demand increases from power producers in China and India. JSW Steel Ltd. (JSTL), India’s third-largest producer of the alloy, may make an offer, two people with knowledge of the plan said Oct. 24.

The price of thermal coal, used to produce electricity, is likely to gain in the next two years because of Asian demand, Credit Suisse Group AG said last month.

Tata Steel spokesman Prabhat Sharma declined to comment. Tata Power spokeswoman Shalini Singh didn’t respond to mobile- phone calls and an e-mail seeking comment.

New Hope may attract interest from BHP Billiton Ltd. and Rio Tinto Group, according to Ord Minnett Ltd., as well as energy suppliers in Japan, which is facing a power shortage after the worst nuclear disaster in a quarter century. The miner said on Oct. 5 that selected groups will be invited to submit offers in a process that is likely to take months.

Globally, coal deals gained have reached $35 billion this year, against $21.8 billion in the same period last year, according to data compiled by Bloomberg.

India, the world’s third-largest coal user, had 31 power plants with four days’, or “super critical,” stockpiles on Nov. 1, compared with 10 on Sept. 1, according to the Central Electricity Authority. The normal level should be 15 to 30 days, the state agency said. Overall, the average inventory at India’s 89 coal-based plants was six days. The average at China’s biggest plants was 20 days.

(sourced Bloomberg)

Mittal suffers loss after furnace fails

Conditions in struggling South African steel industry worsen over the past quarter

Friday, November04, 2011

ArcelorMittal SA reported a R460m headline loss for the third quarter ended September, following the failure of the blast furnace system at its Newcastle works in KwaZulu-Natal, and a sharp rise in input costs.

This compares with headline earnings of R473m for the previous quarter, and R68m for the same period last year.

The group also said yesterday that operating conditions in the steel industry had deteriorated sharply over the past quarter, with the weaker trend in SA’s economy having a big effect on major steel consumers. Strike s in the sector in July hit deliveries, with customers forced to delay orders.

"It has been a difficult and challenging quarter," CEO Nonkululeko Nyembezi-Heita said yesterday. "The Newcastle incident resulted in a substantial loss of production with a concomitant effect on our quarterly results."

She said to ease the effect on customers, 240000 tons of steel was secured in SA and globally, from ArcelorMittal Group mills, and dispatched from mid-October. This still left the market short, with a knock-on effect in the mainstay building and construction sector.

Most of ArcelorMittal SA’s key drivers exhibited stable to negative trends, with raw material prices rising further, and electricity costs soaring 25%. But the firm said strong growth was experienced in Kenya and Zambia, with increased activity in the construction and mining sectors.

"Management (said) at the half-year results that the third quarter would be tough, but the Newcastle furnace issues resulted in a much poorer result," Rubin Renecke, equity analyst at Kagiso Asset Management, said yesterday. "Globally, steel demand remains sluggish ... (but) the weaker rand against the dollar should be positive for local steel pricing going forward."

Year on year, revenue in the quarter rose 5% to R7,6bn, following an 11% increase in average net realised prices, but was considerably down from R8,8bn in the preceding June quarter. Overall steel sales were flat at 1,1-million tons, with long steel products falling by 10%, while flat steel products rose 4%.

Revenue from ArcelorMittal SA’s coke and chemicals division declined 38%, following a 40% decline in commercial coke sales and an 11% drop in average net realised prices. Sales were also hampered by weaker seasonal demand from the ferro-alloy industry due to high winter electricity tariffs, and the poor state of the stainless steel industry.

Liquid steel production fell 17% to 1,2-million tons in the quarter, mainly as a result of the structural failure at Newcastle.

(sourced BusinessDay)

Indonesian coal miner Golden Energy to raise $245 mln in Nov IPO

Fri Nov 4, 2011

JAKARTA Nov 4 (Reuters) - Golden Energy Mines, an Indonesian coal miner, is set to raise 2.2 trillion rupiah ($245 million) in an initial public offering this month, the firm's underwriter said on Friday.

The miner priced the offering at 2,500 rupiah per share, after a 2,300 rupiah to 3,500 rupiah price range, Kokaryadi Chandra, president director of Sinarmas Sekuritas, told Reuters after the book building process was completed.

The company, controlled by the Widjaja family via its listed unit Dian Swastatika Sentosa , is selling a 15 percent stake in the IPO.

The IPO has been delayed several times this year due to uncertainty over the firm's valuation and a strategic partner to develop its coal mines.

It finally secured a strategic partnership with India's GMR Infrastructure in August, after talks with the world largest coal miner Coal India collapsed.

India's GMR Infrastructure will buy around another 15 percent of the firm via a private placement.

Golden Energy owns 10 coal mining areas across Indonesia, the world's largest exporting nation of the thermal coal used in power stations, and plans to increase production capacity to 6-8 million tonnes this year, from 3 million tonnes last year.

It targets producing 10 million tonnes in 2012 and output of 20-30 million tonnes in 2018 from its current reserves of 850 million tonnes, the Widjaja family has said, which would make it one of the country's top ten producers. ($1 = 8,975 rupiah)

(sourced Reuters)

CoAL raises funds for projects

Shares placed with select investors at a discount of 10,5% to the Wednesday price on London’s AIM, funds to be used for growth projects

Friday, 4 November, 2011

COAL of Africa (CoAL) has raised about $106m in a share placement yesterday, giving it the money to buy the Chapudi thermal and coking coal prospect from Rio Tinto, advance its Makhado project and bring its Vele mine into production early next year.

The shares were placed with select investors at R6,50 each, a 7% discount to Wednesday’s close of R7 on the JSE. The discount was 10,5% to the Wednesday price on London’s AIM. The placing price was set at 51p. The shares closed down 6c at R6,94.

CoAL CEO John Wallington said the funds would be split between the growth projects the company has in its portfolio.

"This funding buys us the time to carry out the projects I’ve referred to, but it also gives us the time to make the right strategic decisions over the next six to 12 months," he said.

Management would restructure the business over the next year to avoid having to come to the market for funds again, he said.

CoAL has allocated $25m to starting Vele, paying the first tranche of $43m to Rio Tinto and a year of exploration work at Chapudi worth $15m. It has set aside $17m, which will be used to pay a deposit to Transnet.

CoAL could not come to the market any earlier because of difficulty obtaining permits for its Vele coking coal project in Limpopo. There were objections from environmentalists because of its proximity to the Mapungubwe World Heritage site. CoAL has now secured all the permits it needs to reactivate the Vele project and bring it into production early next year.

The market had been expecting the share placement. "No huge surprise given the poor sets of results and recent successes in permitting," Numis Securities said in a note.

Merrill Lynch said the placement would dilute earnings per share, but it maintained a "buy" rating on the share.

(sourced BusinessDay)

4 dead, 57 trapped in China coal mine rock blast

Friday, Nov 4, 2011 | Agency AP

BEIJING: Rescuers were working Friday to try to save 57 miners who were trapped in a coal mine in central China after a rock explosion that followed a small earthquake, state media reported. Four miners were killed in the blast.

The accident in the coal mine in the city of Sanmenxia in Henan province occurred Thursday evening when 75 miners were working in the shaft, the official Xinhua News Agency said. Fourteen workers escaped.

At least 200 workers were digging a small rescue tunnel about 1,650 feet (500 meters) deep to try to reach the trapped miners, the People's Daily newspaper's website said.

The Qianqiu Coal Mine belongs to Yima Coal Group, a large state-owned coal company in Henan, the State Administration of Work Safety said on its website.

Xinhua said a magnitude-2.9 earthquake occurred to the east of Sanmenxia and that the rock explosion happened about 30 minutes later.

The phenomenon known as a "rock burst" occurs when settling layers of earth bear down on the walls of a mine and result in a sudden, catastrophic release of stored energy. Exploding pillars can turn chunks of rock or coal into deadly missiles, and the shock waves alone can be lethal.

The survival of the trapped miners depends on the intensity of the rock explosion and the rescuers' ability to provide ventilation to them, a local official told The Associated Press.

"If it was not very strong, it might have caused the tunnel to get narrower, but we might still be able to send some air in there to ensure ventilation," said the Yima city Communist Party's head of propaganda, who would give only his surname, Tian, as is common with Chinese officials.

"But if the impact was pretty strong and caused the tunnel walls to collapse, then the ventilation was probably cut off immediately, suffocating the people trapped there. In that case it would be hard to rescue them," Tian said.

Tian said it was difficult to determine how deep in the mine the trapped workers were.

According to Xinhua, workers were digging a tunnel about 830 yards (760 meters) long, but after the rock burst, the tunnel appeared to have "basically folded" a little more than halfway down the passage, at 525 yards (480 meters). It was unclear what the condition of the tunnel was beyond that point, Xinhua said.

China's coal mines are the most dangerous in the world, although the industry's safety record has improved in recent years as smaller, illegal mines have been closed. Annual fatalities are now about one-third of the high of nearly 7,000 in 2002.


Indian Iron Ore Market remains Dead - Fearnleys

Friday, 04 November 11

The Atlantic market kept its strong position from last week. Even with fewer fixtures reported. Fronthauls still around 25k, with a 2-3k usd premium for vessels willing to go through Aden. USG/Skaw fixing around usd 29700, and Skaw/USG concluded in the usd 8000 range. We do believe less activity in the weeks ahead of us. The Pacific market has been dropping and it seems like it will continue to remain so due to lack of fresh cargoes and building up of tonnages. For Indo-India, large eco Supra can fetch close to usd 10k from North China position and NOPAC RV close to usd 9k. Indian iron ore market remains dead with no activity on WCI & ECi forcing vessels to ballast to RBCT and Indonesia. RBCT rounds now fixed basis APS ++BB and vessels ballasting from ECI to Indonesia fixing around usd 8k. Red Sea fertilisers to India are fixed around mid 20s. Very little activity on short period and rate is around 12k for large Supras.

Fair activity with mineral requirements in the North Atlantic from USEC and Baltic catering for healthy levels as market is tight for prompt loaders. Fixing levels in the 20´s for Baltic rounds, upper teens for TA rounds. Less activity and weakness in the USG and ECSA from an increasing number of ballasters appears from the Med and Far East. Levels for trip out hovering in the 26 + 600 range basis APS. In the Far East activity is low, tonnage lists grow, and rates are under downward pressure. NOPAC rounds 12500, period activity scant. The general sentiment is losing confidence from a slow and descending forward market.

After a relatively long period with improving rates, the Cape market experiences a correction mid last week. Rates kept dropping throughout this week, with West Australia/China being done just bellow usd 10 pmt. Tubarao/Qingdao was done last week around usd 32 pmt, the lowest done this week is just below usd 25 pmt. The drop in spot rates has resulted in less period activity with chrtrs aiming around mid teens, a level perceived to be of non interest to the owners. The rest of the week is remained to be quiet with Eisbein going on in Germany.

(source - Fearnleys via coalpsot)

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Arcelormittal ponders iron ore pricing

Fri, November 04, 2011 8:20AM

ARCELORMITTAL, the world's largest steelmaker, is evaluating the possibility of changing the pricing mechanism of its long-term iron ore supply contract but doesn't necessarily expect it will follow the same route as its Chinese peers, the company's chief executive said yesterday.

"Whether it should be spot or ... quarterly ... we are in the middle of evaluating these things," Lakshmi Mittal told analysts in a conference call.

Mr Mittal’s comments come as an iron ore and steel pricing specialist said iron ore spot market prices may have bottomed out following a slump in October.

Brazilian mining company Vale, the world's biggest iron ore producer, said last week it's negotiating on an individual basis with its clients to ascertain what kind of pricing system they prefer following recent market turbulence in the pricing of iron ore, a key steelmaking raw ingredient.

Vale said it's prepared to compete on the iron ore spot market rather than sell ore on contracts if that's what clients want, but customers would have to stick to their decision.

Some steelmakers are calling for a more flexible pricing system, which could help them enjoy the recent iron ore price drop but by the same token face the possibility of greater exposure to fluctuating iron ore prices down the road. In late October, prices of spot iron ore delivered into China plunged to the lowest level since the height of the global economic crisis, according to The Steel Index.

Chinese steelmakers have been quite aggressively showing their preference for a system closer to the spot price, while the Europeans and Japanese tend to prefer contracts that may give greater stability, Vale's executive strategies director Jose Carlos Martins said last week.

"Our customer requirements, our markets are different ... than the Chinese steel industry," Mr Mittal said. "So we'll have to keep all this in mind ... (when we) decide the best course of action in next weeks and months based on what creates the most value for ArcelorMittal," he added.

ArcelorMittal is one of Vale's largest long-term customers. The steelmaker signed a contract in 2008 with Vale to purchase 480 million tonnes of iron ore and pellets over a period of ten years. The contracts were signed in terms of volume and not price.

Since then the iron ore market has undergone a revolution in its pricing system. The annually negotiated pricing system gave way in April 2010 to a quarterly pricing system based on spot iron ore prices and in the case of BHP Billiton, has moved to even shorter-term contracts.

Mr Mittal said he prefers a pricing system that provides a "stable pricing environment".

"Iron ore prices have ticked up $US1 to $US2 every day this week to reach $US122.70 a tonne delivered into China today," said Steven Randall, managing director of London-based price discovery service The Steel Index in an interview.

"This isn't a stellar recovery but it's consistent. There's buying interest at these levels."

On October 28 prices of spot iron ore delivered into China plunged to $US116.90 per tonne, the lowest level since December 2009 at the height of the global economic crisis, according to The Steel Index. Prices slumped 31 per cent in the month of October alone, as increased spot market supplies of the steelmaking raw material, particularly from Australia, encountered only lukewarm buying interest from Chinese mills due to a continuing weak steel market in China, reported The Steel Index's China-based specialist Oscar Tarneberg.

Record high iron ore output from both Australian and Brazilian miners in the third quarter "coincided with the introduction of steel production cuts in China."

The outlook for iron ore prices for the rest of November still looks uncertain as there's potential for Indian exporters to sell more onto the international market after the recent lifting of an export ban on iron ore produced in India's Karnataka region, according to Mr Randall. At the same time, China may ease its restrictive credit policies if local inflation slows, which could stimulate local demand from steelmills, he said.

The precipitous fall in iron ore prices over the past month has left spot prices around $US60 a tonne below the quarterly contract prices being paid by steelmakers for the October-December period, according to a report by Tarneberg published yesterday. As a result, Chinese mills have been looking to renegotiate their contracts for the quarter while Japanese, Korean and Taiwanese mills have said they will remain on quarterly agreements.

Spot market iron ore prices touched their highest-ever level of $US191.90 a tonne in mid-February on robust demand before the current round of market volatility began, according to The Steel Index.

(sourced Dow Jones Newswires)
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BHPB to begin work on IndoMet coal project

Friday, 04 Nov 2011

BHP Billiton Ltd said that it plans to begin work on the USD 1.34 billion IndoMet coal project in Indonesia within weeks, a move that would open up a new mining province to help meet booming Asian demand for steelmaking raw materials.

BHP said that joint venture companies controlled by BHP and Indonesia's PT Adaro Energy will begin building the Haju mine in jungle around 220 kilometers northwest of Balikpapan port by the end of the year.

Haju is the first stage of the IndoMet project on the island of Borneo, which could be producing 5 million metric tons of coking coal annually by 2017. IndoMet is BHP's fifth-biggest coking coal resource.

A BHP spokeswoman said that "PT Lahai will construct a road and a mine (Haju) and related infrastructure, commencing, subject to approvals, in the fourth quarter of 2011.”

(sourced Dow Jones Newswires)

Macquarie predicts rebound in iron ore prices

Friday, 04 Nov 2011

Iron ore prices have plunged in the last two months from USD 180 per tonne to around USD 118 per tonne. Macquarie Commodities Research puts this down to aggressive destocking by Chinese steel mills and sees upside ahead.

Macquarie predicts easy USD 20 to USD 30 rebound in iron ore prices

Macquarie said that current price levels are not reflective of real demand weakness or substantial oversupply.

Instead, the firm has been watching iron ore inventory at 50 smaller steel mills which during previous price slow downs, from January to March and May to July, fell to 28 days of use. In contrast, inventory at mills’ yards and in port and transit has slumped to just 21 days towards the end of October.

According to Macquarie, the pace of destocking is unsustainable and a Chinese swing from destocking to just moderate restocking could add 80 million tonne per annum to global demand.

Macquarie said that “In turn, the firm expects the first USD 20 to USD 30 per tonne of a recovery should be easy. We therefore expect iron ore to be trading above USD 140 per tonne by the end of 2011.”


Iron ore swaps volume hit record in October - Report

Friday, 04 Nov 2011

According to Steel Index, the volume of forward iron ore swaps cleared globally soared to an all-time high above 9 million tonnes in October, as prices collapsed on slower demand from top consumer China.

Steel Index said that the contracts were valued at around USD 1.4 billion and trumped a previous record in August when volume reached more than 6.6 million tonnes worth over USD 1 billion.

Steel Index said that the majority of the contracts last month were cleared on the Singapore Exchange where volume hit 15,443 lots, or 7.7 million tonnes.

Spot iron ore prices .IO62-CNI=SI lost nearly 31% in October, their biggest monthly loss ever, as weaker steel demand in China slashed appetite for the raw material.

But prices began recovering on Monday as a more than 35% slump since September drew buyers back into the market, although traders said worries that steel demand in China may remain tepid for the rest of 2011 could limit any rebound.

Mr Oscar Tarneberg senior analyst for Steel Index in Asia said that "The surge in iron ore swaps trading volumes in October reflects the increased price risk in the physical market.”

He added that "With prices falling so precipitously, swaps offer physical participants a tool to hedge against the impact of sharp price movements and uncertainty."

(Sourced from Reuters)

ArcelorMittal CEO Mr LN Mittal sees a long way to go for steel plant in India

Friday, 04 Nov 2011

BS reported that ArcelorMittal said the company still has a long way to go in India before it takes a final view on the construction of the proposed steel plants.

Mr LN Mittal president & CEO of ArcelorMittal while declaring Q3 results did not sound very enthusiastic about the progress of the company in India.

In a select media call, he said “We have got mining leases & licenses, which are in different stages of progress. Some are prospecting licenses, some are exploration, but we haven't got mining operation approvals yet.”

He said the mining allocations to ArcelorMittal were done long before so there was some progress.

He told “But it's still a long way to go before we take a final view on construction.”

The company has been eyeing countries like Brazil and India for expansions and its growth drivers in newer markets. However, the market uncertainties have forced it to cut down on its planned steel investments.

All this is happening at a time when the company is yet to make any significant investments in India even after signing MoUs with state governments as early as 2005. Mr Mittal, last year, had said the company was looking to build smaller modules of steel plants in the emerging markets.

(source Business-standard)

Coal minister assures all help to RINL for coal blocks allocation

Friday, 04 Nov 2011

Mr Sriprakash Jaiswal minster for coal appreciated the initiatives and efforts of RINL in expanding its capacity from the present 3 million tonne per annum to 6.3 million tonne per annum and also its future expansion program to 20 million tonne per annum.

He lauded the progress and growth of RINL. The Minister assured RINL CMD all possible needful help in the allotment of Coal blocks to the Company as RINL has no captive Coal blocks.

This assurance came from the union minister when Mr AP Choudhary CMD of RINL and Mr TK Chand, Director (Commercial) called on Mr Sriprakash Jaiswal in New Delhi.

Mr Choudhary briefed the union minister about the plant’s performance, its growth plan and future expansion program of the Company. Mr Choudhary impressed upon the union minister the need to allot both Coking Coal and Thermal Coal mines to RINL as RINL-VSP is going for massive expansion.

(Sourced from PTI)

BJP seeks CBI probe into Goa exports

Friday, 04 Nov 2011

BL reported that Bharatiya Janata Party president Mr Nitin Gadkari on Thursday led a delegation of the party's Goa unit leaders to President Ms Pratibha Patil and sought a Central Bureau of Investigation probe into the alleged illegal mining of iron ore in Goa, which accounts for 60% of the country's iron ore exports

Mr. Gadkari said the scam causing a loss of INR 25,000 crore to the exchequer took place over the last five years.

The delegation asked the President to direct the Centre to take stringent action against the wrongdoers so as to rid the State of the mining mafia and safeguard the interests of thousands earning their income on legal mining activities.

They charged “The Congress regime and the Pradesh Congress Committee are involved in the scam.”

The BJP charged that the ruling Congress government was trying to cover up the scam.

(Sourced from BL)

Gujarat NRE Coke Coal gets USD 100 million loan

Friday, 04 Nov 2011 | sourced Profit.NDTV

NDTV reported that Gujarat NRE Coke Limited has secured a USD 100 million long term loan agreement for Gujarat NRE Coking Coal to help the unit meet its capital expenditure needs.

As per report Axis Bank’s Hong Kong Branch sanctioned this agreement after India's largest independent producer of low ash metallurgical coke completed necessary formalities related to the agreement.

The company now has an access to the funds made available under the loan agreement.

Bangladesh steel rebar makers incur BDT 600 million loss a day

Friday, 04 Nov 2011

Bangladesh steel product makers Wednesday said that one day's production loss now comes to BDT 600 million because of staggered gas supply at the country's prime rod manufacturing hub in Chittagong.

They said steel makers in Sitakunda and Baizid belts, nearly 250 kilometres away from Dhaka and just 15 kilometres from Chittagong Port manufacture around 10,000 tonnes a day.

The gas distribution entity Karnaphuli Gas Distribution Company began gas staggering three days a week for the industrial belt on October 26. The manufacturers supply nearly cent per cent of quality mild steel rod to meet the country's requirements. Besides, on an average they supply 70% of total steel requirements of the country.

The major steel players in the belt are BSRM, AKS, RSRM, KSRM, SARM, GPH Ispat, Baizid Steel, Islam Steel which produce over 5000 tonnes of steel products a day. The other re-rolling mills numbering 40 plus produce nearly another 5000 tonnes, industry people said.

Mr Alihussain Akberali chairman and managing director of the country's largest steel maker BSRM Group said that "We estimate that production losses have reached BDT 600 million a day as all major players produce nearly 10,000 tonnes of steel products a day.”

Mr Alihussain Akberali hinted that the gas staggering would create shortage of MS products during its peak time leading to rise in the prices of key construction materials.

He said those who earlier converted their plants into furnace oil system, but kept it on hold, would raise their production cost. He added that "I think an additional BDT 1700 per tonne would be required if any rod manufacturer engages in production through furnace oil.”

Many millers said they would be forced to declare lay-off if the gas staggering continues for a few more days.

Head of Marketing and Production Development of the BSRM Group of Companies Mr Firoze has said they have two major re rolling plants in Chittagong in the Fouzderhat and Nasirabad industrial areas and production at both the units has reduced by 45% due to gas staggering. He said that "This will result in the hike of prices of rod, angle, channel and other steel products and the capital city will be most affected as flyovers and other major infrastructures in Dhaka are using 100% steel products made by the major steel plants of Chittagong.”

(Sourced from FE)

Indonesia sees coal output at 327 million tonne in 2011

Friday, Nov04, 2011

Reuters reported that Indonesia's coal production is seen at 327 million tonnes this year, rising to 332 million tonnes in 2012

An official at the country's mining ministry said that this was a lower than a May forecast of 340 million tonnes for this year from the Indonesia Coal Society.

Indonesia is the world's largest exporter of thermal coal.

(source Thomson Reuters)

Kumba workers to get ZAR 500 000 each

Friday, 04 Nov 2011 | By

Kumba Iron Ore announced that its shareholders had approved the general terms and conditions necessary to implement phase one of its broad based employee share participation scheme known as Envision.

The offering is seen as the most generous in the history of SA mining with employees from the lowest skill levels expecting to take home what may amount to R500 000 for five years of service.

This is in addition to the basic salaries earned by employees and an average of ZAR 55 000 in dividends thus far payed out by the scheme to individual participants.

According to Vusani Malie company secretary, employees will be paid out the capital appreciation linked to Envision’s 3% holding of Sishen Iron Ore Company, Kumba’s major subsidiary, accumulated over the five years since the scheme was implemented

The actual value of the payout will be calculated based on the five day volume weighted average price of Kumba’s shares up to November 17, said Malie, with the final payout being made on December 15.

All employees below managerial level will stand to benefit an equal amount on a pro-rata basis calculated according to the total period over which they had been employed during the life of the first phase of the scheme.

Malie said that the scheme will pay out a total ZAR 2.5 billion or ZAR 500 000 for an employee who has been employed by Sishen for the full five year period.

More than 5 800 employees stand to benefit from the scheme.

Heilongjiang coke prices edge down

Friday, 04 Nov 2011

Coke market edges down in northeast China's Heilongjiang province.

The ex-works price of II grade metallurgical coke drops by CNY 30 per tonne to CNY 1,850 per tonne in Qitaihe, in Hegang and Shangyashan, the II grade metallurgical coke price is priced at CNY CNY 1,850 per tonne and CNY 1,840 per tonne down CNY 30 per tonne.

Industry sources report that Chinese steel mills increase efforts to press down purchase price for raw materials and cut back purchase. Coking enterprises have no other choice but to accept it. Currently, several steel mills continue to suspend purchasing the steel-making ingredient.


China Bohai Thermal coal prices hit all time high

Friday, 04 Nov 2011

It is reported that the latest Bohai-Rim Steam-Coal Price Index or BSPI indicates that the average price of thermal coal with calorific value of 5500 kilocalories per kilogram reached an all-time high of CNY 853 per tonne in the week ending October 26.

The price was up CNY 6 per tonne or 0.71%t from a week earlier and an increase of CNY 28 per tonne compared with September 7 when a rebound was seen after nine consecutive weeks’ fall.

At Qinhuangdao port, the price of 5500 kilocalories per kilogram and 5800 kilocalories per kilogram thermal coal was up CNY 5 per tonne to CNY 850 per tonne to CNY 860 per tonne and CNY 900 per tonne to CNY 910 per tonne respectively compared with the previous week while that of 4500 kilocalories per kilogram and 5000 kilocalories per kilogram thermal coal kept stable at CNY 650 per tonne to CNY 660 per tonne and CNY 745 per tonne to CNY 755 per tonne.

In China's main coal-producing regions, such as Shanxi and Inner Mongolia, coal prices have remained stable after previous weeks upswing. Coal prices in these two regions have perched high for several weeks on speculation that China may face another round of power shortage in the coming winter. And the tough coal transport capacity may be one of the main reasons to bolster up the price.


Vale Q3 average iron ore sale prices

Friday, 04 Nov 2011

Vale announced its Q3 average iron ore price

Q3 '10Q2 '11Q3 '11
Iron ore128.21145.3151.26
Manganese ore285.91182.14129.21
Thermal coal98.7395.2998.28
Metallurgical coal184.6256.53282.54
Platinum (US$/oz)1,551.851,765.121,765.57
Cobalt (US$/lb)13.6115.8318.71


(In USD per tonne)

Ukraine’s coal mining output up nine percent in Jan-Oct

Friday, 04 November 2011

According to the Ministry of Energy and Coal Industry of Ukraine, in the January-October period of the current year Ukraine's coal mining output increased by 9.3 percent or 6.771 million mt year on year to 67.696 million mt, including 20.710 million mt of coking coal and 46.986 million mt of thermal coal.

Tags: coking coal , Ukraine , raw mat , CIS , mining , production
sourced: steel orbis

Africa Barrick Gold enters into iron ore rights agreement with Liontown Resources

Friday, 04 Nov 2011

African Barrick Gold has entered into an agreement with Liontown Resources Limited which allows Liontown the opportunity to explore for iron ore deposits on certain exploration tenements held the Barrick Gold in Tanzania.

The company said that the agreement allows for Liontown to earn an interest of up to 70% of the iron ore rights on c.530 square kilometers of land within the Masabi, Masabi Extension, Siga Hills and Siga Hills North exploration projects.

ABG will retain all rights to minerals discovered other than iron ore and by products directly associated with iron ore mineralogy. The initial 6 month data review period will be to assess the available technical data to determine whether there is potential for significant iron ore mineralization within the properties. At the end of this Stage, Liontown will be able to either define smaller Project Areas for further iron ore exploration or withdraw from the Agreement with ABG.

Following the Assessment Stage, Liontown can earn 60% equity in any iron ore discovery within the Project Areas by spending USD 10 million within 4 years on exploration and resource definition;

1. Liontown can at its election, increase its equity in the iron ore rights to 70% by spending an additional USD 10 million over a further 2 year period and

2. Liontown must spend US$500,000 during the Initial Earn In Stage before having right to withdraw from the Agreement with ABG.

This agreement provides ABG with the upside from potential iron ore mineralization on these exploration tenements while also ensuring under the agreement that Liontown samples and assays for gold, the rights for which are retained by ABG.

(Filed by Matsiko Mike SteelGuru Uganda correspondent)

West Australian miner Padbury joins Geraldton Iron Ore Alliance

Friday, 04 November 2011

Perth-based Australian mineral exploration company Padbury Mining Limited announced on November 3 that it has joined the Geraldton Iron Ore Alliance (GIOA), following the lead of fellow iron ore developers Gindalbie Metals, Crosslands Resources and Sinosteel Midwest Corporation.

The GIOA was formed by a group of companies with iron ore deposits in the Geraldton/Mid West area of Western Australia. Padbury's managing director Gary Stokes said "The GIOA offers a valuable network to its member companies and I look forward to working with them and contributing to the advocacy of our region."

Padbury is currently developing its flagship Peak Hill joint venture for which the company defined an initial JORC compliant inferred resource in April this year of 850 million mt, at 27.3 percent iron, also prospective for hematite.

(sourced steelorbis)

Thursday, November 3, 2011

25 mining companies in Sihora to come under committee lens

Tue, Nov 3, 2011 | TNN

BHOPAL: A committee has been formed to look into all aspects of mining activities of some two dozen mining firms at Sihora tehsil in Jabalpur district, signalling somewhat of a progress into the issue. The Congress and the ruling BJP traded charges with one laying the blame for the alleged mining scam at the doorstep of the other.

"The inquiry is for carrying out physical verification of the area of excavations for mining, transportation and storage of minerals and violation of lease terms and environmental norms. Nearly, 25 mining companies operating in Sihora tehsil, are coming under the ambit of the probe," Sub-divisional Magistrate Amit Tomar told the TOI.

The inquiry committee, headed by Additional District Magistrate (ADM) Akshay Singh, comprises sub-divisional magistrate, deputy director (mining) and sub-divisional officer (forest). The probe panel will also look into the complaints of respective village panchayats about siphoning off mineral wealth through illegal mining. There were also complaints that a few firms had indulged in illegal mining activities outside the mining lease area.

Apart from the complaints regarding mining activities, Tomar said, the administration would also look into alleged irregularities in transportation of minerals without pit passes and storage. The mining firms are supposed to store minerals within the lease area in keeping with the provisions of law. However, many of them prefer to ignore it and dump materials at other places. Rich in minerals like iron ore, manganese and bauxite, Sihora tehsil and neighbouring Katni district have become the hub of state's mining activities with a number of mining firms springing up in the area since mid 1990s.

Among them were mining firms owned by the leaders of the Congress, the ruling party at that time. However, after the BJP came to power in December 2003, some of its leaders, too, developed strong business interests both in mining and its transportation in the area.

Spotlight turned on mining activities in Sihora tehsil this month after state Congress spokesman Manak Agrawal moved a local court in Bhopal, demanding registration of criminal cases against chief minister Shivraj Singh Chouhan, BJP national general secretary Narendra Singh Tomar and 23 others.

However, a day before Agrawal filed the complaint in the court, a former BJP legislator had sent a complaint to the chief minister and others alleging large scale 'irregularities' by mining firms owned by a sitting Congress legislator from the same region. (sourced TOI)

Mines ministry pushes for new iron ore royalty maths

Thu, 3 Nov, 2011 |sourced ET

NEW DELHI: The mines ministry will push for a new system of calculating royalties instead of the current practice of basing it on an average price determined by the Indian Bureau of Mines, ministry officials said. Under the new method, pithead prices, on which royalty is based, will be discovered from iron prices across the supply chain.

The ministry says this proposal, which is unlikely to raise royalty collections for states, will be taken up by its study group later this week. In its report on illegal mining in Karnataka, the state Lokayukta had criticized the practice of using the statewise average prices put out by the bureau, saying that it lead to lower royalty collections. The Lokayukta had found that the bureau's weighted average pitmouth value of ore, to be collected from the top 10 non-captive producers, did not accurately reflect market price of iron ore.

The ministry, however, maintains that royalty can only be collected on the pithead price of iron ore and cannot be based on market prices. In May, Orissa chief minister Naveen Patnaik had also asked for royalty to be charged on NMDC's prices or all-India average prices. Last month, in his reply to Patnaik, mines minister Dinsha Patel said the current practice was adopted after states decided that determining sale prices from individual invoices, particularly for captive mines, was difficult.

In February, rule 45 of Mineral Conservation and Development Rules was amended to allow states to collate prices at different points of sale. Until states decide on what is most convenient to them, the mines ministry will suggest this method for calculation of royalties. An upward revision of royalty rates, allowed once in three years, is now only possible after August 2012. States collect a charge either on the tonnage as in the case of limestone which is largely mined for captive use, or on an ad valorem basis. A royalty of 10% ad valorem is levied on iron ore.

(sourced EconomicTimes)

Notification delay may pull NMDC iron ore exports below 1 mn tonnes

Thu, 3 Nov, 2011

Hyderabad : State-owned NMDC’s exports of iron ore may fall by over 61 per cent to less than 1 million tonnes this year from 2.6 million tonnes last year, a senior official of NMDC has said.

The official, who declined to be named, said the drop in exports will not impact the financials of the company, as domestic demand and prices are encouraging.

The plunge in exports is primarily due to the delay in issuance of a notification by the government permitting overseas shipment of the mineral resource even after Cabinet approval, the official said.

“Even if we get approval from the government this month or next month, we will consider exports on a pro rata basis.

If we start exports in January, we may export around 0.6 or 0.7 million tonnes this year. We may not touch the 1 million tonnes mark,” the official told PTI.

When contacted, NMDC Chairman and Managing Director Mr Rana Som said Cabinet has approved exports by the company to the extent of 2.8 million tonnes per year for three years.

He also confirmed that the export entitlement of the company in each year will be determined on a pro rata basis.

NMDC sells fine variety ore at Rs 3,380 per tonne and lumps at Rs 4,600 per tonne.

Total exports of iron ore amounted to 2.56 million tonnes during FY’11, as against 3.43 million tonnes in the previous financial year, a decrease of 25 per cent.

Meanwhile, a team of officials from Minemakers Limited, an Australia-based mining company, is meeting with NMDC officials on a proposed joint venture to develop the Wonarah phosphate deposit in Australia’s Northern Territory.

“They are in Hyderabad. We will have to study what all reports they gave us on the project. After that, we will conduct due diligence and take a decision,” Mr Som said.

NMDC had earlier entered into a non-binding agreement with Minemakers to develop the latter’s Wonarah phosphate deposit, which is Australia’s largest undeveloped rock phosphate project.

If the project is found favourable, NMDC and Minemakers will then form a JV in which the Indian miner will pick up a 50 per cent stake and have the responsibility for arranging finance for the project through debt raising.

NMDC will also repay Minemakers for costs already incurred on the development of Wonarah.

The investment made by NMDC on the study and other activities may be converted into capital when the JV is formed.

Keywords: notification delay, NMDC, iron ore exports

(sourced The Hindu Business Line)

SA Coal, Use it or lose it

Thursday, 3 Nov 2011

SA has some of the world’s richest coal deposits . Yet the country is failing to exploit this natural resource, as Charlotte Mathews reports.

The idea that SA’s coal industry needs a co-ordinated “road map”, or long- term plan, was first aired four years ago by a handful of its top executives — Eskom’s Steve Lennon, Exxaro’s Sipho Nkosi and Anglo American’s Roger Wicks.

It has taken three years, and some energetic problem-solving, to reach a point where the first report of the SA Coal Road Map project is about to be released. The report will help the country plan what to do with its coal deposits over the next few decades.

It’s a vital industry. In 2009, according to Chamber of Mines figures, coal became the country’s largest mining activity, generating R65bn in revenue against R49bn from gold, the mineral that has always distinguished SA in the world’s eyes.

The team, organised by the Fossil Fuel Foundation, an industry think-tank, had to overcome issues such as the coal companies’ desire to keep market-sensitive data confidential, and possibly breaching the Competition Act, if they shared information.

In 2008 the department of minerals & energy was split into two , one department focusing on minerals, the other on energy. While key staff were moved around, the project had to wait.

It had a relatively modest budget of about R4m, which would have been enough if the participants had contributed their data. But that didn’t happen and a lot more legwork was needed. The project will need more funds for the second phase.

“Bit by bit we had to accumulate the information we needed,” says steering committee chairman Ian Hall. But as the project evolved, the levels of communication and co-operation improved.

“We attracted a number of people who wanted to be included,” Hall says. “The road map’s stakeholders now represent a big cross-section of the industry.”

The need for long-term planning in the industry was highlighted by government’s recent release of its IRP2 strategy for SA’s future electricity generation mix. The target under the IRP2’s “balanced scenario” is to have 48% of SA’s energy come from coal by 2030 compared with 93% now.

For Greenpeace SA, even that is too much. A report commissioned by the organisation entitled “The True Cost of Coal” and released last week says the externalised cost of the Kusile coal-fired power station (mainly the effect on water sources) would be about R60,6bn /year. That is equivalent to about 97c- R1,88/kWh , which means the indirect costs of the station are at least a third more than the 65c/kWh that Eskom’s customers will pay in 2012/2013.

Eskom declined to comment on the Greenpeace report but referred to its previous statements on climate change and pollution control. It has a “six-point plan” to contribute to global efforts to combat climate change, including reducing its reliance on coal over time, installing clean coal technologies at new coal-fired power stations, improving its own and its customers’ energy efficiency and researching other ways to reduce carbon emissions.

Greenpeace’s view is obviously not shared by the mining industry, or parts of government, which feel SA is not extracting as much value from its coal endowment as other countries.

Most of SA’s coal is thermal, used in power stations, and it has relatively small quantities of coking coal, which is used in steelmaking. There are also scattered deposits of anthracite, a higher-value type of energy coal.

Latest data from the department of mineral resources shows SA ranks fourth-largest in the world in its coal reserves of 30,4bn t but seventh-largest in production, at 250,6Mt in 2009. At current rates of extraction, SA has about 40-50 years of coal supplies.

Hall told last month’s SA National Energy Association (Sanea) conference that the last authoritative estimate of SA’s recoverable coal resources was carried out in 1982, suggesting the country had 59,2bnt . In 2009 the figure was adjusted for depletion to an estimate of 33,1bnt. The Council for Geosciences is updating these figures and is expected to release its report in January.

SA’s coal sales rose a modest 8,7% over the 10 years to 2009 but most of the increased output went to Eskom. Coal exports were almost flat in that period, peaking at 71,5Mt in 2003 but falling as low as 57,8Mt in 2008, the year when the average benchmark export coal price soared to R737/t from R361/t in 2007. In that year average inland prices for coal were R153/t, from R108/t in 2007. Domestic coal prices are generally below exports, mainly because Eskom, the biggest customer, uses a lower quality.

About 84% of SA’s coal comes from the Witbank, Ermelo and Highveld coal fields, which will be largely exhausted within the next 10 years. While the Waterberg has substantial resources of coal — about 40% of the country’s remaining resources — it presents geological challenges which are likely to make mining more expensive. Lack of rail infrastructure and minimal water will also have to be addressed.

The country’s biggest coal producers are Anglo American Coal, Exxaro, Sasol Mining, Xstrata Coal and BHP Billiton Export Coal SA (Becsa). Other large producers include Total Coal, Optimum and Shanduka. There are also numerous smaller miners with one or two mines or projects in development. Among the five biggest producers, only three have major new projects which will supply both Eskom and export markets: Anglo American’s US$512m Zibulo mine in Mpumalanga; Exxaro’s R9bn Grootegeluk expansion in the Waterberg; and the Xstrata/African Rainbow Minerals R3,5bn joint-venture Goedgevonden mine near Witbank.

When Becsa, Exxaro, Anglo Coal and Rio Tinto recently put up for sale some of their undeveloped coal prospects, it was widely seen as a vote of no confidence in long-term growth prospects for the SA coal industry.

This is surprising, considering strong demand from India and China for SA coal and Eskom’s heavy reliance on coal- fired power stations. The utility has even expressed a desire to protect its long- term supply. The only sector of the coal industry that is showing an appetite for new projects is the junior miners, which have more appetite for risk.

Some pressures affecting investment in coal are global: fluctuations in prices, changes in SA’s target markets from Europe to Asia, and environmental pressures against burning fossil fuels. Others are shared by SA’s entire mining industry: talk of nationalisation, delays and complexities in securing mining licences and, since the global economic crisis started, limited access to financing for new projects.

Exxaro chairman Len Konar says in the group’s latest annual report that in the 16 years to 2009 SA’s mining sector actually shrank, while the global average growth in mining was 5%. He ascribes this to outside factors like the volatile rand-dollar exchange rate and the recession. He says other issues affecting the local industry are being addressed, such as infrastructural challenges, bureaucratic delays, regulatory uncertainty, the balance between productivity and cost, and the limited pool of skills .

In his medium-term budget policy statement last week, finance minister Pravin Gordhan conceded SA had lagged behind other countries, like Brazil and Australia, in growth in mining production in the past eight years. He identified six main factors: regulatory uncertainty, logistical challenges, limited electricity generation capacity, currency volatility, the debate on nationalisation and the risks of deep-level gold mining .

To this, says Frans Barker of the Chamber of Mines, should be added the high cost of services provided by parastatals, like electricity, transport and potentially water. Xavier Prevost of XMP Consulting adds that talk of nationalisation is another big issue.

“The department of mineral resources said recently it didn’t think this was deterring investment. When you talk to investors from other countries, the first question they ask is whether SA is going to nationalise the mines. Until government makes a decision on it, no-one is going to invest in mines in SA.”

The logistical problem of rail and port bottlenecks is cited repeatedly by participants in the coal industry.

Prevost says SA’s problems are not impossible to overcome but that the country is not tackling them properly.

“Certainly, the coal industry is responsible for some of them. Transnet’s inability to provide enough rail capacity to move coal from mines to ports and local users has been one of the main issues preventing many mine projects from becoming feasible .

“Mines are prepared to invest in rail, but Transnet isn’t implementing talk into action. Transnet has been discussing expansion for a long time, but nothing happens,” he says.

Slides presented by Transnet CEO Brian Molefe at the recent Coaltrans conference in Madrid showed five coal export corridors in SA: Richards Bay Coal Terminal (RBCT) , Richards Bay Navitrade Terminal and Matola (the coal terminal at Maputo) for thermal coal, while Maputo main port and Durban Bulk Connections also handle sized coal. That gives total port capacity of 99,5Mt/year against rail capacity of 75,4Mt/year .

Molefe said Transnet’s target was to build up coal freight capacity to 81Mt/year by 2014/2015.

But why isn’t Transnet targeting at least 100Mt/year, if that’s what the ports can handle? There are two main reasons: the parastatal’s own lack of funding and, possibly more important, Transnet’s belief that the coal industry cannot produce as much as it claims it will.

With changing patterns of global economic growth, the focus of SA’s coal exports has moved from its traditional European market to Asia. Indian and Chinese buyers have been actively seeking to secure coal offtake from SA in the past couple of years.

The Financial Times reported on October 17 that the European Union’s “Energy Roadmap to 2050”, being prepared for release by the end of this year, suggests European consumers’ costs of energy would double by 2050 as wind power, requiring more infrastructure, would contribute more to the energy mix than nuclear and coal. Coal and gas currently provide about half of the EU’s electricity.

The International Energy Agency’s World Energy Outlook suggests OECD countries’ coal-fired power generation will fall up to 2035 as they move away from fossil fuels, but this will be more than offset by rising demand from developing countries. China’s 600 gigawatts (GW) of new coal-fired electricity capacity exceeds the current capacity of the US, EU and Japan.

According to statistics that Lars Schernikau of coal traders HMS Bergbau presented at the recent Coaltrans Madrid conference, India’s demand for steam coal is expected to rise to 1bn t by 2017 as domestic production cannot meet the country’s needs. He says it is difficult to predict China’s production and imports but its impact on the global thermal coal market is likely to be “huge”.

Yet the 2009/2010 department of mineral resources report forecasts that SA’s coal exports will increase only “slightly” this year. It says though demand from developed countries is expected to remain weak until clean coal technology is widely used, demand from Asia could push up prices.

Are changes in markets and fluctuating prices deterring investment in SA coal mines? Not as much as generally believed, Prevost says.

“Back in 2006/2007 SA was exporting 88% of its coal to Europe but, because it was unable to meet that demand, we lost ground, and now Colombia, which is further away, is supplying more coal to Europe than we are.

“Our main market is now Asia, but the Indians and Chinese buyers are very price-sensitive. When the price was $122/t, demand from Asia fell. Now the price is $110/t-$112/t and no-one is buying , which is why RBCT is not moving the tonnages that Transnet is delivering to the port.”

But that’s no reason for Transnet to slow down rail expansion, Prevost says.

“The general view in the market is that coal is the fuel of the future. Germany is replacing its nuclear power stations with coal-fired power stations using clean coal technology. Demand for coal will be good for 20 years or more. Clean coal technology will not remove all emissions but it will reduce them to negligible levels.”

Greenpeace SA doesn’t agree. “The assessments made by the Business Enterprises unit at the University of Pretoria show that ‘clean coal’ simply does not exist,” Greenpeace says in its report.

Hall told the Sanea conference that coal accounted for almost a third of the world’s primary energy in 2010, its highest share since 1970. The main reason is rapid demand from industrialising populations in the developing economies of China and India. The populations of the world’s cities will rise to 5,2bn by 2035 from 3,3bn at present, pushing up demand for energy and steel.

The SA Coal Road Map is to present 30-year scenarios for the industry, open these options for comment, and then move into its second phase, identifying a preferred scenario and ways to achieve this scenario.

The Fossil Fuel Foundation didn’t want to disclose its findings ahead of the general release. But Hall’s comments at the Sanea conference suggest the road map presents three scenarios.

The first assumes significant exploitation of SA’s coal resources, if government’s plans for 10GW from nuclear power stations and its renewable targets encounter capital constraints and delays. That would mean building more coal- fired power stations and developing the resources in the Waterberg, Soutpansberg and Limpopo basins, with associated rail infrastructure.

The second possibility is “moderate” use of SA’s coal, if government achieves its targets and SA fulfils its carbon emission-reduction promises. That would still see some development of rail infrastructure in the Waterberg, but slowly. Coal exports would rise until 2020, but only gradually, if at all, after that.

The third scenario is that the country’s future energy and that of the rest of the world would be sourced mainly from non fossil fuel sources, which means no new coal-fired power stations would be built and coal exports would decline.

If clean coal technology can be made to work successfully, SA should not ignore a major resource that can generate cheap electricity for economic development and continue to provide a large number of jobs.

Though there are environmental reservations about coal mining, the reality is that if SA doesn’t exploit its coal reserves, its own needs and those of the coal-hungry markets of Asia will be sourced from elsewhere.

(sourced Financial Mail)

Hike in import duty on power equipments will hurt us: NTPC

Thu, Nov 03, 2011 | Source : CNBC-TV18

India is in the midst of a massive power crisis with shortage of coal being cited as one of the key reasons. However, speaking to CNBC-TV18, Arup Roy Choudhury, CMD of state-run power generator NTPC said, things have definitely improved in the last couple of weeks.

The mining space was under severe stress of late with a barrage of issues ranging from political agitation to worker strikes. “We also had the aftereffect of the monsoon season to deal with,” Choudhury said adding. “…but all seems well going forward, and the generations have again picked up.”

NTPC’s plant load factor or PLF is up over 90%, informed Choudhury. He expects power generation to be much better in the third quarter compared to the previous one.

On the issue of imported coal, Choudhury said, it is not a viable option for Indian power producers. “We have to look at power generation through domestic coal,” he stated.

An important government meeting is scheduled today to consider imposing duty on imported power equipment. According to Choudhury, any increase in import duty will be a negative for NTPC. “It will have a direct ramification on power prices,” he added.

Last week, boosted by a better-than-expected top line growth, NTPC posted a 15% rise in net profit at Rs 2,424 crore during the second quarter of the current fiscal.

Below is the edited transcript of Choudhury’s interview with CNBC-TV18. Also watch the accompanying video.

Q: How bad is the coal shortage situation now? Is it a bit better than how it was three weeks back when we were hearing things like companies are working with one week supply or do things remain as difficult as that?

A: Well has definitely improved. If one can see how supply from our stations are growing. We had a critical situation where we had everything coming at one go. We had the Telangana agitation, Coal India’s strike for a day. We also had after effect of heavy monsoon. So that is over now and generations have picked up again. It is looking good at the moment.

Q: Will PLFs go up significantly now?

A: As of now today our PLFs are more than 90%.

Q: Do you see a temporary respite or a durable solution to the raw material issue because these things keep coming back and some of the private producers are still talking about fairly tight supply?

A: I don’t think I should make a bigger comment. But NTPC is a generating company and we have demonstrated time and again that with everything being available we are able to generate at the highest level.

Internationally also we are the number one company in capacity utilisation. But the main fear is coal and I don’t think imported coal is a solution because it increases the cost of power. So we have to look at domestic coal mining and exploit our reserves.

Q: We also hear that the Coal Ministry is almost set to restore the five captive coal block allotments to NTPC in a week but earlier there was a talk of cancellation on ground of delays in development. Have you heard anything on that front?

A: Yes you are right. It is going to get restored any day. We have been given connection for another 8,000 megawatt capacity. We received a letter saying that we will be given captive mines for that. So that improves our position. We will be able to do a majority of our own coal needs through our domestic mining in the next three to four years.

Q: There is an important meeting today in afternoon where the government is meeting to consider imposing duty on imported power equipment. If that comes through how could it affect companies like you who use such equipment? Could it be negative?

A: Well we are driving at reducing the cost of power. One of the important components is fixed cost which goes by cost of imported equipments or equipments. There is already a 15% purchase preference which is being enjoyed by domestic suppliers. Any increase beyond this is only going to load price of electricity.

India's quest for foreign coal looks here to stay

Thu Nov 3, 2011

MUMBAI (Reuters Breakingviews) - India looks set to keep searching for overseas coal. Though the country has the world's fourth largest reserves, environmental restrictions mean production is struggling to keep up with demand from coal-hungry power stations. That explains why Indian firms like Aditya Birla Group, which is considering a bid for Australia's $5 billion New Hope, are gobbling up overseas acquisitions.

Business argues government is to blame. Last year the former environment minister declared a third of coal reserves "no-go" areas. The policy has since been reversed, but regulatory clearances for new mining projects remain hard to come by. Coal India, supplier of 80 percent of the country's coal, may miss its supply targets for the current year. Power stations are running low on stock. The coal ministry projects a supply shortfall of up to 30 percent of its 2012 target.

While the industry is right to push for a resolution, the government has two legitimate concerns. First, coal reserves are predominantly located in densely-forested areas. Second, these areas are often inhabited by poor tribal communities. A new mining bill, which is yet to be passed in parliament, proposes firms share 26 percent of their earnings with the tribal communities they displace. That helps deal with the latter problem. But the government must still come up with a better environmental policy to replace the short-lived "no go" areas.

In the meantime, Indian companies are looking abroad. Even excluding Birla's interest in New Hope, groups have spent $10 billion this year on foreign mines. Though the quality of imported coal is better, it costs three times as much as the domestic variety. When the difference in quality is factored in, it is still 45 percent cheaper to use Indian coal to generate electricity. The more India relies on imports, the higher its electricity costs -- though that is still preferable to power shortages.

However, even if India can resolve its environmental issues it is not likely the country would fully reverse the trend towards coal imports. While domestic supply may look cheap, new sources of coal are buried deeper underground, and speculative reserves require further exploration. Bringing new domestic supply on stream will still drive up prices. India's overseas coal-buying spree looks set to continue.


-- Aditya Birla Group is considering bidding for Australia's New Hope Corp, a $5 billion coal miner that put itself up for auction last month, Reuters reported on Nov. 2.

-- Coal India, which supplies 80 percent of the country's coal, may miss its supply targets for the current fiscal year, the Mint newspaper reported on Oct. 28.

-- Coal India's chairman said: "Last year we had zero percent growth. This year we're in a negative growth. We're not getting blocks, we're not getting clearances."

-- India's coal ministry has promised more coal to existing power plants, but according to a report by the Press Trust of India on 27 Oct. around 33 power plants currently have coal supplies that can keep them running for just four days. Power plants usually stock around 10-15 days of coal.

-- Indian firms have already spent over $10 billion this year to acquire coal mines overseas. Adani paid $2.72 billion for Linc Energy's Australian mines. Reliance acquired three mines in Indonesia and GVK spent $1.26 billion on three Australian coal mines.

-- Reports in the Indian media on Sept. 20 suggested that the Indian government's group of ministers on coal had reached a compromise which would ease current policy embargoing coal mining in so-called "no-go" areas.

(sourced Reuters)

Steel Authority Profit Tumbles 55% on Coal Costs, Foreign-Currency Loss

Thu, Nov 3, 2011

Steel Authority of India Ltd. (SAIL), the nation’s second-biggest producer, reported a worse-than-expected 55 percent drop in second-quarter profit after paying higher coking coal prices and incurring foreign-exchange losses.

Net income fell to 4.95 billion rupees ($100 million), or 1.2 rupees a share, in the three months ended Sept. 30 from 10.9 billion rupees, or 2.64 rupees, a year earlier, the company said today in a statement. The median of 26 analyst estimates compiled by Bloomberg was 8.72 billion rupees. Sales gained 2 percent to 109.8 billion rupees.

Coking coal, a key raw material used to make steel, surged 40 percent during the period, compared with a 14 percent increase in the price of steel hot-rolled coils. Steel Authority imports about 70 percent of the coking-coal it needs.

The company booked a 5.09 billion-rupee foreign-exchange loss, against a gain of 1.53 billion rupees a year earlier, after the rupee depreciated 8.7 percent in the last quarter.

Shares of New Delhi-based Steel Authority fell as much as 4.9 percent to 107.25 rupees and traded at 109.25 rupees as of 2:54 p.m. in Mumbai. The stock has declined 40 percent this year, compared with a 15 percent drop in the key Sensitive Index of the Bombay Stock Exchange.

Raw material costs rose 15 percent to 56.1 billion rupees in the quarter, while employee expenses rose 16 percent to 19.8 billion rupees, the company said.

India’s steel demand, which grew 9.9 percent in the last fiscal year, is likely to rise at a slower pace in the year that started April 1 as higher interest rates curb demand for cars and homes, G.K. Basak, executive secretary of the steel ministry’s joint plant committee, said on Sept. 9.

Steel Authority in August said it plans to invest 350 billion rupees to build a factory at a shuttered fertilizer plant in the eastern state of Jharkhand, sidestepping land- acquisition hurdles.

(sourced Bloomberg)

Coal India Ltd gets Finance Ministry's nod for acquiring unlisted foreign companies

Thu,3 Nov, 2011

KOLKATA: Mining company Coal India Ltd (CIL) has got the Finance Ministry's nod for acquiring stake in overseas unlisted firms.

"We have received Union Finance Ministry's clarifications sought for overseas acquisitions. The ministry permitted (us) to go ahead with acquisition of unlisted firms," CIL chairman N C Jha said on the sidelines of the company's Foundation Day celebrations attended by Coal minister Sriprakash Jaiswal.

However, the Finance Ministry has not given complete relaxation to the norm of minimum 12 per cent internal rate of return (IRR) from such acquisitions.

"The Finance Ministry has said we can go ahead with the proposals even if the return is below 12 per cent if they are for strategic reasons, but those has to be cleared by them," Jha said.

He said CIL received proposals offering IRR between 9 and 12 per cent. The Finance Ministry will scrutinise the deals offering below 12 per cent IRR.

CIL, the world's largest coal miner, failed to strike any deal due to procedural delays in approval by the government. It had sought relaxation in two parameters of overseas acquisition norms, which were allowing them to acquire stake in unlisted firms, including those offering below 12 per cent IRR.

Jha said they would now pursue with some of the proposals lying before them.

(sourced ET)

SAIL, Posco bury hatchet ahead of steel minister's visit to Seoul

3 Nov, 2011 |ET Bureau

NEW DELHI: Steel Authority of India (SAIL) and Korea's Posco have largely settled their differences over the proposed 3 million tonne plant the two companies plan to build at Bokaro, ahead of a visit to Seoul by Union steel minister Beni Prasad Verma on November 6.

The differences were related to pricing of a key raw material and on the quantum of equity stakes for the two partners, said a person familiar with the negotiations. A team from Seoul has been working on details of the proposed agreement with SAIL over the last few days. They may, however, not have it ready before the minister's trip since any strategic alliance will have to be cleared by SAIL's board of committee.

The Korean steelmaker that will bring the patented non-coking coal steelmaking technology FINEX to the joint venture has agreed to SAIL's offer of iron ore fines at a 10% discount, said the person cited earlier. Posco had earlier wanted a 20% discount to market prices.

SAIL on its part has conceded to Posco's insistence on a majority equity stake. Posco had maintained that the Korean government which had funded the development of FINEX, would not okay a joint-venture involving the critical technology in which Posco had less than 51% stake. "Future joint ventures with SAIL could be on an equal partnership basis," said the person who is also involved in the discussions.

The two companies are still trying to sort out differences on whether SAIL could retain a first right of refusal for any future agreements with the Korean steelmaker. SAIL will be the first company to try out the FINEX technology outside of South Korea. According to sources, while Posco had offered to keep SAIL informed in such a situation, it didn't offer a first right to refusal. Posco's 12 million tonne plant in Gopalpur, Orissa will also use the FINEX technology.

(sourced EconomicTimes)

Greece crisis: Greece exit from euro possible: France, Germany

Thu, 3 Nov, 2011

CANNES, France: European leaders' long-delayed admission that a break-up of their cherished common currency was a distinct possibility is overshadowing a two-day meeting of the world's largest and fastest growing economies beginning Thursday in this Cote d'Azur resort.

French President Nicolas Sarkozy will welcome Barack Obama of the US, Hu Jintao of China as well as the leaders of India, Brazil, Russia and the other members of the Group of 20 leading world economies in the city made famous by its annual film festival, but the event is far from the star turn the unpopular French leader had hoped to make six months before he faces a tough re-election vote.

Sarkozy and other top EU officials have long held that it was unthinkable for Greece to quit the euro because it would be, Sarkozy has said, ``a failure of Europe.''

But in a late-night press conference with German chancellor Angela Merkel Wednesday, the leaders signalled for the first time that Greece's exit from the euro was indeed possible.

Saying that Europe had ``done everything we could'' to keep Greece in the eurozone, Sarkozy said ``now it is up to them to decide if they want to stay in the euro with us.''

That shift was prompted by the shock decision of Greek Prime Minister George Papandreou to call a controversial referendum on his country's $130 billion European bailout plan in early December that caught European leaders completely off guard and scrambling for a response.

Papandreou's stunning announcement Monday that he would stage a referendum roiled world financial markets and threw into question an ambitious and costly European deal worked out in torturous negotiations a week ago.

Merkel confirmed that Greece did not inform the rest of the eurozone about the referendum. ``This did not happen in a coordinated fashion,'' she said.

She and Sarkozy summoned Papandreou to Cannes for talks Wednesday at which European leaders expressed their anger and pressed him to hold the referendum as soon as possible.

A ``no'' vote in the referendum would have enormous consequences not just for Greece but for the rest of Europe. It could lead to a disorderly Greek default, force Greece out of the 17-nation eurozone, topple many fragile European banks and send the global economy spinning back into recession.

Sarkozy's office announced yet another round of discussions about Greece for Thursday morning, with Germany, Italy, Spain, the IMF and the European Union. The talks will notably not include Greece itself.

Playing hardball, eurozone officials said an (euro) 8 billion ($11 billion) loan that Greece needs within weeks to avoid bankruptcy was conditional on Greece backing the latest rescue deal.

Sarkozy had hoped the meeting of leaders of the Group of 20 leading world economies, in Cannes on Thursday and Friday, would be Europe's chance to assure the rest of the world that a comprehensive plan to deal with its debt crisis had finally been reached after nearly two years of half-measures and procrastination.

Papandreou's gambit ended that lofty ambition and likely derailed Sarkozy's hopes of transforming a successful summit into a boost to his own re-election chances.

The G-20 leaders are slated to discuss food security, reform of the international monetary system and the volatility of commodity prices _ none of which is expected to get much attention or produce any solid conclusions at a summit so dominated by the European quagmire.

Anti-capitalist protesters have not been cowed by the European debt drama, and have staged demonstrations demanding a tax on all financial transactions, an end to tax havens and more aid for development.

(sourced EconomicTimes)

JSW Ispat announces change in directorate

Thursday, 03 Nov 2011

JSW ISPAT Steel Ltd has informed BSE that:

1. Mr M Sankaranarayan has resigned as director of the company with effect from October 4th 2011, consequent upon withdrawal of his nomination by UTI.

2. Ms Manju Jain ceases to be a director of the company with effect from October 10th 2011, consequent upon withdrawal of her nomination by IFCI Ltd

Australian iron ore mine magnate leads fight against tax

Thu Nov 3, 2011

* Small Australian miners plea for mine tax changes
* Small miners say global miners will pay nothing
* Treasurer says big miners pay the most

CANBERRA, Nov 3 (Reuters) - A delegation of small- and mid-sized Australian mining company executives on Thursday called on Prime Minister Julia Gillard to abandon a proposed mining profits tax, saying the biggest firms would pay nothing and leave smaller ones to shoulder the burden.

The claim was immediately rejected by Treasurer Wayne Swan before the Australian Parliament.

Gillard earlier this year vowed to introduce a 30 percent tax on profits from iron ore and coal mining after holding closed-door negotiations with the nation's three biggest mining houses, BHP Billiton , Rio Tinto and Xstrata .

At the time, Gillard estimated the three companies would account for upwards of 90 percent of the estimated A$11 billion in revenue in the first three years.

Fortescue Metals Group founder Andrew Forrest, one of Australia's richest individuals, who made his fortune in iron ore mining, led the delegation, which also warned the tax threatened Australia's economic competitiveness and would stifle exploration.

"The government hasn't thought this through," Forrest told reporters.

Swan rejected the delegation's claim that big mining companies would not pay the new tax, and said companies reaping big profits from the mining boom would be legally required to pay their fair share.

"This tax does not discriminate against small miners. It will be paid predominantly by large miners," Swan told parliament, adding the comments by Forrest were "complete rubbish."

The government on Wednesday introduced legislation for the tax to apply to iron ore and coal miners making A$50 million or more in annual profits. It is scheduled to start July 1, 2012, though it is still uncertain if the government has the support it needs from three independent lawmakers to pass the bills.

Forrest, BC Iron managing director Mike Young, and Atlas Iron chief Dave Flanagan lobbied independent parliament members on Thursday to push their case for the government to rethink supporting the tax.

The executives released projections from accounting firm DBO claiming the tax would see small- and mid-tier miners pay an effective rate of 46 percent, while BHP Billiton and Rio Tinto would pay no tax due to the large deductions they would be afforded.

Forrest said the bigger mining houses would pay no tax under the plans for up to 25 years.

Young also criticised the A$50 million profit threshold for the tax as too low because it would apply to miners after they produce only about 800,000 tonnes of iron ore, a relatively small tonnage.

"We are going to be well above this threshold," Young told reporters.

BC Iron mined about 600,000 tonnes of iron ore last year, and is aiming for around 3 million tonnes this year.

By comparison, Rio Tinto mined more than 200 million tonnes of ore, BHP Billiton 15 million tonnes and Fortescue around 40 million tonnes.

(sourced Reuters)

Update on Fitzroy coal export hub in Queensland

Thursday, 03 Nov 2011

It is reported that a AUD 1.2 billion proposal for a central Queensland coal export facility will be rigorously assessed for its potential environmental, social and economic impacts.

Queensland Coordinator General Keith Davies has declared the Fitzroy Terminal, proposed for Port Alma, 50km south of Rockhampton, as a significant project.

The declaration does not indicate approval or endorsement, but signals the start of an assessment of the potential environmental, social and economic impacts.

The facility would have an export capacity of 22 million tonnes per year, generate up to 350 construction jobs and up to 150 operational jobs.

Deputy Premier Mr Andrew Fraser said it was important to secure appropriate infrastructure to service the growing mining industry in central Queensland, but there needed to be a balance with potential environmental impacts. He said that "If approved, the Fitzroy Terminal would help address the increase in demand for essential coal port facilities by providing an alternative port for smaller tonnage mines.”

The project is owned by a consortium including Queensland-based private investment group Mitchell Group Holdings.

The federal environment minister has also decided to conduct an environmental impact statement on the project.

The Queensland coordinator-general declares a proposal to be a significant project after considering its scale, complexity and technology components, as well as the potential effects on the environment.

(sourced from Nine msn)