Essar Energy revives power purchase pact with Gujarat utility

Sat, Oct15, 2011

London: Essar Energy has revived a 25-year contract to supply Gujarat with 800 MW of power that was terminated two months ago.

The long-term power purchase agreement with Gujarat State electricity utility, Gujarat Urja Vikas Nigam Ltd was terminated in August, just three months after it was signed.

GUVNL had failed to meet certain conditions of the agreement within the agreed timetable, London-listed Essar Energy said at the time, not specifying what they were. Now the contract was being revived after the conditions had been satisfied, it said.
Tariff

Essar Energy will supply GUVNL with power at a levelised tariff of Rs 2.80 per kWh net of transition costs, according to the same terms struck in May. The supplies will come from Salaya II, the 1,320 MW capacity power plant, run on imported coal, due to be commissioned in the first quarter of 2014.

The rate is below that agreed in a contract signed with the Bihar Electricity Board in August. Essar Energy will supply 300 MW of contracted capacity for 25 years from its Tori power station in Jharkand at a levelised tariff of Rs 3.28 per kWh, significantly higher than a previous contract with the same electricity board. The deal prompted hopes that the firm could achieve higher tariffs from deals in the future, according to analysts.

Essar Energy currently has 1,600 MW of capacity operational, and an additional 8,070 MW under construction, as it hopes to increase power generation's contribution to its overall revenues, currently dominated by its refinery business. Other projects under construction include Mahan 1 in Madhya Pradesh, with 1,200 MW capacity, Salaya I, and III in Gujarat, with 1,200 MW and 600 MW capacity respectively.

Keywords: Essar Energy, Gujarat Urja Vikas Nigam, power purchase agreement, coal imports

(sourced Business Line)

Karnataka state will buy 1 million tonnes of imported coal

Sat,Oct15,2011

BANGALORE: Finally, the state has come up with a contingency plan to overcome hurdles in power generation due to coal shortage. It has placed orders to buy 1 million tonnes of imported coal from domestic sources to run its two major thermal power stations in north Karnataka.

"Though we cannot run our thermal plants purely on imported coal, we have decided to blend imported and domestic coal (20:80 ratio)," Karnataka Power Corporation (KPC) managing director Yogendra Tripathi said. Tripathi said the state government is buying imported coal from an Indian company ( Gupta Coal India Ltd) at Rs 5,700 per tonne, that's approximately Rs 570 crore for 1 million tonnes.Officials said use of imported coal will raise generation cost by more than Re 1 per unit.

Energy minister Shobha Karandlaje said the government is also looking at importing coal from Australia or Indonesia. "Our officials are trying to obtain a coal mining lease if it's available,'' she said in New Delhi on Wednesday.

(sourced TOI)

Bellary, CBI officials continue raids targeting mining areas

Saturday, Oct 15, 2011

CBI officials continued their raids targeting mining areas of Bellary on Friday.

They reached Bellary at midnight on Thursday and began their operations from 9am after reaching Sandur taluk.

Earlier, raids were first conducted on Deccan Mining Syndicate (DMS) which is said to be involved in illegal mining that was carried out by Associated Mining Company (AMC) belonging to G Aruna Lakshmi, wife of former minister G Janardhana Reddy.

The 15-member team was headed by DIG and CBI, Hyderabad. The raids were conducted on the leased mining areas of DMS. This is the second such raid by CBI officials on DMS property.

The officials came armed with documents to prove DMS had occupied about 42 hectares illegally without getting any lease grants. AMC occupied 10 hectares without proper grants.

Tahsildar KB Shivakumar, range forest officer Gopal, mines and geology department official Shankar, ACF officer Venkatesh and others provided relevant information on illegal occupation to CBI officials.

The officials then visited NMDC and collected details of irregularities alleged committed by AMC.

The raids followed a Supreme Court order to investigate the irregularities that were committed by G Janardhan Reddy and others associated with AMC and OMC. CBI officials also conducted raids on a couple of close aides of Reddy in Bellary, Hospet, Toranagallu and DMS.

According to a CBI official source, first information report was prepared on 134 persons after the Supreme Court passed an order to register cases against Associated Mining Company (AMC) and DMS.

In the meantime, former Lokayukta justice N Santosh Hegde hailed the raids by CBI officials from Andhra Pradesh. They were able to arrest G Janardhana Reddy for his involvement in illegal mining.

Although CBI officials based in Karnataka had conducted raids a couple of times, nothing came out of that. Instead of raids, action should be initiated, Hegde said.

(sourced DNA)

Coal India forced to divert e-auction lot

Saturday, Oct 15, 2011

By Sumit Moitra,DNA

Kolkata: Failure to supply adequate coal to the power sector creating spectre of wide spread power outages across the country has forced.

The coal ministry has directed Coal India to offer 4 million tonne of coal earmarked for the lucrative e-auctions to state-owned power plants in a bid to tide over the fuel crisis.

Coal India said the diversion is only for October.

Diversion of coal from e-auction to power sector, to which coal is sold at the base or notified price, would surely impact its profitability.

Coal India is supplying 900,000 to 950,000 tonne of coal to power plants every day, chairman Nirmal Chandra Jha said on Friday, without elaborating.

“The power sector is facing acute shortage of coal. In order to make more coal available to them, this month’s e-auction quota is being offered to them to lift the coal from as-is-where is basis by making their own arrangement. And that will be within the overall FSA quantity,” Jha said.

The miner has contracts to sell 347 million tonne of coal to utilities this year, said IA Khan, a deputy adviser at India’s Planning Commission.

“Most of the problems caused by heavy rains have been resolved, but we are hearing that there could be more strikes,” Choudhury said. “The situation in Telangana is fluid, but we’re doing our best to get back to normal.”

Pinakin Parekh and Neha Manpuria, analysts with JP Morgan said in a note on Friday that e-auction coal sales contributed 26% of Coal India’s Ebidta or operating profit, based on the first-quarter figures, and 11-12% of volumes.

State-owned power producer NTPC is struggling to keep some of its units going as coal supplies hit an all-time low partly due to Coal India’s overall poor output and also due stoppage of mining at Singareni Collieries due to the Telengana agitation.

Coal Ministry steps up coal supply to power firms

15 Oct, 2011

NEW DELHI: Amid coal shortages hitting power generation in the country, the government today said it has stepped up the supplies to power firms to overcome the crisis of load-shedding.

The ministry swung into action after electricity supply was badly hit in some parts, including North India.

"The coal dispatch has now increased to 180 rakes... out of which 149 rakes have been supplied to power sector," the coal ministry said in a statement.

The ministry had said yesterday that coal dispatches have increased to 169 rakes (as on Thursday), out of which 148 rakes had been supplied to the power sector

Coal Minister Sriprakash Jaiswal had said on Wednesday that normalcy in coal supply to power firms would be restored within 48 hours.

The total dispatches are likely to be increased further over the next few days, the statement said.

In order to meet the requirements of the power stations in north, the ministry said that it was targeting to increase the supply of rakes to 53 per day. The ministry had dispatched on an average 40 rakes per day of coal in the current month.

"The power plants in the northern region were supplied 140 rakes during the last three days, which includes 16 rakes to Badarpur TPS (Thermal Power Station) and 20 rakes to Dadri TPS," the statement said.

The ministry also said that the coal stock in the power houses, particularly north, was being monitored very closely and wherever required the supply of the fossil fuel was being increased.

"The coal companies have been advised to ensure priority movement of coal to the power stations," the statement said.

The power situation in the country is grim as many plants of the country's largest power generator NTPC are running below capacity levels due to paucity of coal.

Many states including Delhi, Maharashtra, Karnataka and West Bengal, have seen power cuts for long hours in the past few days.

A slew of factors, including floods in Orissa and Telangana agitation, have hit coal supplies to power units.

At present, over 40 thermal power stations have coal stocks sufficient to meet demand for less than a week. As many as 29 projects have less than four days of coal reserves.
(sourced ET)

Chinese mills offered better Q4 iron ore pricing options

Saturday, 15 Oct 2011

Reuters reported that a number of Chinese steel mills have been given the option to buy iron ore for the fourth quarter based on October to December spot rates instead of a common industry practice to buy on prices based on previous months.

Three mill sources briefed on the change told Reuters that miners, such as Vale SA have offered Chinese mills' the option to pay for fourth quarter supplies based on more current rates following the recent tumble in ore prices.

A source with one of China mid sized steel mills said "We received a letter from Vale asking us for our opinion of changing fourth quarter pricing to be based on October-December spot rates."

The spokeswoman at Vale was not immediately available for comment.

Reuters reported on Thursday that Chinese mills were seeking to postpone shipments or renegotiate fourth-quarter iron ore contracts.

Currently, prices for quarterly contracts are generally based on the average index prices over a three-month period ending a month before the start of each quarter. That means that prices for the fourth quarter would normally have been based on average spot prices from June to August when prices were higher than now.

(sourced from Reuters)

Iron ore spot at 11 month low and Shanghai rebar falls for 5th week

Saturday, 15 Oct 2011

Reuters spot iron ore prices fell to fresh 11 month lows on Friday on thin appetite from top buyer China where steel futures dropped for a second day on Friday on route for a fifth weekly decline.

Iron ore prices have lost around $10 a tonne so far this week as lower steel prices and tighter credit in China as well as the uncertainty facing the global economy convinced Chinese mills there was no immediate need to restock on the steel-making raw material.

An iron ore trader in Shanghai said "I can sum up the market in one word, terrible. We're still holding on to some cargo because prices have gone down a lot since after the Chinese holiday and they continue to fall. But you can easily get cargo these days."

Traders have said the steep drop in iron ore spot prices has prompted Chinese steel mills to seek either a postponement of shipments or a renegotiation of fourth quarter contracts. But BHP Billiton the world No. 3 iron ore miner said it has not had any shipment to China cancelled or renegotiated in the last few weeks.

Index-linked iron ore prices, based on spot deals in China and used by global miners in determining contract rates, fell to their lowest since November 2010 on Thursday.

An iron ore derivatives trader in Singapore said "The physical market is still under pressure and that's not going to be bullish for the swap market. Unless people see a ray of light at the end of the tunnel, we are not going to see a significant up move on swaps."

Key to the slower demand for iron ore is the sustained decline in steel prices in China, the world biggest consumer and producer. The most-traded January rebar contract on the Shanghai Futures Exchange slipped 0.6% to CNY 4,293 a tonne by the midday break. That contract hit a record low of CNY 4,255 on Wednesday.

Rebar which lost more than 11% in September is down by 1% this week its fifth straight week of decline excluding October 3 to 7 when China was shut for a public holiday.

(Sourced from Reuters)

No recent iron ore shipment to China cancelled - Mr Marcus Randolph

Saturday, 15 Oct 2011

Reuters quoted Mr Marcus Randolph CEO of Ferrous and Coal of BHP said global miner BHP Billiton has not had any iron ore shipment to China cancelled or renegotiated in the last few weeks.

He said that "We haven't had any shipment to China cancelled or renegotiated."

Traders said concern had risen in markets that Chinese steel mills were seeking to postpone shipments or renegotiate fourth quarter iron ore contracts as spot prices fell to their lowest since November 2010.

Global steel prices and production have weakened amid growing uncertainty about economic growth and financial markets in the second half.

Rival global mining group Rio Tinto reported on Thursday record iron ore sales for its third quarter, saying demand was holding up.

Mr Randolph said the iron ore sector was marked by insufficient supply, with BHP Billiton producing "as fast as we can", but that a pipeline of mining projects delayed by the 2008 financial crisis should outpace demand growth this decade.

He said that "We're expecting to see slower growth in iron ore as Chinese growth starts to tail off, adding his personal view was that Chinese steel use could overshoot its current growth trend before falling back and hitting iron ore and steel prices in coming years.”

He also said "If all of the projects come online and there are USD 430 billion of projects we will exceed the requirements of the steel industry in our forecast."

(Sourced from Reuters)

Indian Railways to rise in freight rates by 15pct

Saturday, 15 Oct 2011

BS reported that at a time when the industry is suffering from high inflation, the railways have decided to go for a more than 15% across the board rise in freight rates through the imposition of an extraneous hike in tariff. The move is meant to help the railways garner more revenue and is likely to translate into an INR 6,000 to INR 7,000 crore burden on the industry.

A 10% busy season charge on the base freight rate will be applicable from October 15th 2011. The railways will also impose a five per cent development surcharge from October 15th 2011 on the net tariff, comprised of the base freight rate and various demand management charges, under the dynamic pricing policy.

Unlike earlier, the busy season charge will be levied on all commodities except containerized cargo and certain automobile traffic. It is likely to continue till June 30th 2012.

All the commodities will be charged at the rate of 10%, with 100% exemption to container operators and automobile traffic moved in NJMG, BCACM and BCCNR wagons. Other charges like punitive charges for overloading, penal charges on misdeclaration and freight concession (discount rebate) will also be granted on the net tariff rate.

The railways had in 2007 imposed a 2% development surcharge to replace the safety surcharge levied earlier. That will now be levied at the rate of five per cent. Development surcharge will be calculated over and above the 10% busy season charge that has become applicable on the base freight rates from this month.

Though the railways did not increase freight rates at the time of the Budget in February, it has adopted the surcharge route to generate more revenue. For instance, in April this year it imposed a surcharge of five per cent on the coal and coke group. On all the other commodities, a seven per cent busy season charge was imposed. Similarly, it had imposed a surcharge on iron ore last year. Not only is the surcharge this time one of the highest so far, but it is also uniformly imposed on all commodities.

Before the introduction of the dynamic pricing policy in 2006, the railways' passenger fares and freight rates remained unchanged round the year and across all routes, even though tariffs for airlines and road sectors varied depending on the demand and the season. According to the dynamic pricing policy, the rates for non-peak season, non premium services and empty flow directions are less than the general rates; the rates for peak season and premium services could be higher than normal.

For freight, the non peak season is July 1 to September 30. For the passenger segment, this period is January 15 to April 15 and then July 15 to September 15 but the railways do not follow variable pricing for passengers.

An official on the condition of anonymity said generally an increase in freight rates was decided on need basis, depending on the amount of revenue required to be generated. He added that "The railways have not increased the base freight rate but only tinkered with the extraneous charges."

Officials defended the decision, saying the railways did not pass on the burden to customers despite an increase in input costs on account of fuel price hikes and higher wages.

(sourced from BS)

Coal miner Walter's shares rise on takeover talk

Sat, Oct15, 2011

* Stock rises for second consecutive day
* Two newspaper reports say Walter Energy is target

(Reuters) - Shares of Walter Energy rose for a second day on Friday on reports that the U.S. coal mining company is the target of a takeover.

The newspaper, The Australian, reported that BHP Billiton , the world's largest mining company, is considering a $6 billion bid for the company. It cited no sources.

On Thursday, a British newspaper, The Independent, said BHP and Anglo American were interested in acquiring Walter, which has large reserves of steel-making metallurgical coal. That report said Anglo had poured cold water on such talk when it first came up in September.

BHP declined to comment. The company has flagged that it would chase acquisitions in commodities where it is not one of the leading players, after it was forced to scrap three big takeovers between between 2008 and 2010 on competition and political concerns.

As one of the world's biggest coal producers, it would be likely to run into competition hurdles if it bid for Walter Energy.

UBS analyst Glyn Lawcock played down the likelihood that BHP would be interested in Walter Energy as BHP has the ability to double coking coal production from its Australian operations and is also focusing on Indonesia.

"U.S. coal producers are generally higher cost and lower margin than Australian assets within BHP current portfolio. I'm not sure why BHP would want to do it," he said.

A spokesman for Alabama-based Walter said the company would not comment on speculation

The company's shares rose 12 percent on Thursday and jumped 6 percent on Friday morning before easing to close up 2.8 percent at $77.36.

Analyst Lucas Pipes, of Brean Murray Carret & Co, said the price rise was clearly linked to the market talk that Walter was a target.

He said U.S. coal producer Peabody Energy and European steelmaker ArcelorMittal had just received final approval to go ahead with their joint acquisition of Australian miner Macarthur Coal .

"That indicates there's still a lot of demand for met coal reserves and Walter falls into that category," Pipes said.

Other U.S. coal stocks rose on Friday on macro-economic issues, analysts said. Alpha Natural Resources ended up 4.8 percent to $21.65, Arch Coal finished 4.4 percent higher at $17.50 and Peabody Energy rose 3.2 percent to $39.46. The Dow Jones coal index closed 4.4 percent higher.

ArcelorMittal puts 12 MTPA Orissa steel plant on backburner

Saturday, 15 Oct 2011

ET reported that perturbed over delays in getting necessary approvals and land acquisition issues, global steel giant ArcelorMittal is understood to have put its proposed 12 million tonnes steel plant in Orissa on back burner.

According to company sources, no progress has been made by the company in the state in last one and a half years and at the moment the company is focusing more on its plans for setting up steel units in Karnataka and Jharkhand.

Only 8 gram sabhas meetings out of 15 required for land acquisition in Orissa has been conducted till first half of 2010 and the status remains the same, sources said.

In 2006, ArcelorMittal had signed an MoU with the Orissa government to set up a 12 million tonnes per annum steel plant in four phases at Keonjhar, entailing an investment of INR 50,000 crore. The MoU is due for renewal in December 2011.

When asked whether project in Orissa was stalled, the company's India spokesperson declined to comment.

(sourced from ET)

Power situation grim as more states face crunch

New Delhi, October 14, 2011

Shortage of power in states such as Delhi, Andhra Pradesh, Maharashtra and Karnataka Friday threatened to cascade into a pan-India crisis with coal supplies hit due to varied reasons, including rains and civil strife. Several states have been facing three-four hours of power cuts a day and the situation appeared to be worsening despite some steps to spruce up feedstock supplies announced by Coal Minister Sriprakash Jaiswal Thursday.

"In order to ensure greater availability of coal for the power sector, the ministry of coal has decided to offer some of the e-auction coal to the sector during the current month," said a statement issued Wednesday evening.

As per the existing policy on supply of coal, 10 percent of the total available quantity of this feedstock is kept for e-auction. Jaiswal also directed officials to increase immediately loading of coal to 180 rakes per day from the present 153 rakes.

Out of these 145 rakes were earmarked for the power sector.

"We welcome this first step from the government. This will definitely help mitigate the immediate coal crisis,” said Ashok Khurana, director general of the Association of Power Producers, an lobby mainly for private players.

The main reasons behind the shortage of feedstock are heavy rains in some coal producing areas, a two-day strike by workers of state-run Coal India last week and the disruption of mining in Andhra Pradesh due to a strike to press for a separate state of Telengana.

As a result, many of the units of the country's largest power producing utility, the state-run NTPC, have been left with coal supplies for no more than two days. Some units were also operating at sub-optimal levels, power ministry officials said.

In the national capital, one of the two distribution companies said the situation was set to improve by weekend. "But during the interim, to the extent of the shortfall, the Delhi discoms will be constrained to undertake load shedding on a rotational basis."

In West Bengal, though, the situation was caused by Coal India's subsidiaries halting supplies to state-run utilities due to default in payment, prompting the state's power minister to assure people that the situation will improve in three days.

Gujarat, on the other hand, while not facing a power crisis decided to stop distribution to other states as a precautionary measure, claiming a 30 percent drop in coal supplies to the state from central government-run coal mining entities.

(sourced HT)

New pricing system for iron ore

By Alex MacDonald, The Australian
October 15, 2011 12:00AM

BHP Billiton plans to create a new, more transparent iron ore pricing system called Global Oreby the end of the year or early next year.

The chief executive of the company's ferrous and coal division, Marcus Randolph, told an audience at the World Steel Association in Paris that he was working with members to develop a pricing system that would allow iron ore prices to be quoted on a screen to provide the market with a more transparent price than index providers such as Platts.

"We have to have that in order to have a viable derivatives market," Mr Randolph said.

"As you try to create a financial market, a derivative market, you actually must have 100 per cent verification of what is the price right now. Global Ore is not based on a reported price; it's visible to people" on a screen real-time, he said.

Global Ore will be modelled on Global Coal, another trading platform BHP has helped set up where consumers and producers offer prices on a website in order to buy and sell thermal coal. Global Ore would be based on a similar ownership model to Global Coal, where both consumers and producers own the trading platform.

Financial institutions would also be able to participate, Mr Randolph said, but he wasn't clear whether that would be as a user or owner or both.

The Global Ore platform initially would allow consumers and producers to trade iron ore fines.

The derivatives market has grown since the world's three largest iron ore miners, BHP Billiton, Rio Tinto and Brazil's Vale, abandoned the annual price benchmarking system in 2009 for shorter term price contracts.

The contracts were set up on a quarterly system, but "most people are finding quarterly is an inconvenient period", Mr Randolph said. As a result, more contracts were now being priced on a monthly basis.

BHP sold more than 50 per cent of its iron ore on a monthly basis and an even higher proportion of its coking coal on a monthly basis, Mr Randolph said.

Only 15 per cent of world iron ore sales and 4 per cent of coking coal sales were done on price contracts longer than a quarter, he said. "The intent of a monthly price is not to negotiate. It's actually to fix the price where the market is. We are not where we have a transparent market, but we certainly have a low volatility market."

Mr Randolph said the Chinese were more willing to engage in short-term price negotiations than the Japanese, whose carmakers preferred annual steel contracts.

Simon Wandke, vice-president and chief commercial officer of Arcelor Mittal's mining unit, agreed with Mr Randolph that there was potential for a more liquid and transparent iron ore derivatives market, but he wasn't certain steelmakers would adopt such instruments given the low level of liquidity and the likelihood that they would cover only a portion of the grades and products in the iron ore market.

(sourced Dow Jones Newswires)

BHP set to bid $6bn for US coal giant Walter Energy

By Sarah-Jane Tasker,The Australian

October 15, 2011

BHP Billiton, the world's biggest mining company, is considering a $US6 billion ($5.86bn) takeover of a US coal producer to support its view that supply of the sought-after commodity will be scarcer than iron ore in the next decade.

Speculation from London yesterday suggested that the global major, fresh from receiving approval this week for its $30bn Olympic Dam copper and uranium expansion in South Australia, was circling Walter Energy, the world's largest producer of coal used for steelmaking.

The Birmingham, Alabama-based company was put in play in July, when activist hedge fund Audley Capital wrote to the board calling for it to seek a buyer because it lacked the leadership to take advantage of an "unprecedented market opportunity" after coal prices jumped.

Walter, whose share price has been cut in half since April, rebounded strongly on the takeover speculation. It jumped 13 per cent in New York to $US75.22 -- the biggest gain in five weeks.

With Walter Energy's market capitalised at about $US4.7bn, a bid of about $US6bn could be the target in any takeover move, given that analysts expect a 30 per cent bid premium.

Walter, which operates mines in Alabama, West Virginia, British Columbia and Wales, acquired Vancouver-based Western Coal in April for $C5.3bn, boosting its reach into Canada.

BHP chief executive Marius Kloppers is expected to be in Canada early next week, after the company's annual general meeting in London, where he is to meet Saskatchewan Premier Brad Wall.

While his visit is said to be an attempt to ease tensions between the miner and the government -- after BHP's $US39bn bid for Potash Corporation of Saskatchewan was killed off earlier this year because of political opposition to the deal -- it is also timely because of the bid speculation.

The global major's successful acquisitions this year were in shale gas in the US through a $US12.1bn bid for Petrohawk -- the miner's biggest acquisition -- and the $US4.75bn purchase of Chesapeake Energy's Arkansas shale ground.

But with the company tipping coal demand to increase in a supply-constrained market, its attention could now be turning to the steelmaking commodity.

BHP's chief executive of ferrous and coal, Marcus Randolph, said the company expected coking coal to be scarcer than iron ore over the next decade.

"We are more bearish about iron ore than coking coal," Mr Randolph said during the annual World Steel Association conference in Paris last week.

"Between now and 2020 there is going to be a lot more iron ore supply coming into the market than coking coal, and our expectation is that, of the two, the scarcer over that period of time will be coking coal."

One analyst said while it would be a surprise if BHP did bid for Walter, the activity could not be ruled out. "Mr Kloppers' acquisition agenda has always been assets that are large scale, low cost, easy to mine and a strong export market for the product. While this ticks all the boxes, it is not totally compelling," he said.

Rival bidders for Walter Energy could include Anglo American, Rio Tinto, Brazil's Vale and CSN. It was flagged early last month that Anglo American was considering a $US7.5bn bid for Walter.

Britain's Independent newspaper reported there was "vague speculation" that JPMorgan and Goldman Sachs had been called in as advisers to potential bidders.

BHP said it did not comment on market speculation.

(sourced The Australian)

Beowulf announces positive study on iron ore mines in Sweden

Friday, 14 Oct 2011

A study on Beowulf Minings Ruoutevare and Kallak iron ore mines in Sweden revealed they could generate revenues of USD 9.1 billion and USD 8.4 billion respectively.

Updated economic estimates included in the report suggest that, over the first 15 years of mining, at a rate of 10 million tonnes per annum, Ruoutevare could generate gross revenues of USD 9.1 billion and Kallak could generate gross revenues of USD 8.4 billion based on an a long term high product price forecast of USD 126 FOB a tonne for iron ore concentrate from Ruoutevare and USD 132 FOB a tonne for iron ore concentrate from Kallak.

Based on management current unclassified resource estimate of 600 million tonnes for Kallak, the mine life could be up to 60 years and the forthcoming maiden independent JORC resource estimate will be utilised to complete the full updated conceptual study on Kallak in due course.

An updated conceptual economic model shows a payback period on total investment of as low as 2 years for Ruoutevare and 2.4 years for Kallak compared to the previous 2010 estimates of 3.1 years and 3.6 years respectively.

Severstal to supply rolled steel for Kia Rio model

Friday, 14 October 2011

Russian steelmaker Severstal has begun to supply rolled steel for making front roof panels for the new Kia Rio model. Severstal earlier reached a similar supply agreement for another car, namely, the Hyundai Solaris (sedan and hatchback).

Over the first nine months of 2011, Severstal delivered a total of more than 4,500 mt of rolled steel to the Hyundai plant in St. Petersburg and obtained approval for 47 parts for the Hyundai Solaris (sedan and hatchback) and the Kia Rio sedan. The rolled steel delivered to the Hyundai plant meets the HYUNDAI-KIA GLOBAL MATERIAL GUIDE standard.

Severstal has invested over Ruble 634 million ($20.1 million) to improve its steel sheet quality for the automobile industry over the last two years. Severstal's innovations have been aimed at improving automobile body sheet quality, while its innovative developments have been confirmed by 88 patented technical solutions and 10 awards of international car showrooms.

Tags: Russia , CIS , Severstal , production , automotive , steelmaking (sourced steelorbis)

China Sept iron ore imports up 2pct at 60 million tonnes

Friday, 14 Oct 2011

Reuters quoted official data from China customs authority showed that China imported 60.57 million tonnes of iron ore in September up by 2.5% compared with the previous month and the highest monthly figure since January.

But despite the increase, Chinese traders remain pessimistic about their prospects in the coming months amid uncertainties about the global economy and tightening domestic credit. They said a decline in purchases since the middle of September was masked as buyers sought to guarantee supplies ahead of the National Day holiday.

A dealer based in the eastern Chinese port of Qingdao said "The high volume of imports is related to the early bookings made before the holiday."

Total imports over the first three quarters of the year reached 508 million tonnes up by 11%YoY.

China imported 1.33 million tonnes of steel products in September down by 1.5% while exports rose 0.5% to 4.21 million tonnes.

(Sourced from Reuters)

Australia’s IOH sells three iron ore tenements in Pilbara

Friday, 14 October 2011

Australia-based iron ore exploration company Iron Ore Holdings Limited (IOH) has announced that it has sold its three Central Pilbara satellite tenement packages, namely Phil's Creek, Lamb Creek, and Yandicoogina Creek to Process Minerals International (PMI), wholly-owned subsidiary of Australia-based diversified mining service and processing company Mineral Resources Ltd.

IOH will receive A$42 million cash over a 90-day period and at the final completion of the MinRes transaction IOH will retain 100 percent ownership of 878 million mt of JORC resources in the Pilbara region of Western Australia.

According to the IOH statement, for the transaction to be completed, IOH needs to get ministerial consent for the transfer of the relevant tenements and approval from the Department of Minerals & Petroleum for the Phil's Creek mining proposal. The parties have 45 business days to satisfy these conditions.

Tags: raw mat , Australia , Oceania , mining

China mills offered cheaper iron ore pricing options-sources

Fri Oct 14, 2011

* Several Chinese mills can buy iron ore based on current spot rate
* Reference period for Q4 rate moves to Oct-Dec from June-Aug
* Follows fall in spot iron ore to lowest since Nov 2010

By Ruby Lian and Fayen Wong

SHANGHAI, Oct 14 (Reuters) - Iron ore miners have given steel mills in top importer China the option to buy the raw material cheaper for fourth-quarter contracts, sources at mills said on Friday, following a fall in spot rates to 11-month lows.

Quarterly contracts are usually based on the average of index-linked spot prices over a three-month period ending a month before the start of each quarter.

But Chinese mills, with margins cut by lower steel prices, are not keen on paying more than $175 a tonne for iron ore -- the fourth-quarter contract rate based on June-August average spot prices -- when the current rate is around $160.

Three sources at Chinese mills briefed on the change told Reuters that iron ore miners, such as top producer Vale SA , have offered Chinese mills the option to pay for fourth-quarter supplies based on more current rates.

"We received a letter from Vale asking us for our opinion of changing fourth-quarter pricing to be based on October-December spot rates," said a source with one of China's mid-sized steel mills.

"Other miners have also said that they would consider steel mills' interests and have therefore made such moves."



Another official with one of China's largest steel mills told Reuters that his company would still buy iron ore based on index, but with the reference period changed to October through December.

A spokeswoman at Vale was not immediately available for comment.

Reuters reported on Thursday that Chinese mills were seeking to postpone shipments or renegotiate fourth-quarter iron ore contracts.

China is the world's biggest buyer of iron ore, the biggest money maker for Vale, Rio Tinto and BHP Billiton which together control around two- thirds of the global seaborne market.

Around 1 billion tonnes of iron ore is traded in the global seaborne market, with about 20 percent sold in the spot market and the rest via long-term contracts.

MORE FLEXIBLE

The debate over pricing options suggests that the quarterly contract pricing system, which the industry adopted last year after scrapping a 40-year-old custom of changing prices every year, may not last for long, traders said.

The industry could soon move to a monthly system to more quickly reflect swings in spot prices, they said.

"Because of the price swings in the spot market, the miners are going to have to be a little bit more flexible with their pricing system," said an iron ore trader in Singapore.

A number of Chinese customers have reneged on their annual contracts in late 2008 in order to source iron ore at cheaper prices following the collapse in the global economy.

Chinese mills have mostly paid lip service to longer-term pricing, citing benefits for the industry's stable development, while they have been willing to switch to spot pricing in the past.

Platts 62-percent grade index prices from June to August stood at an average $175.63 a tonne, down marginally from $176.96 in March-May, the basis for third-quarter pricing.

BHP Billiton, the world's No. 3 iron ore miner, said it has not had any shipment to China cancelled or renegotiated in the last few weeks.

An industry source said BHP has not made changes to its pricing periods as it already prices its ore close to the period of delivery, instead of using previous quarter's prices.

Unlike BHP, Vale and Rio Tinto still price the majority of their contracts on a quarterly basis.

(sourced Reuters)

US freight shipments reach two-year high

Friday, 14 October 2011

The US Department of Transportation's Bureau of Transportation Statistics (BTS) announced Thursday that the Freight Transportation Services Index (TSI) rose 0.4 percent in August from July, reaching the highest level since July 2008. Freight shipments have increased 19 of the last 28 months.

Freight shipments were also up 4.6 percent from August 2010 and 10.3 percent from August 2009. For the first eight months of 2011, however, the index increased by a more measured pace of 1.6 percent over 2010 levels.

(sourced steelorbis)

Tags: USA , North America , freight , trading

ArcelorMittal confirms closures at Liege site

Fri Oct 14, 2011

BRUSSELS Oct 14 (Reuters) - ArcelorMittal the world's largest steelmaker on Friday confirmed that it will permanently close its liquid phase steel production at its site in Liege, Belgium.

Union leaders said late on Wednesday that the group's local bosses had announced that the two blast furnaces, one idled since 2008, the other since August, and a foundry would be closed down.

ArcelorMittal said it faced a structural over-capacity in Northern Europe, given a difficult European market.

"The liquid phase in Liege is still not competitive enough under foreseeable market conditions," Joao Felix da Silva, CEO of ArcelorMittal Liege said in a statement on Friday.

Arcelor said the decision would not impact its capacity or market share in Europe.

(sourced Reuters)

Iron ore spot prices sag to 11 month lows and ample supply

Friday, 14 Oct 2011

Iron ore with 62% iron content dropped 2.4% to USD 161.25 a tonne based on Platts iron ore index IODBZ00-PLT the lowest since November 15. A similar gauge by Steel Index .IO62-CNI=SI fell 1.5% to USD 162 a level not seen since November 12.

A Singapore based iron ore trader said "There's a lot of supply now in the spot market and the Chinese are probably waiting for prices to drop further."

Signs of slowing steel demand in China, the world No 1 consumer and producer have weighed on steel prices particularly long products used for construction due to tighter credit in China and as a construction boom that fuelled a record production pace earlier in the year had lost steam.

The most traded January rebar contract on the Shanghai Futures Exchange declined 0.7% to CNY 4,318 a tonne by the midday break. Lower steel prices meant there was no rush for Chinese mills to buy iron ore with analysts also looking at a further drop in the price of the raw material.

Commonwealth Bank of Australia said "The current level of SHFE steel rebar futures suggests the iron ore price may ease to around USD 150 per tonne to USD 160 per tonne in line with our forecasts."

It said "Cost support in China for the marginal producer is around USD 145 to USD 150. We would expect prices for seaborne iron ore to be supported at USD 150 to USD 160 initially barring a more dramatic global growth slowdown."

A further decline in forward swaps showed investors are seeing more room for spot rates to fall. The Singapore Exchange cleared November contract shed USD 1.50 to USD 152.67 a tonne and December was off USD 1.25 to USD 148.

Still customs data showed China imported 60.57 million tonnes of iron ore in September up by 2.5% from August and the highest monthly figure since January.

Mr Graeme Train commodity analyst at Macquarie in Shanghai said "It would take pretty drastic circumstances for the Chinese to push back on imported ore."

He said that "Whether the price is going up or going down, the absolute level of iron ore imports will be the same unless you get a situation where global credit markets crunch and nobody can get LCs and ships can't sail."

Mr Train said iron ore shipments to China should continue to rise in the coming months as domestic ore production drops over the winter.

(Sourced from Reuters)

Scrap shipments lead US container exports in August

Friday, 14 October 2011

The Journal of Commerce/PIERS reported Thursday that US containerized exports in August were up 5.4 percent year-on-year, marking a three-month high. Overall containerized exports rose 1.2 percent over July volumes and 8 percent year-to-date, through August. In particular, scrap metals shipments were up 32 percent in August over July.

Exports totaled 977,330 20-foot equivalent units (TEUs) in August, for a second consecutive monthly gain. Total US exports in July and August were also up 5.2 percent over the same period last year.

Tags: scrap , raw mat , USA , North America , freight , trading (sourced steelorbis)

India’s iron ore exports down 12.3 percent in H1 FY 2011-12

Thursday, 13 October 2011

According to the data issued by the Indian Ports Association, in the first half of the Indian fiscal year 2011-12 (started March 31) iron ore exports from India's main ports reached 31.59 million mt, down 12.3 percent year on year. This figure accounts for approximately 80 percent of India's total iron ore exports.

In the given period, iron ore exports decreased at most of India's ports on year-on-year basis, except for the Port of Visakhapatnam with iron ore exports of 9.72 million mt, up 9.7 percent year on year. In August alone, iron ore exports from the Port of Visakhapatnam increased by 27.8 percent year on year.

(sourced steelorbis)

Peabody and ArcelorMittal receives clearance from China for Macarthur offer

Thursday, 13 October 2011

US-based giant coal company Peabody Energy and the world's biggest steelmaker ArcelorMittal have announced that they have received clearance from the Ministry of Commerce of the People's Republic of China (MOFCOM) for the $A16.00 per share cash offer to acquire all the outstanding shares of Australia-based low-volatile metallurgical coal producer Macarthur Coal Limited.

With the approval of MOFCOM, the companies have received all the necessary regulatory approvals for the acquisition.

The offer of PEAMCoal, the 60-40 joint venture formed by Peabody and Arcelor to bid for Macarthur, is still the only offer for Macarthur shares and it is scheduled to close on October 28, 2011 unless extended. PEAMCoal currently has approximately 22.78 percent relevant interest in Macarthur.

Tags: coking coal , raw mat , USA , Australia , Oceania , North America , mining , Macarthur Coal

(sourced steelorbis)

Iran’s steel export value up 64 percent in first half of Iranian year

Thursday, 13 October 2011

Iran's steel export value reached $264.4 million in the first half of the current Iranian year (March 21-September 20), up 64 percent year on year, according to the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO).

(sourced steelorbis)

India’s JSW and Japan’s MISI ink deal for steel processing JV in India

Thursday, 13 October 2011

Indian steelmaker JSW Steel Ltd has announced that it has signed a joint venture agreement with Japanese trading company Marubeni-Itochu Steel Inc. (MISI) to build a state-of-the-art steel processing center in northern India, under the name of JSW MI Steel Service Center Pvt. Ltd.

Both parties will hold 50 percent equity in the joint venture. The project will cost INR 1.22 billion ($24.8 million), 50 percent of which will be funded through equity and 50 percent through banks.

According to the JSW Steel statement, the first phase of the project is expected to come on stream in FY 2012-13 with an initial installed capacity of 180,000 mt per annum. The joint venture company will process flat steel products such as hot rolled, cold rolled and coated products for automotive, white goods, construction and other value-added sectors.

Tags: hrc , crc , coated , flats , India , Japan , Far East , Indian Subcon , production , investments , automotive , construction , steelmaking , white goods , JSW Steel , East Asia and Pacific , South Asia , Marubeni Corporation
(sourced steelorbis)

BHP Billiton: Raw material prices will come down in long run

Thursday, 13 October 2011

Mining giant BHP Billiton's chief executive ferrous and coal Marcus Randolph said at the 45th annual meeting of the World Steel Association (worldsteel) held in Paris on October 13, that steelmaking raw material prices, including prices of iron ore and coking coal, have increased significantly in the last 10 years since raw material demand has grown so fast that raw material producers have been unable to keep up.

Mr. Randolph stated that almost half of the seaborne iron ore trade is destined to China, while he predicted that the apparent steel consumption of China, which is currently a bit higher than 400 kg per capita will continue to rise for a while and then will begin to trend sideways at about 600 kg per capita. Thus, at some point the growth of China's iron ore demand is expected to slow down. According to Mr. Randolph's presentation, between 2010 and 2020 world iron ore demand will grow by four percent, while seaborne demand is expected to rise by five percent, as the seaborne trade is dominated by Chinese demand. As for coking coal, Mr. Randolph told attendees that, while China had been a net exporter of coking coal in the past, the country reached its coking coal production limit by 2008. As a result the growth in the seaborne coking coal trend differs from that for iron ore. Between 2010 and 2020, world coking coal demand is foreseen to rise by three percent, while seaborne demand is expected to increase by five percent in the same period.

In order to close the gap between demand and supply, Randolph said that huge investments are being implemented. Between 2010 and 2020, iron ore production in Australia is expected to increase by 15 percent, iron ore output is predicted to rise in Brazil by 12 percent, by 49 percent in West Africa and by three percent in India. However, supplies may still fall short even if all these projects are completed, the BHP Billiton official warned.

As for coking coal, between 2010 and 2020 coking coal output in Australia is expected to increase six percent, the output is predicted to grow by 15 percent in China, by 14 percent in Russia, five percent in Canada and 39 percent in South Africa.

Marcus Randolph defended the short-term pricing system, stating that the annual negotiations result in the buildup of large debts from the difference between the old price and the new price, and that deliveries get cancelled when spot prices are below the contract price or when low cost suppliers have been forced to cut production. Randolph said that market pricing mechanisms are now more transparent and the development of forward markets gives customers financial management tools.

Finally, Mr. Randolph told attendees that he expects iron ore prices to come down; however, the speed with which this happens, he said, will depend on project developments in Africa, Mongolia and Russia.

Tags: iron ore , coking coal , raw mat , Australia , China , Oceania , Far East , BHP , conferences , steelmaking , East Asia and Pacific
(sourced steelorbis)

China's average daily crude steel output at 1.93 million mt in late September

Thursday, 13 October 2011

According to the data released by the China Iron and Steel Association (CISA), in late September (Sept 21-30) average daily crude steel production of CISA member companies reached 1.6397 million mt, increasing by 0.61 percent as compared to late August (Aug. 21-31) this year.

Meanwhile, in late September, China's overall average daily production of crude steel reached 1.9304 million mt. Average daily production of crude steel in China for the whole of September amounted to 1.9377 million mt, increasing by 2.24 percent as compared to 1.8952 million mt in August.

Tags: raw mat , China , Far East , production , crude steel , East Asia and Pacific

(sourced steelorbis)

Rio achieves record iron ore sales

October 13, 2011

Australia's biggest iron ore producer Rio Tinto has set a new quarterly record for sales of the steelmaking commodity.

It also achieved a quarterly record for hard coking coal production, also used in the production of steel.

Rio sold 60 million tonnes of iron ore from its Pilbara operations in Western Australia, saying that ports and rail recovered strongly from bad weather earlier in the year.

It produced 50 million tonnes of iron ore during the quarter, up five per cent on the same quarter in 2010.

The company said its iron ore division was operating at full capacity.

The resources giant was selling all iron ore it produced and its growth programme was on track, supported by the strength of its balance sheet, chief executive Tom Albanese said in a statement.

The sales result was above analysts expectations.

The company's shares had shot up 3.48 per cent, or $2.37 per cent, to $69.83 at 1553 AEDT.

Rio Tinto, the world's second-largest iron producer after Vale of Brazil, is targeting 240 million tonnes production for calendar 2011, after first-half production of only 15 million tonnes.

Iron ore represents more than 70 per cent of group earnings.

The company said mined copper was hit by lower grades at Escondida and Kennecott Utah Copper and was down 32 per cent on the third quarter of 2010.

Bauxite production was up seven per cent on the prior corresponding period, with aluminium up two per cent but alumina down five per cent.

Coal production from the Queensland and NSW coal mines rebounded from the severe rains in the first half of the year, the company said.

Australian hard coking coal production set a new quarterly record and was 14 per cent higher than the third quarter of 2010 and 55 per cent higher than the second quarter.

Other production from the Australian coal operations favoured semi-soft coal which was 57 per cent higher than the third quarter of 2010 with thermal coal three per cent lower.

(sourced AAP)

ArcelorMittal mining arm courts external customers

Thu Oct 13, 2011

PARIS Oct 13 (Reuters) - The mining division of ArcelorMittal is aiming to increase raw material sales to other steelmakers as part of its new role as a standalone business within the world's largest steel group, a company executive said on Thursday.

ArcelorMittal has stepped up mining investments in an effort to secure raw material supply, and the company published for the first time separate results for its mining operations as part of its first-quarter earnings statement this year.

"It's no longer where mining is a cost centre or a cost support, mining is a profit driver going forward, just as the steel side is," Simon Wandke, ArcelorMittal's chief commercial officer for mining, said.

"We don't have to supply all our tonnes to ArcelorMittal Steel," he told the annual World Steel Association conference. "We have contracts with global steel companies, a number of our customers are in the room today."

ArcelorMittal was taking a "portfolio approach" to mining assets, using a mix of acquisitions and partnerships to secure specific types of metal ore, he said, citing the takeover of Canadian miner Baffinland this year as giving access to high-quality iron ore amid declining global quality.

ArcelorMittal is aiming to raise its iron ore production by 10 percent this year and its output of coking coal -- another raw material used in making steel -- by 20 percent.

Mining activities have attracted increasing attention from industrial users as high commodity prices linked to booming Chinese demand have shifted some profitability upstream.

Wandke said his division was selling raw materials to external customers through separate commercial operations.

"Our growth is global and not just internal. So we have offices for mining around the world that have a different front door from steel."

He declined to give details about steel customers or pricing levels when asked by Reuters on the sidelines of the conference.

Mining major BHP Billiton told the conference mining projects should allow iron ore supply growth to outpace demand this decade after a period of undersupply that has stoked prices.

Wandke said that this rebalancing of supply and demand would take some time while projects come onstream.

"We think the market is going to remain pretty tight for a number of years."

(sourced Reuters)

Rio is making piles from ore

By Barry FitzGerald
October 14, 2011

RIO Tinto is set to beat last year's record profit of $US14.32 billion comfortably after latest production figures showed it is well on the way to meeting its 2011 production target for iron ore - its profit mainstay.

The group's third (September) quarter production report, released yesterday, shows that Rio set new quarterly records for iron ore sales, as well as setting records for coking coal production.

Pilbara and Canadian iron ore production for companies owned or part-owned and managed by Rio was 64 million tonnes (Rio's share was 50 million tonnes) in the September quarter, up by 5 per cent on the previous corresponding period.

That took production for the first three quarters of the group's reporting year to 179 million tonnes (Rio's share was 141 million), leaving it requiring output of 61 million tonnes in the final quarter to hit its 240 million tonne target for the year.

The market pushed the stock $1.88, or 2.7 per cent, higher to $69.34. That was more than the 56¢, or 1.5 per cent, gain for BHP Billiton, which has yet to report for the September quarter.

Just as important for Rio in hitting production targets has been the ability of iron ore prices to be largely immune so far from the worst of the commodity price shakedown that has accompanied the equities rout on Europe's debt concerns.

Spot prices for the key steel-making raw material have weakened in the past month by about 9 per cent to $US162 a tonne. But that price is still well above last year's average of $US135 a tonne, ensuring that the bumper earnings from iron ore will continue for some time yet.

Most analysts have Rio earning more than $US17 billion for 2011, indicating a big second half given its profit for the June half was $US7.58 billion. That represented a 30 per cent improvement on the 2010 June-half result of $US5.8 billion.

Rio chief executive Tom Albanese highlighted iron ore's relative price strength in his commentary on the production report lodged with the stock exchange.

''Whilst we are mindful of current market volatility, the fundamentals are holding up well, particularly for bulk-traded [iron ore, coking and steaming coal] commodities,'' Mr Albanese said.

Coking coal prices have retreated recently but the spot price of $US256 a tonne remains well ahead of last year's average of $US217 a tonne. Steaming or energy coal has bucked the trend in recent weeks to edge higher to $US125 a tonne. Last year's average for the commodity was $US98 a tonne.

There were some areas of weakness in Rio's September production report, most notably in the copper division. A combination of industrial action in Chile and Indonesia and lower grades cut copper production by 32 per cent in the quarter from the previous corresponding period.

Sourced smh.com.au

JFE may build a new steel plant in SE Asia

Thursday, 13 Oct 2011

FT reported that JFE Steel is preparing a plan to build a new USD 3 billion steelmaking unit in South East Asia.

If the company goes ahead with the plan, it would mark the first time since the Second World War that any large Japanese steelmaker has built a large integrated plant outside Japan.

Mr Eiji Hayashida CEO of JFE told the Financial Times that a decision over going ahead with such a plant was likely within the next two years and could possibly be with a local industry partner.

He added that "It' the only way I can see to provide for the possibility of longer term growth for JFE, since I can see the opportunities for providing more steel in the company’s main traditional markets will be limited."

The countries JFE is most likely to choose for a new site includes Thailand, Malaysia, Vietnam and Indonesia. Possible collaborators with JFE could include the steelmakers JSW of India and Thailand's Sahaviriya Steel Industries.

According to Mr Hayashida, in each of these countries, the longer term growth prospects for steel seemed better than in Japan, China and South Korea, which have acted as the main growth locomotives for JFE over the past 20 years.

In 2010, JFE made 32.7 million tonnes of steel, behind the 36.1 million tonnes of steel produced by Nippon Steel, its larger Japanese rival. This year JFE’s output is likely to be down to 31 million tonnes, of which about 17 million tonnes will probably be sold in Japan.

Mr Hayashida said that manufacturing in Japan had settled into what he thinks will be a long term steady decline as a result of rising environmental regulation, the strong yen and problems over guaranteeing energy supply at a reasonable cost.

As for China, he thinks the economy is likely to grow but at a slower rate than recently, partly because of concerns by the Chinese authorities about keeping inflation under control.

The JFE head also thinks growth in demand for steel from China will be reined back due to what he feels will be a slowdown in exports of goods from China to Europe over the next two years, as a result of the eurozone crisis.

He said that "I'm very worried about the damage that I think is being done to the European economy by the economic uncertainties. In my view these problems are going to cause damage to the Chinese economy as well."

(Sourced from Financial Times Limited)

Indian coking coal imports in April to September 2011slip YoY

Thursday, 13 Oct 2011

BS citing experts and traders reported that coking coal imports into India dropped for the first time in last three months despite price fall in global markets as costlier dollar and an ailing steel industry demand squeezed import orders.

Data from Indian Ports Association showed that in April to September 2011 period, coking coal imports through Kolkata and Haldia was 2.83 million tonnes, down by 16% as compared with the same period in 2010. Imports at Visakhapatnam port dropped by 15.3% and at Paradip, the decline was 3.3% for the same period. These three eastern Indian ports account for almost 60% of India's coking coal import.

In April to September 2011 period, total imports declined by 0.4% YoY, after growing 2.3% in April to August 2011 period and 9.3% in April to July 2011 period.

Mr Arun Bhattoria, a Kolkata based coal trader, said that "Steel industry demand for coke has come down given the higher rates for iron ore. Some steel plants have raised steel prices while traders are importing steel, which gives better return than coking coal imports."

Mr Sandeep Jain, commodity analyst with Karvy Comtrade, said that "The main reason for coking coal import drop is the depreciation of rupee against the dollar. The rupee has weakened by almost 6% in the last month. Even though coking coal rates have gone down in dollar terms in global markets, Indian importers were unable to take the opportunity as dollar became costlier here."

Coking coal is currently priced at USD 280 per tonne, down from USD 310 a tonne in July to August 2011. The rates have come down as supply has improved from major exporter Australia after devastating flood there affected production in January.

(sourced from BS)

SAIL may ink Bokaro plant MoU with POSCO in November

Thursday, 13 Oct 2011

Reuters reported that Steel Authority of India Ltd is likely to sign an joint venture agreement with South Korean steel major POSCO for setting up a factory in eastern India.

Mr Beni Prasad Verma Indian steel minister told reporters “We are hopeful of signing the agreement in November. I will be going to Korea next month.”

SAIL and POSCO are looking to set up a 3 million tonnes steel plant in the eastern city of Bokaro with an investment of INR 160 billion (USD 3.2 billion).

(Sourced from Reuters)

Worldsteel cuts Indian steel demand grow in 2011 to 4.3pct from earlier 13.3pct

Thursday, 13 Oct 2011

World Steel Association in its Short Range Outlook for 2011 and 2012 said that India's steel consumption may grow by just 4.3% in 2011 to 67.7 million tonne.

Worldsteel said “In 2011, India’s steel use is forecast to grow by 4.3% to reach 67.7 million tonnes due to economic growth. In 2012, the growth rate is forecast to accelerate to 7.9%.”

On April 18th, worldsteel in Short Range Outlook for 2011 and 2012 had said “India is expected to show strong growth in steel use in the coming years due to its strong domestic economy, massive infrastructure needs and expansion of industrial production. In 2011, India’s steel use is forecast to grow by 13.3% to reach 68.7 million tonnes. In 2012, the growth rate is forecast to accelerate further to 14.3%.”

Steel consolidation now focused on China - Mr LN Mittal

Thursday, 13 Oct 2011

Dow Jones reported that as per the world's largest steel maker’s CEO Mr LN Mittal, China holds the greatest potential for further consolidation within the steel industry following the conclusion of a consolidation spree in developed world such as the US and Europe.

Mr Mittal on the sidelines of the annual World Steel Association said “The potential is only in China. If you go around the geographies there is limited potential" for consolidating assets elsewhere.”

He noted that consolidation has already occurred in regions such as Europe and in the US, the world's second largest steel consuming country after China.

Mr Mittal said Chinese steel consolidation would be led by China's top 10 producers rather than foreign companies.

But Mr Mittal doesn't expect ArcelorMittal will play a role in the consolidation. He said “China is not in a mood to allow foreign companies to increase their presence in the country.”

He expects China's top 10 Chinese steel producers will account for 60% of China's steel output in five years' time and 75% in 10 years, up from 40% to 45% at the moment.

He noted that within five years, Chinese steelmakers may also start to look internationally to expand their operations, which would be positive for globalization.

(Sourced from Dow Jones Newswires)

Australian coal producer Gujarat NRE downplays carbon tax impact

Thursday, 13 Oct 2011

A major Illawarra coal producer said carbon tax will not affect its plans to massively expand its operations.

Gujarat NRE has told the Australian stock exchange, the carbon tax will not affect its future growth and that it expects the tax to cost $2.70 per tonne of coal produced.

Mr Arun Jagatramka Chairman says the company will become one of Australia largest producers of hard coking coal to meet the growing demand in India.

He said that "The Indian steel industry today is producing about 70 million tonnes we expect India to be going to 200 million tonnes in less than 10 years' time that will require an additional 100 million tonnes of coking coal which is more than the current production of hard coking coal in Australia."

Mr Jagatramka says the Illawarra coal supplies are well suited to long-wall mining. He said that "The quality that we have here in the Illawarra is part of the top 10% in quality perspective of all the coke and quality in the world."

Meanwhile, Gujurat NRE has officially unveiled its new long-wall mining equipment which will be based at the company Russell Vale mine site north of Wollongong.

The company says the new equipment to benefit the region, with the machine expected to allow for up to three million tonnes of coal to be mined within the next three years.

The mine expansion has won approval from New South Wales Planning but has been referred to the Planning Assessment Commission for final approval due to the late disclosure of political donations.

(Sourced from www.abc.net.au)

Indonesia's coal rush - JOSEPH KIRSCHKE

Thu, 13 October 11

Last winter, the Chinese government mobilized thousands of soldiers and reservists of the People’s Liberation Army to the port of Qinhuangdao, the shipping point for more than half the country’s coal, in northeast China. Their collective mission: to help load and supply imported coal to avert massive power outages.

Amid a summer heat wave, China, which relies on half the world’s coal supply for 70 percent of its energy, is again in bad shape — even as it simultaneously mines coal and imports it at record levels. The Railway Ministry has deployed trains nationwide as 20 regions have instituted rations to cope with a power deficit far above that of Japan’s after the March tsunami.

All this is a plus for Indonesia, Southeast Asia’s biggest economy, which already exports more coal to China than any other nation. But Beijing’s increasing focus on innovation, economic sustainability and the environment means that thermal coal, or steam coal, will allow coal companies in Indonesia even more profits as China heaves further into the 21st century. Thermal coal is used for power generation, and Indonesia has more of it than any country in the world.

China is now the world’s leading consumer of coal — bringing in some 200 million tons of it at last year — since importing began four years ago, despite having the third-biggest reserves on the planet. But China’s domestic coal market faces serious hardships; each one drives up import demands, all contribute to a long-term drop in production.

Payloads from distant Inner Mongolia and Xinjiang, for example, face ramshackle highways: a 100-kilometer, two-week-long traffic jam filled with coal trucks just outside Beijing last year was nothing if not a reminder. Record mining fatalities — some 80 percent of the world’s total with 3,000 deaths annually — are also prompting authorities to shutter mines by the thousands. At the same time, according to Beijing’s China Coal Research Institute, four-fifths of all Chinese coal fails to meet national industrial standards.

But for a country building a new power plant weekly, with the world’s largest carbon footprint, the environment and energy efficiency are a priority. This is underscored in Beijing’s 12th Five-Year Guideline, a policy mandate dating back to foundation of the People’s Republic in 1949. In it, the Communist Party of China now emphasizes economic and environmental sustainability, including further use of thermal coal — both high-grade and low in sulfur.

This is excellent news for Indonesia. China, in fact, is predicted to more than double thermal coal imports to 200 million tons by 2015, up from 90 million tons this year, as 39 percent of the world’s increase will come from Indonesia. By 2030, global coal production is projected to reach seven billion tons — 5.2 billion of it being steam coal. Thermal coal, thus, is set to outstrip the value of all other Indonesian export commodities — well above other types of coal, minerals and natural gas.

Straddling the “Ring of Fire,” Indonesia is to geothermal power what the Persian Gulf is to oil — with 40 percent of the world’s thermal coal. This is an energy source used by 70 other countries and is considered highly sustainable. Indeed, thermal coal is already considered one of the most prized commodities on the planet.

China’s trend isn’t entirely new. In recognizing its value in reducing acid rain and greenhouse gases while increasing the efficiency of its coal-fired power plants, China has greatly surpassed the United States in its “clean coal” capacities. Developments include the 2008 establishment of a $73 million thermal coal research facility by the Chinese Academy of Sciences and British Petroleum. And Beijing has acquired 41 patents on thermal coal technology in the last 30 years.

Not only the European Union, Washington, too, has partnered with Beijing. It has done so in particular via China’s Thermal Power Research Institute, a leading research organization that has licensed technology to a US clean coal energy initiative. Previously scrapped due to high costs, the project was revived with $1 billion from the Obama administration in 2009.

This demand equals a win-win for Indonesia’s thermal coal companies — and, by extension, Indonesia, thanks to its low-cost work force and shipping industry. In May, President Susilo Bambang Yudhoyono officially announced a $468 billion economic master plan for 2011 to 2025 that some have called “ambitious.”

His wish may have already been granted.

About Joseph Kirschke
Joseph Kirschke is a Jakarta/Beijing-based Communications Consultant and Political Analyst who works with international investors, media and energy and trade companies.


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(sourced coalspot)

Coking coal price may surge again on rain in Queensland

Thursday, 13 Oct 2011

Bloomberg reported that the record rains that flooded Australia and led to surging coking coal prices last year are brewing again.

Australia Bureau of Meteorology said the chances of above average rainfall in parts of Northern Queensland in the rest of the year are 65% to 70%. One contributor is the returning La Nina weather event that cooling ocean temperatures and stronger trade winds are indicating may return this quarter.

Mr Andrew Watkins the bureau manager of climate prediction said “Last year was a near record La Nina event, possibly the second strongest since 1917-1918. About 50% of the time a La Nina follows a La Nina so it’s not that uncommon to have a double whammy.”

The previous La Nina, Australia most expensive natural disaster, shut mines and sent coal to a record USD 330 a tonne in the April to June quarter.

The prospect of disrupted supply from the world biggest exporter led Citigroup Inc analyst Mr Daniel Hynes to say coal may spike more than 20% to about USD 350 per tonne if the disruption is as severe as last summer.

Macquarie Group Ltd said a lack of inventory at steel mills could well cause a degree of panic should the forecast La Nina bring more rain to Queensland, disrupting supply. BHP Billiton Ltd the world biggest producer of coking coal with mines in Queensland Bowen Basin recorded a 30% jump in earnings from the fuel in fiscal 2011 because of higher prices even as the bad weather cut output.

Mr Richard Knights a mining analyst at Liberum Capital Ltd said “The impact on the coking coal market is enormous if the Bowen Basin is out of action in London said. A prolonged period of supply disruption would mean a sharp rise in the next quarterly contract.”

Current indicators show that a potential La Nina for the 2011-12 wet seasons will be weaker than the previous one that produced one of the strongest events on record, Atmospheric and oceanic indicators continue to show favorable odds towards a La Nina event.

(Sourced from Bloomberg)

Euro Coal-Prices dip, trade remains thin

Wed Oct 12, 2011

* Nov S.African trades at $112.50/T
* Oil rises but coal fails to follow

LONDON Oct 12 (Reuters) - Prompt physical coal prices fell slightly by around 25 U.S. cents a tonne on Wednesday after a day of quiet trade.

Few bids, offers or trades were reported in Europe, although South Korea and China have continued to quietly buy prompt cargoes, traders said.

"It's hard to see the market's direction clearly," said Emmanuel Fages, analyst with Societe Generale in Paris.

Coal has largely been immune to the sharp movements seen in other markets although prices have drifted lower by around $15 a tonne during the past two months.

Brent crude oil rose on Wednesday, lifted by news Slovakian lawmakers will approve a plan to expand powers in the euro zone rescue fund.

European demand has been minimal aside from the regular spot buying by one major utility which is always short physical coal but the pace of buying has picked up in Asia.

TRADES

A November loading South African cargo traded at $112.50 a tonne, up around 25 cents.

A December delivery DES ARA cargo traded at $119.50.

(sourced Reuters)

Russia Ashinskiy sees steel output rise 12pct in Jan to Sept

Wednesday, 12 Oct 2011

According to results for the January to September period of the current year, Russian steelmaker Ashinskiy Metallurgical Works produced 588,000 tonnes of steel in the given period, showing a 12.3%YoY. This production figure includes 577,700 tonnes of slab up by 14.5%YoY.

During the period in question, Ashinskiy Metallurgical Works produced 472,500 tonnes of rolled steel up by 4.3% compared to January to September 2010.

(sourced from steelorbis)

Russia Evraz revives dividends, shares soar

Wed Oct 12, 2011

* H1 net $263 mln, Reuters poll forecast $614 mln

* H1 EBITDA $1.62 bln, poll forecast $1.65 bln

* Shares up more than 10 percent in London

* Will pay interim, special dividend

Oct 12 (Reuters) - Russian steelmaker Evraz on Wednesday announced its first interim dividends since the global financial crisis hit in 2008, sending its shares sharply higher despite missing estimates with its first half results.

"As a result of the 1H 2011 performance and the strength of our balance sheet the directors have decided to resume the payment of dividends to shareholders," chief financial officer Giacomo Baizini said in a statement.

"We are declaring an interim dividend of US$89 million or 34 percent of our net income in 1H 2011. We are also declaring the payment of a special dividend of $402 million."

The payout is equivalent to $0.60 a share, and the special dividend equals $2.70 a share.

At 1656 GMT, the shares were up 10.4 percent or $1.63 at $17.25.

Evraz, part-owned by billionaire Roman Abramovich, has improved its liquidity position this year by reducing total debt to $6.04 billion at the end of the first half, compared to $7.81 billion at the end of 2010.

Fitch Ratings last month upgraded Evraz's debt rating to 'BB-' from 'B+' on the back of the company's successful refinancing and debt reduction efforts.

"All in all, the much improved balance sheet with no significant short-term maturities makes the results decent and the company less vulnerable in case of weak market conditions," VTB analysts wrote in a note.

Although the shares surged, the company's first-half net profit and earnings before depreciation, taxation and amortisation (EBITDA) came in below market expectations.

First half net profit was $263 million, while analysts polled by Reuters expected $614 million, up from a year-earlier loss of $270 million.

Evraz also said one-off losses related to the conversion of debts had reduced the figure from $494 million.

First half EBITDA was $1.63 billion, up from $1.15 billion in the year-earlier period and just below the $1.65 billion poll forecast.

Sales were $8.4 billion, up from $6.38 billion and more than the $8.14 billion poll forecast.

CHALLENGING MARKET

Evraz also warned that it has experienced weaker trading in recent weeks due to lower production and export prices in part caused by the challenging global economic environment.

"The group's recent trading has been impacted by scheduled repairs, lower production volumes, a weak market environment in the Czech Republic and a change in product mix in South Africa," Chief Executive Alexander Frolov said in a statement.

"In addition, in recent weeks, there have been some decreases in export prices," he added.

In China, the world's leading steel producer, Shanghai rebar prices dropped 11 percent in September.

The company, which does not ship significant volumes there, earned 34 percent of its revenues in Russia last year and 24 percent in the Americas, with another 10 percent of sales to the European market.

In a separate interview with Reuters Insider, Baizini said the company is prepared for any market slowdown.

"We make sure that we are not producing any steel which is unsold," he said.

"We do keep monitoring the situation, early days, but we're ready for it."
(sourced Reuters)

PPT iron ore terminal project awaits forest clearance

Wednesday, 12 Oct 2011

Telegraph reported that an INR 506 crore iron ore terminal project, an ambitious expansion project of Paradip Port Trust, remains stalled because of absence of clearance from the ministry of forest and environment.

The project could lead to a major increase of the cargo handling capacity of the port. Port authorities had felt the need for a deep draught iron ore berth to meet expeditious handling of ores because of the recent iron ore export boom.

Thereafter, an accord was signed between the PPT and a private bidder on July 1st 2009. However, the project has failed to move forward as the MoEF clearance has not yet been accorded.

Forest officials said that PPT officials had invited tender for the project in a hurry without being armed with the MoEF clearance. The clearance is mandatory for the project to take off.

Mr Manoj Kumar Mahapatra, divisional forest officer, Rajnagar Mangrove (wildlife) forest division said that "First, PPT authorities should have sought the MoEF go ahead before inviting global tenders. But they did not do so. Hence, the port trust will have to wait for the clearance."

Mr S Ananta Chandra Bose deputy chairman at PPT said that "The matter has been taken up with appropriate authorities. This project is of immense importance for the growth of the port. We are hopeful that MoEF will accord the seal of approval for the project without further delay."

Mr Mohapatra said that "Since this is an important port project, we are treating the case expeditiously. The PPT has already given us an undertaking that compensatory forestation will be carried out. The clearance proposal has been sent to the Union ministry. We expect a positive reply from MoEF very shortly."

The site for the terminal project is under the PPT's jurisdiction. However, the construction site falls under the coastal regulation zone territory and the MoEF clearance is a must for such projects.

(sourced from Telegraphindia)

Tata may cut Europe steel output if order books weak

Wed Oct 12, 2011

* Working at 80-85 pct of capacity vs 85-90 pct in H1 2011
* Tata Steel trying to reduce stocks-Köhler

LONDON Oct 12 (Reuters) - Tata Steel , the world's No. 7 steelmaker, may cut production further in Europe in the next few months if steel orders weaken, Karl-Ulrich Köhler, CEO of Tata Steel in Europe said on Wednesday.

The company had already cut production capacity from 85-90 percent in the first half this year to 80-85 percent currently, it said.

"We don't exactly know where this is going to go in the next couple of months," Köhler said during a press briefing, talking about the fragile economic situation in Europe.

"If it's a temporary thing we will find temporary solutions. We are not producing to stock, we are reducing stocks, that's part of our efficiency programme and if the order book is not supporting production we can certainly reduce further."

In September, Tata Steel's European unit, shut down one of its four blast furnaces in Scunthorpe, United Kingdom. Another blast furnace at the site was idled a few years ago on a long-term basis, while the two remaining furnaces are currently operating. Tata Steel Europe is the second-largest steel producer in Europe with an annual capacity of 18 million tonnes.

(sourced Reuters)

NMDC to auction 300000 tonne iron ore in on Oct 14

Wednesday, 12 Oct 2011

PTI reported that NMDC will conduct an E auction on Friday for the sale of 300,000 tonne of iron ore to steel and allied industries in Karnataka.

This will be second auction conducted by the mining major in a span of 10 days, having sold about 200,000 tonne of ore on October 4.
Mr Rana Som Chairman of NMDC told PTI that “On October 14, we are going to auction about 300,000 tonne of ore.”

He added that NMDC is looking to increase the quantum of iron ore to be sold through the E auction route in the coming days.

(Sourced from PTI)

Coal ministry to pull up CIL for missing production targets in Q1

Wednesday, 12 Oct 2011

PTI reported that Coal India Limited has blamed its failure to keep to production targets in Q1 this fiscal on rains and delays in securing green clearances, but the Indian coal ministry is in no mood for excuses and has called a meeting this week on the issue, where it is likely to berate the Navratna PSU's top brass.

An official in the coal ministry said “Coal India will be pulled up for missing its output target in the production target review meeting to be held this week.”

The meeting, to be chaired by Indian coal minister Mr Sriprakash Jaiswal, will be attended by officials of the coal ministry, CIL CMD Mr NC Jha and the CMDs of all the subsidiaries of CIL.

CIL had blamed early rains and inclement weather in the eastern region for playing spoilsport in achieving its 98.7 million tonne coal production target for the first quarter. In addition, a plethora of problems like delays in the grant of green clearances for its projects hurt production by CIL, which missed the April-June target by 2.4 million tonnes.

(Sourced from PTI)

Power crisis continue across the country

By Shambhavi RaiShambhavi Rai, CNN-IBN

Wed, Oct 12, 2011

New Delhi: There has been a severe power shortage for the last few days across Maharashtra and Karnataka. The two state governments have assured that the situation will soon be back to normal. With the states hit by one of its worst power crisis in recent times, people have begun attacking power distribution offices across the state.

The reason for the crisis is shortage of coal supply to power plants that has crippled power generation.

And it's not just Maharashtra, the capital too has faced up to four hours of power cuts everyday. Delhi power minister Haroon Yousuf said things will back to normal in two days. Yousuf blames UP for withdrawing more than its fair share of power form the Northern Grid.

Even Karnataka is severely hit with upto eight hours of load shedding in rural areas. While the Telangana crisis in neighbouring Andhra is being blamed for disruption in coal supplies, the Chief Minister says all is well.

Karnataka Chief Minister DV Sadanananda Gowda said, "We will get 500 MHZ of power from UPCL. For the time being we are commissioning a second unit of power transmission. We are meeting the Centre on October 14 and we hope they'll cooperate with us. We will provide full power on Deepavali, you can all enjoy."

Across India states have promised better power supply - but with the festival of lights round the corner, will it be a dark Deepavali?

(sourced IBNLive)

key word: Power Crisis, Maharashtra, New Delhi, Mumbai, UP, Mumbai, Karnataka , Powerless, Electricity

China Coal Price Rises as Qinhuangdao Stockpiles Plunge 25%

(Updates with port inventories in third paragraph.)

Oct.11 (Bloomberg) - Coal for generating power rose at China's Qinhuangdao port as inventories plunged to the lowest level in two years as utilities bought more before winter.

Coal with an energy value of 5,500 kilocalories per kilogram rose 0.6 percent to a range of 840 yuan ($132) to 850 yuan a metric ton yesterday, compared with two weeks earlier, according to data today from the China Coal Transport and Distribution Association. The association didn't publish data a week ago because of a national holiday.

Stockpiles at the port, which ships half of China's seaborne coal supplies, fell 25 percent to 4.41 million tons from two weeks earlier. That's the lowest level since inventories dropped to 4.06 million tons on Oct. 11, 2009.

Power plants in China typically start buying fuel from late September before peak heating demand during the colder months. This year, the biggest railway carrying coal from the northern mining province of Shanxi to Qinhuangdao started repairs on Sept. 21 for as long as 15 days, according to the Qinhuangdao Seaborne Coal Market industry website. The Daqin Railway repairs would cut daily capacity by 300,000 tons, the website said.

“Stockpiles fell as supplies reaching Qinhuangdao decreased because of the Daqin maintenance,” according to a report published on the association's website today. “Demand for coal also has risen as major power stations and heating companies started stockpiling coal early.”

Coal prices at Qinhuangdao are expected to remain steady in October as rising domestic demand is offset by increasing imports, the association said in the report.

China's coal imports rose to a record 17.5 million tons in July, according to customs data. Overseas purchases fell to 16.6 million tons in August, still 27 percent above the 13.1 million- ton monthly average from January to August.

(sourced BusinessWeek)

Power crisis looms in West Bengal as utilities run out of cash for coal

Daily power-cuts as long as 4-5 hours in West Bengal

By Pratim Ranjan Bose

Oct12, 2011
Kolkata :Nearly 90 lakh subscribers in West Bengal, barring Kolkata, now face daily power-cuts as long as 4-5 hours with the State utilities running out of money to pay for coal.

With declining own generation, official estimates suggest the average shortfall in the State is now running up to 600 MW a day.
Revenue gap

According to sources, fearing the frown of the Mamata Banerjee-led government, the power utilities (in generation or distribution) did not approach the regulator for tariff revision this year, and are now incurring a combined cash-loss of over Rs 200 crore a month.

The generation utility, West Bengal Power Development Corporation Ltd (WBPDCL), alone is facing a revenue gap of Rs 140 crore for supplying electricity at 25 per cent below cost price.
Outstanding to CIL

In the absence of budgetary support from the State Government, which is facing highest revenue gap among all States, WBPDCL has run up a huge outstanding of Rs 500 crore to three Coal India subsidiaries.

The bill had actually swelled to Rs 600 crore, inviting repeated reminders (and even stoppage of delivery) from CIL.

While a payment of around Rs 100 crore ensured coal supplies during Durga Puja, the situation worsened soon after the festival. As against a minimum requirement of 15-odd rakes (of 3,500 tonnes each), the coal arrivals are now 9-11 rakes a day.

The State's Power Minister, Mr Manish Gupta, admits that coal delivery, especially from Eastern Coal Fields (ECL), has been affected due to “issues related to delay in payment.”

However, he denied the existence of any funds crisis. He had also blamed CIL for arbitrarily raising prices with effect from February.

“CIL, being a PSU, should ensure supplies to the State at an affordable price,” Mr Gupta said. He was sure the power situation would return to normal in a couple of days.
Precarious situation

Meanwhile, utilities have raised nearly Rs 2,100 crore short-term loans to meet the cash shortfall. While WBPDCL has already exhausted its credit limit and is finding it difficult to raise more funds, the distribution utility has scope to raise Rs 200 crore more — enough to run the show for two more months.

The 25 lakh consumers of CESC Ltd in Kolkata are, however, not facing a crisis, as of now.

Keywords: Power crisis, Coal, West Bengal, daily power-cuts, Electricity

(sourced Business Line)

Battle over huge coal deposit highlights risks in Indonesia

By Michael Taylor
Oct11, 2011

JAKARTA (Reuters) - Indonesia contains some of the world's richest mineral deposits, located tantalizingly close to the markets of China and India, but a court battle over a $1.8 billion coal mine highlights the risks foreign miners face in the country.

London-listed Churchill Mining Plc has been in dispute with Indonesia's Nusantara Group for three years over the right to develop the world's seventh-largest undeveloped coal asset. The case has reached Indonesia's highest court and could take years more to settle.

The 350-sq-km (135-sq-mile) mine site in East Kutai, a coastal district in East Kalimantan province, is said to contain 2.8 billion tonnes of coal reserves.

"It's a big medium to low-grade thermal coal deposit," Churchill Executive Chairman David Quinlivan told Reuters in a telephone interview. "That requires a substantial amount of infrastructure to be able to bring it into production.

"But once in production, it will be very much a long-term project -- 50 years or more."

Nusantara Group originally held six licenses in the disputed area. According to court documents filed by Churchill, these lapsed between March 2006 and March 2007. The East Kutai government declared the area open to other companies and Indonesian firm PT Ridlatama received four mining licenses, Churchill said.

Between November 2007 and February 2008, Churchill bought a 75 percent stake in Ridlatama's licenses and spent about $40 million on the project. But after Churchill announced in May 2008 that the project could yield substantial coal, things turned messy.

A few weeks later, the East Kutai regional government granted extensions to the Nusantara Group mining licenses that Churchill believed had lapsed.

The undeveloped and potentially highly lucrative coal mine has since become the subject of a series of legal tussles . But after a March 2011 tribunal ruling in Indonesia, Churchill and minority partner Ridlatama no longer own the East Kutai project.

Churchill filed an appeal on September 26 in Indonesia's Supreme Court. It is unclear how long the court's verdict will take.

"At least months and it can be years," said Rozik Soetjipto, an Indonesia mining consultant on supreme court judgments. "About one or two years, maybe longer if something is very exceptional, but generally less than two years."

Officials at Nusantara were unavailable for comment despite repeated telephone calls and e-mails.

LEGAL TUSSLE

"I'm disappointed more than anything else -- that it had to get to this to try and maintain title," Quinlivan said, adding that Churchill may seek international arbitration. "The legal process doesn't end in Indonesia."

According to Churchill, Nusantara Group is controlled by former Indonesian army general Prabowo Subianto.

Prabowo was a former head of the Kopassus special forces and was once married to one of former strongman President Suharto's daughters. He is the son of a former Indonesian finance minister and data from Indonesia's anti-graft agency shows he had an estimated personal wealth of about $160 million as of 2009.

The legal tussle between Nusantara and Churchill also highlights the complex bureaucracy of the sprawling country of 17,000 islands.

"If you are going to be on the wrong side of a land acquisition that is in dispute, if it gets blown up in the press, then you will end up with the perception that regulatory risk is getting worse," said Andreas Bokkenheuser, an analyst at UBS. "But if you look beyond assets in dispute, I actually see the regulatory risk improving in Indonesia."

The government is drafting a rule that would, by 2014, require miners to carry out minimum processing on minerals before export -- part of a mining and coal law introduced in 2009 aimed at making life easier for investors.

Despite these changes, one Indonesia-based analyst estimated there are currently about 100 unresolved disputes involving mine ownership or licenses.

"They are trying to clean up the sector," said Bokkenheuser. "We're seeing enforcement of the law, which is positive... There is still a concerted effort to make the mining environment more attractive for foreigners to come in and invest."

Indonesia's coal export growth will be fueled in large part by China and India, where power demand is expected to lift coal imports significantly over the next five years. Output will hit 340-354 million tonnes for 2011, industry groups say.

The government has also tabled a new land bill to speed up land acquisition, but it may be not be effective until 2012 and companies still face risks.

"Number one, don't underestimate the legal due diligence," said Bokkenheuser, referring to foreign miners looking to invest in Indonesia. "Use a combination of Indonesian and foreign guys to do so because you will need local help on that issue.

"Point number two ... you need to make it clear what kind of land you have got -- because land is another regulatory issue -- we still don't have a land reform (bill) in Indonesia that empowers the government to buy land."

For Churchill, the advice may be too late.

"My advice would be, be wary and make sure you've done extensive -- and I mean extensive -- due diligence," Quinlivan said. "Even though, whilst you may have done all this due diligence, and we certainly believe we had, things can turn around that are very unexpected.

"If there is a loophole there, somebody will use it." ($1 = 8905 Indonesian Rupiah)
(sourced Reuters)