Maharashtra Elektrosmelt merges with SAIL

Tuesday, 19 Jul 2011

Maharashtra Elektrosmelt Ltd, the 99.12% subsidiary of Maharatna Steel Authority of India Limited, has been merged with SAIL.

The process of merger of MEL with SAIL was started in April 2006 and culminated with the receipt of the final order from the Ministry of Corporate Affairs on June 14th 2011. The final order of amalgamation of MEL with SAIL has been filed with the Registrar of Companies at Delhi and Mumbai. It has been decided that all the public shareholders of MEL shall be allotted SAIL shares in a swap ratio of 1.7:1.

Located at Chandrapur in Maharashtra, MEL is a strategically important unit for SAIL as it meets the requirement of manganese based ferroalloys, a key input for iron & steel making. MEL presently has the capacity to produce about 100,000 tonnes of manganese based ferroalloys through the submerged arc furnace route. The merger of MEL with SAIL is expected to align the development of MEL and related investments in line with the ferroalloy requirements of SAIL.

SAIL has already made plans for the expansion of MEL. In this regard, Mr CS Verma chairman of SAIL said that commensurate with SAIL’s further expansion plans, MEL’s expansion will be pursued for meeting the full requirement of ferroalloys of the SAIL steel plants. To cater to the additional requirement of ferroalloys of SAIL plants in future, plans have been drawn up for installation of a third SAF with capacity to produce about 90,000 tonnes of ferromanganese at an estimated cost of about INR 200 crore.

The process of awarding of contract to the successful bidder is likely to be completed shortly. Addition of a 4 MW capacity power plant (steam turbine & generator) which will use byproduct gases from the proposed third furnace is also on the anvil at an estimated cost of INR 36 crore.

SAIL is also exploring the possibility of setting up a captive power plant of suitable capacity through the joint venture route within the MEL plant area in order to produce cost effective ferroalloys. Investment for this project is expected to be around INR 1,200 crore.

Chinese steel industry still has chance to restructure - Angang

Sunday, 06 Mar 2011

Reuters reported that the next five years will give China steel sector its last chance to resolve structural problems through a nationwide merger program.

Mr Zhang Xiaogang president of the Anshan Iron and Steel Group issued a stark warning to the domestic steel sector, saying that efficiency was shrinking as a result of chronic overcapacity problems.

He said that "The Chinese steel sector is facing an extremely big challenge and steel enterprises mustn't take the old road and chase their own investments, additional capacity and their own market share at a time when there is already overproduction."

Mr Zhang said the performance of the company in the fourth quarter of 2010 was not too good. He said “We didn't make losses in the fourth quarter but profits were lower than in the first, second and third quarters.”

Mr Zhang told reporters at last year that NPC session that the issues surrounding the merger were expected to be solved by the time parliament met again in 2011. This year he said the remaining stumbling blocks were likely to be overcome very soon, but he wouldn't provide further detail.

Mr Zhang said Angang and other steel firms were currently looking for investment opportunities abroad but costs were currently too high. He said that "Everybody wants to have but you can't just look to the next two years; you have to look at the end of five years and see if the results are good or not, whether the costs are good and whether there is competitiveness."

Mr Zhang added Chinese steel mills were unlikely to accept the more flexible monthly or even daily price adjustments now being offered by leading global miners saying China still seeks longer term agreements with the likes of Rio Tinto, BHP Billiton and Vale.

Anshan Iron and Steel based in northeast China Liaoning province and the parent of Shenzhen listed Angang has been involved in a protracted merger with local rival Benxi Iron and Steel.

China steel industry, by far the world biggest is estimated to have a total capacity of around 800 million tonnes. Crude steel production last year stood at 627 million tonnes. The sector has been struggling with lower margins in recent months with steel price increases failing to match the surge in the cost of key raw materials iron ore and coking coal. In its new five year plan for the sprawling sector, Beijing is pushing for a comprehensive consolidation drive saying that fewer mills will help create higher industry standards and reduce pollution and energy waste, as well as giving China a bigger say in global iron ore pricing.(sourced:Reuters)

Tags : Angang, China's crude steel production 627 million tonnes, raw material,

Ghost of Alcan haunts Rio as directors leave

March 5, 2011
By Barry FitzGerald, smh, Business Day

RIO TINTO might be back on top of its game but the fallout from its disastrous $US38 billion acquisition of the Canadian aluminium group Alcan in 2007 is still claiming victims, this time at the highest level.

The Anglo-Australian miner has announced that two non-executive directors, Sir Rod Eddington and Yves Fortier, will be retiring from the board at the conclusion of the group's annual meeting on May 5.

Rio has only three Australians on its board, despite Australia providing most of its earnings and operations, by a big margin.


Rio said that in replacing Sir Rod and Mr Fortier it would recognise the ''desirability of appointing another Australian director''.

Rio's senior independent director, Andrew Gould, has also flagged his departure at the conclusion of Rio's 2012 annual meeting.

Sir Rod's exit has been expected since he suffered the humiliation of a 36 per cent 'no' vote against his re-election to the board in 2009.

He does not face shareholders again at this year's annual general meeting but would have run the gauntlet at next year's meeting, were he still on the board.

Sir Rod and other non-executive directors were criticised for not checking the ambitions of the former Rio chairman Paul Skinner, who sought solace for Rio in the arms of the Chinese state-owned Chinalco, rather than turning to shareholders for a much-needed recapitalisation after the global financial crisis, as the miner eventually did with its new chairman, Jan du Plessis.

And before that, there was criticism that under Mr Skinner, Rio made a mistake by refusing to engage BHP Billiton during BHP's pre-global financial crisis takeover bid for the group.

Sir Rod's difficulties at Rio's 2009 annual meeting also came with the overlay of his boardroom position with the failed Allco Finance Group. He was was an Allco director from 2006 until 2009. Allco collapsed in November 2008 with debts of $1.1 billion

The official reason for Sir Rod's departure - he is 60 - is so he can wind back his extensive international travel commitments.

A graduate engineer from the University of Western Australia and Oxford, where he was a Rhodes scholar, Sir Rod has travelled more than most.

As for Mr Fortier, Alcan's chairman from 2002-07, his retirement was first announced in February last year. That placated investors, particularly in London, who were agitating for a board and management overhaul following the ill-timed Alcan acquisition.(Business Day)

Western Coal CEO to run Walter Energy after merger

Thursday, 03 Mar 2011 |Reuters|

Reuters reported that coal company Walter Energy Inc, which is in the process of buying Canada's Western Coal, said that Western CEO Mr Keith Calder will take the reins of the combined company after the deal is completed.

Walter Energy's interim CEO Mr Joe Leonard will step down from that position, but will remain on the company's board. The company said it expects the deal to close on April 1st 2011.

Walter agreed to buy Western Coal for USD 3.3 billion in December 2010, in a deal that will put it on track to becoming the world's No 3 producer of steel making metallurgical coal at a time of booming demand.

Mr Calder has been at the helm of Western Coal since late 2009 and was managing director of Rio Tinto's copper projects previously.

Western Coal has also nominated Mr Calder, Mr David Beatty and Mr Graham Marshall to serve on Walter's board.

Atlas Iron share in Giralia exceeds 90 percent milestone

Friday, 25 February 2011

Australian iron ore miner Atlas Iron Limited has announced that it holds 91.22 percent of the voting rights in fellow Australian iron ore mining company Giralia as of February 25.

As SteelOrbis previously reported, according to a statement made on February 4, Atlas had extended its approximately AU$828 million (US$831 million) off-market takeover bid for a 100 percent stake in Giralia Resources Limited which also operates in Australia's Pilbara region. Accordingly, the offer was extended until 5.00 pm, February 28, 2011 from February 11, 2011. The process started on January 11, 2011 with an acceptance condition of 90 percent. The company then changed its offer to unconditional.

The offer has been recommended by the board of Giralia, with the merger of the two Pilbara mining companies to create a group worth AU$2.5-3 billion.

"The two companies have deposits that either join or are very close to each other at Mt Webber, McPhee Creek, Beebyn Range and Western Creek. This merger is a great way to grow production, reduce operating costs, maximize cash flows and deliver significant value for all shareholders," Atlas' managing director David Flanagan commented in a previous statement.

As SteelOrbis also previously reported, Atlas had agreed to buy Perth-based metals developer Aurox Resources on March 10 last year in a deal worth AU$149 million at that date. The merger was completed by the end of August.

Tags: iron ore , raw mat , Australia , Oceania , investments , M&A , mining , Atlas
(sourced:steelorbis)

Nippon Steel Sumitomo merger to curb carbon credit demand

Saturday, 19 Feb 2011

Reuters reported that the merger of Japan's two largest steelmakers will likely cut steel output at home as they look to expand offshore and will further curb demand for UN backed carbon credits beyond 2012.

Steelmakers in resource poor Japan have steadily become more efficient since the 1970s and now use 15% to 20% less energy to produce a tonne of steel than their counterparts in the United States, Germany, India or China. They are also well below self pledged emissions targets linked to the Kyoto Protocol, the UN's main climate change pact that sets targets for about 40 rich nations during the 2008-2012 first phase.

Japanese steel firms could have a competitive advantage by expanding in poorer nations since they will be more efficient and ahead on the emissions reduction curve against rivals. It could also drive greater efficiency in the industry.

Mr Masaki Mita, Japan representative for energy data and pricing service Argus Media, said that "A positive implication of the merger would be the chance they can make their advanced energy saving technology a global standard."

Nippon Steel Corporation and Sumitomo Metal Industries have likely achieved emission goals they set for themselves over the five years to March 2013, helping Japan meet its Kyoto obligations for its 2008-2012 phase.

Once the merger is completed in 2012, the combined firm will be the world's No 2 steel producer behind ArcelorMittal and is expected to lower their emissions further from the combined figure of about 60 million tonnes of CO2 equivalent per year now.

A Tokyo based carbon trader said that "The merger is set to be completed in 2012, so I don't see any big news that would affect demand for Kyoto credits right now. But in the longer term, changes in Japan's industrial structure mean there will be fewer buyers of carbon credits, and that will have an impact on the market."

Similar success by other firms in Japan's steel sector, the country's main CO2 emitter, has seen firms ceasing to buy Kyoto carbon credits, including CERs (certified emissions reductions).

Japan's steel sector as a whole has bought about 50 million CERs or 5% of the total estimated flow of CERs for Kyoto's five year first phase. The credits are generated from UN approved clean energy projects in developing countries.

Each CER represents one tonne of CO2 saved from being emitted, such as using wind power instead of coal to generate electricity. Based on current market prices in Europe, the 50 million credits bought by the steel sector are worth around EUR 570 million, showing how significant the sector is to the international market.

Carbon traders said that steel companies have considered selling their surplus CERs, but are waiting to see projected final emissions balances for 2008-2012.

That is partly because the goal the sector set for itself for 2020 looks easier to meet than the one for 2008-2012. S, Japan is developing an alternative to the U.N. market schemes to promote its energy saving technology such as those used by steelmakers, and can obtain carbon offset certificates via bilateral agreements with poorer countries. This means the steel sector might have another option even if it fails to meet its 2020 goal.

Unlike Japanese firms, ArcelorMittal has had little appetite for Kyoto credits, benefiting from having more than half of its steel production in non EU countries where carbon regulations are looser.

Carbon dioxide from burning fossil fuels is the main greenhouse gas that scientists say is heating up the planet. Growth in steel demand centers on emerging markets, which are the target for Nippon Steel and Sumitomo as well.

Mr Akihiro Sawa executive senior fellow at the 21st Century Public Policy Institute in Tokyo said that the two firms would come up with steps to cut their CO2 emissions worldwide by 10% to 20% below current levels. He added that "I don't think they have agreed to consider a merger in the context of global climate change. Their intention has been driven by rivals like ArcelorMittal and concerns about their purchasing power against resource firms. Having said that, I'm sure their agenda for merger talks will include a strategy to fight climate change."

In 1990, Japan's steel sector as a whole emitted just over 200 million tonnes of CO2. But a peak out in domestic output means the sector is well within the goal of 183 million tonnes a year on average for 2008-2012, which would be down 9 percent from the Kyoto Protocol's base year of 1990.

The steel sector has set its own target for 2020 based on CO2 per unit of output, which does not necessarily cap CO2 in contrast to its 2008-2012 goal. If the sector meets the Japanese government's crude steel output estimate of 119.7 million tonnes for 2020, up 9% from last year, its self pledged target is to cut CO2 by 5 million tonnes from business as usual levels of about 210 million tonnes by 2020.

(Sourced from www.reuters.com)

Tags:CERs, European market, Carbon traders, Kyoto credits

Atlas Iron now holds 59.92 percent of voting rights in Giralia

Monday, 14February2011

Australian iron ore miner Atlas Iron Limited has announced that it holds 59.92 percent of the voting rights in fellow Australian iron ore mining company Giralia as of February 14.

As SteelOrbis previously reported, according to a statement made on February 4, Atlas had extended its approximately AU$828 million (US$831 million) off-market takeover bid for a 100 percent stake in Giralia Resources Limited which also operates in Australia's Pilbara region. Accordingly, the offer was extended until 5.00 pm, February 28, 2011 from February 11, 2011. The process started on January 11, 2011 with an acceptance condition of 90 percent.

The offer has been recommended by the board of Giralia, with the merger of the two Pilbara mining companies to create a group worth AU$2.5 billion.

"The two companies have deposits that either join or are very close to each other at Mt Webber, McPhee Creek, Beebyn Range and Western Creek. This merger is a great way to grow production, reduce operating costs, maximize cash flows and deliver significant value for all shareholders," Atlas' managing director David Flanagan commented in a previous statement.

As SteelOrbis also previously reported, Atlas had agreed to buy Perth-based metals developer Aurox Resources on March 10 last year in a deal worth AU$149 million at that date. The merger was completed by the end of August.

(sourced:steelorb

Tags:iron ore,raw mat, Australia, Oceania, mining, M&A, Atlas, Pellets, Lump ore,Fine ore

Steel deal sets example for Japan Inc say analysts

By David Watkins (AFP)
Monday,14 Feb'2011

TOKYO — The proposed merger of two Japanese steel giants is a sign of an industry looking to reassert itself and an example to Japan Inc. that restructuring is crucial to take on competition, say analysts.

Japan's biggest steelmaker Nippon Steel and third-ranked rival Sumitomo Metal Industries are working towards a merger that would create the world's second-largest steel firm by 2012, behind Luxembourg-based ArcelorMittal.

The agreement is the first steel industry merger in a decade in the country, and analysts say the move sets an example to the rest of Japan Inc. as it grapples with a weak home economy, a strong yen and rising overseas rivals.

"There is a desperate need for mergers and acquisitions to stitch together Japan's diffuse corporate base," said Nicholas Smith, director of equity research with MFGlobal in Tokyo.

The Nippon Steel-Sumitomo Metal move is seen as indicative of the growing need for steelmakers to gain leverage as prices for coal, iron ore and other raw materials of steel touch record levels.

"Increased scale will make them stronger in negotiating with raw material suppliers -- the rapid run-up in material prices had really hammered profitability," said Smith.

"The merger will give Nippon Steel the scale to consider acquisitions of raw material suppliers, like the Chinese steelmakers have done," he said, noting Chinese crude steel production has more than quadrupled in the last 10 years.

The deal also serves as an example to the rest of corporate Japan.

Many see consolidation in Japan's corporate space as essential to taking on overseas competition, with too many companies making the same products compared with the likes of South Korea and industrial champions such as Samsung.

"Often in comparison with South Korea, Japan is said to have too many players in such markets as autos and electrical machinery," added Hideyuki Araki, economist at Resona Research Institute.

"They vie for the same pie and can be worn out in domestic competition. There is no doubt that a single company that has a strong grip on the industry can better compete in international markets," he said.

Sony partly blamed a fall in third quarter profit on falling TV prices amid heavy competition in a sector where it is up against compatriots such as Toshiba, Panasonic and Sharp.

"Japanese companies are forced to cut prices and have only slim margins amid too much competition," said Hiroshi Watanabe, economist at Daiwa Institute of Research.

The Japanese government has recognised the need for consolidation and is promoting M&As because it sees the need for more reorganisation in a wide range of domestic industries, including materials and electrical machinery.

Tokyo is looking to encourage more mergers and acquisitions by simplifying the tender offer process, speeding up anti-monopoly vetting of merger plans and providing loans for deals, Japanese media reports said this week.

The number of mergers and acquisitions by Japanese firms tumbled 13 percent on-year to 1,707 in 2010, slipping far below a recent peak of 2,775 in 2006, according to M&A advisory firm Recof Corp, the Nikkei business daily reported.

But merger efforts have met with failure in the past year, with executives on both sides unable to iron out integration problems.

Shinsei Bank and Aozora Bank last year scrapped a merger plan because they could not agree on a business strategy.

Japanese drink giants Kirin Holding Co. and Suntory Holdings Ltd. last year abandoned ambitious plans to merge and create one of the world's biggest brewers, unable to overcome differences over who would own and manage the future company.

However, on Thursday drinks maker Sapporo announced it would boost its stake in soft drink firm Pokka, the latest in a series of deals in a shrinking market where players are searching for growth.

While it is important to expand scale in the way Nippon Steel and Sumitomo Metal plan to as they seek more control over prices, a balance needs to be struck to retain enough domestic competition to drive innovation, analysts say.

In particular, Japan must not risk ceding its advantage in high-end products where it still has a commanding share, analysts say. Its steel is seen a symbol of its manufacturing expertise.

Toyota buys nearly 60 percent of its sheet steel for auto bodies from Nippon Steel and Sumitomo, analysts say, and Mazda and Honda buy around 70 percent.

On the other hand, "anybody can make construction steel, and a dizzying array of companies do," said Smith.

(sourced:AFP)

Japanese Stocks Advance to Two-Week High on Steelmaker Merger, Earnings

Feb 4, 2011 12:51 PM GMT+0530
By Norie Kuboyama

Japanese stocks rose, sending benchmark indexes to their highest levels since Jan. 19, as steelmakers surged on a merger proposal and some company earnings improved.

Nippon Steel Corp., Japan’s largest steelmaker, jumped 9.1 percent after announcing a plan to combine with Sumitomo Metal Industries Ltd., which soared 16 percent. Mitsubishi UFJ Financial Group Inc., Japan’s No. 1 publicly traded bank, gained 0.9 percent after profit more than doubled. Sony Corp., Japan’s biggest exporter of consumer electronics, climbed 1.8 percent after reporting profit that exceeded analysts’ estimates.

If the merger proposal triggers further consolidation, that will likely make “a good impact” on investors’ outlook for the Japanese economy, said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $331 billion. “Company earnings are improving this year, beating the market consensus.”

The Nikkei 225 Stock Average rose 1.1 percent to 10,543.52 at the close in Tokyo. The broader Topix gained 0.8 percent to 935.36, with more than three times as many shares advancing as declining. For the week, the Nikkei 225 climbed 1.8 percent, while the Topix increased 1.7 percent. Both gauges gained for a second week.


Steelmakers had the biggest increase in the Topix among its 33 industry groups. Nippon Steel jumped 9.1 percent to 313 yen and Sumitomo Metal Industries surged 16 percent to 224 yen. They were the two largest contributors to the Topix’s gain.

Steelmakers’ Merger

Japan’s No. 1 and No. 3 steelmakers plan to combine to cut costs in what may be the country’s biggest non-bank takeover, aimed at gaining leverage over raw-material purchases and pricing of the metal as costs soar.

“Expectations are increasing for improved performance in the steel industry,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “If domestic competition is mitigated, there’s more chance of guaranteeing profit margins.”

The proposed merger between Sumitomo Metal Industries and Nippon Steel will create synergies for both companies as well as benefit “the wider steel industry by helping to increase pricing and margins,” Goldman Sachs Group Inc. analysts Rajeev Das and Nana Hasegawa said in a report dated today.

Mitsubishi UFJ rose 0.9 percent to 440 yen. The lender joined smaller rival Mizuho Financial Group Inc. in posting third-quarter profit that more than doubled as bad-loan costs fell. Mizuho, Japan’s No. 3 publicly traded lender, was unchanged at 162 yen, after rising as much as 2.5 percent earlier today.

U.S. Jobs

The Standard & Poor’s 500 Index climbed 0.2 percent yesterday in New York as retailers gained after sales exceeded projections and U.S. applications for jobless benefits decreased by 42,000 to 415,000 in the week ended Jan. 29. Economists had forecast claims would fall to 420,000, according to the median estimate in a Bloomberg News survey.

The Topix has gained 4.1 percent this year. Stocks in the index were valued at 16 times estimated earnings on average, compared with 13.6 times for the Standard & Poor’s 500 Index and 11.3 times for the Stoxx Europe 600 Index.

This week is the peak for quarterly results in Japan, with more than a third of the Topix index’s 1,668 companies scheduled to report earnings. Of the 803 companies that have posted net income since Jan. 1 for the latest quarter, 117 have exceeded analysts’ estimates, while 88 have missed them, according to data compiled by Bloomberg.

Sony Earnings

Sony, the maker of Bravia televisions, gained 1.8 percent to 2,919 yen. The company reported net income of 72.3 billion yen ($886 million) in the three months ended Dec. 31, beating the 65.9 billion yen average of six analyst estimates compiled by Bloomberg. Hitachi, a maker of products from home appliances to nuclear reactors, advanced 3 percent to 487 yen after raising its full-year net-income forecast 15 percent, citing cost cuts.

Softbank Corp., the exclusive provider of Apple Inc.’s iPhone in Japan, rallied 3.6 percent to 2,976 yen, the single largest contributor to the Nikkei 225, after boosting its annual operating profit forecast 20 percent, citing demand for the touch-screen smartphone. Softbank was the third-most active stock by value in Japan, following Sumitomo Metal Industries and Nippon Steel.

Jtekt Corp., an autoparts maker, soared 7.8 percent to 1,159 yen and had the third-biggest advance in the Nikkei, after CLSA Asia Pacific Markets boosted the stock price estimate to 1,250 yen from 1,100 yen, maintaining the “outperform” rating. Jtekt had a return to a nine-month profit from a year-earlier loss, the company said in a release before the market closed yesterday.

Mazda Motor Corp., Japan’s second-largest car exporter, sank 4.6 percent to 227 yen and had the sharpest fall in the Nikkei, after turning into a loss in the three months ended Dec. 31. Mazda posted a third-quarter net loss of 2.67 billion yen after a stronger yen cut the competitiveness of its exports.
(souced:Bloomberg.com)

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ICEX plans overseas delivery as iron ore futures see demand

By Soumik Dey Feb 03 2011 , New Delhi

Within days of its launch, India’s iron ore futures have garnered interest from overseas buyers and sellers of the mineral. India Commodity Exchange (ICEX), one of the first to launch the future delivery contract, said it now aims to settle even overseas delivery obligations through Indian ports.
“We are probably first exchange in the world to introduce iron ore futures. Within three days of launching contracts in the mineral, we are getting enquiries for delivery from abroad,” Rajnikant Patel, whole-time director of ICEX told Financial Chronicle.
Patel was inducted into the exchange’s board after Reliance Exchange Next bought up India Bulls stake in ICEX. He had earlier officiated as managing director and CEO of Bombay Stock Exchange and facilitated the exchange’s de-mutualisation.

“Our prices quoted for delivery to buyers abroad for the commodity is inclusive of cost, insurance and freight and deliveries could be arranged by us through Indian ports,” he said.
Overseas buyers, sellers and physical dealers with hedging interest showed interest in Indian iron ore futures. "Delivery enquiries were from mining firms in China and Australia while hedging interests were shown by some delivery agents of global steel companies. We are considering these enquiries positively as our prices are the most competitive," said Patel.
Four days from its launch, on ICEX, iron ore futures three-months delivery contracts totalled to 115,600 tonne. Iron ore futures prices after Thursday’s trade stood at Rs 7,946 per tonne after it opened on the exchange at Rs 8,036 per tonne on launch.

Meanwhile, Patel said that Reliance Spot Exchange handles ICEX spot deliveries as part of its move to streamline all operations in the exchange business and cut additional costs.
“ICEX is a one year-old exchange and we aim to focus on exchange’s business more on agricultural produce and minerals,” Patel said. Currently the exchange offers future delivery contracts for trade.
The exchange is also seeking to broad base its product range, membership and conduct introductory courses for commodities trading in the coming months. “We are not seeking growth in terms of volume perspective and would like to extend the scope and horizons of the market first instead,” he said.

On future of commodity exchange business, Patel said, that the space is likely to see some consolidation in the near future as str­onger players remain and the remaining becomes insignificant.
“We see the commodity exchange space constricting to just two or three major ones from six now. This would also be affected because of mergers and acquisitions in coming years,” Patel, also a former banker with the Reserve Bank of India said.(sourced:mydigitalfc.com)

Nippon, Sumitomo Metal merging to create No.2 steelmaker

Thu Feb 3, 2011 10:35am GMT

* Merged company would trail only ArcelorMittal in global steel output
* Nippon Steel, Sumitomo Metal aim to merge in Oct 2012
* Japan steelmakers face stiff competition from Asian rivals
* Merged company would have unmatched product lineup - analysts
By Junko Fujita

TOKYO, Feb 3 (Reuters) - Japan's Nippon Steel Corp and Sumitomo Metal Industries plan to merge to create the world's second-largest steelmaker in an effort to fend off tough competition from Asian rivals and offset shrinking demand from domestic automakers.
The deal, which would likely see Japan's top steelmaker Nippon Steel acquiring Sumitomo Metal, comes as the industry grapples with surging raw materials prices, exacerbated recently by floods in Australia.

Japanese steelmakers have been particularly hard hit as domestic automakers such as Toyota Motor Corp and Nissan Motor Co build fewer cars at home and expand in emerging markets such as India using products from local steelmakers.
They also face cut-throat competition from South Korea's POSCO and Baoshan Iron & Steel Co , China's biggest listed steelmaker, as Japanese automakers seek lower prices to weather an unfavorably strong yen.

Analysts, as well as Japanese government officials and politicians, welcomed the plans for the merger, which is subject to approval from Japan's Fair Trade Commission (FTC).
"The new group has a chance to become very competitive in Asia," said CLSA analyst Jeremie Capron, adding there was room for Sumitomo Metal to cut costs with the help of Nippon Steel.
"The merged company will have the best product line-up in the industry ranging from construction steel, auto steel sheets, thick plates to seamless pipes. That's quite unique, and the No.1 company, ArcelorMittal , does not have such a product line-up."
Nippon Steel, whose main customers include Japanese automakers, and Sumitomo Metal Industries, which is strong in seamless pipes used in the energy, construction and machinery sectors, said they aimed to merge in October 2012.
Nippon Steel and Japan's No.2 JFE Holdings last week cuts their outlooks for the year to March, citing rising costs of coking coal and iron ore.

"INDUSTRY GOLIATHS"
Nippon Steel executives had said the company was looking to deepen cooperation with Sumitomo Metal and Kobe Steel Ltd , with which it has some operational partnerships, but had cited objection from the FTC for its inability to do so.
The merged company would rank No.2 in the world, with a combined crude steel output of 47.8 million tonnes last year, Sumitomo Metal Industries President Hiroshi Tomono said at a news conference in Tokyo. It will employ more than 75,000 people.

That would still be about half the production of top-ranked ArcelorMittal but place the group ahead of Baosteel. Based on 2009 crude steel production, Nippon Steel ranked fourth in the world and Sumitomo Metal placed 19th, according to the World Steel Association.
"These are two industry goliaths. The merger of these two titans of industry looks designed to exceed anything the Chinese can do," said John Meyer, a London-based analyst at investment bank Fairfax.

"The integration...combines the production and technical skills of both companies to produce better-quality products more efficiently and more effectively. Other steel producers will struggle to compete with the new efficiencies of scale and services being offered by the joining of these titans," he added.
Nippon Steel, with a market capitalisation $24 billion, and Sumitomo Metal, valued at $11 billion, already hold minority stakes in each other.
They have not yet decided the merger ratio.
Nippon Steel President Shoji Muneoka told a news conference that he expected the FTC to approve the merger, given that the two firms have different product strengths.
Muneoka also said the relationship with Kobe Steel, in which Nippon Steel holds a stake of 3.4 percent, would be maintained.

Rival JFE said it supported the merger and Japanese Trade Minister Banri Kaieda said it had his blessing.
"The merger aims to strengthen global competitiveness through reorganisations of operations as global competition heats up in the steel industry," he said.
"I value such a move highly because it is line with our 'new growth strategy' aimed at realising a strong economy."
JFE unit JFE Steel was the last major merger in the Japanese steel industry, when Kawasaki Steel and NKK combined in 2002 to form what is now the world's fifth biggest steelmaker. (Additional reporting by Chang-Ran Kim, Yuko Inoue, Chikako Mogi, Nathan Layne in TOKYO, Nick Trevethan in SINGAPORE, Ploy Ten Kate in BANGKOK; Editing by Edwina Gibbs and Lincoln Feast)

Ncondezi Coal seeking Mozambican acquisitions

Monday, 17 Jan 2011
Ncondezi Coal Ltd, seeking to build a coal mine in Mozambique, said that it’s studying acquisitions as interest in the African nation rises following the AUD 3.9 billion bid for Riversdale Mining Ltd last month.
Mr Graham Mascall CEO of Ncondezi Coal said that “Now that we’re established in Mozambique, we have a very good profile with the government, with other industry players, with people interested and we’re getting a lot of in-bound opportunities which we’d like to have a look at. We’re looking predominantly in Mozambique.”
Mr Mascall said that “Mozambique has really grown in its interest for people because of the size of the coal resources I would be surprised if some of the thermal coal buyers in India, some of the steelmakers in China, aren’t looking at us and keeping a watching brief.”
Ncondezi holds four exploration licenses in the Mozambique province of Tete, adjacent to projects owned by Vale, the world’s biggest iron ore exporter and Riversdale. Ncondezi plans to start output from its USD 376 million thermal coal mine as early as 2013 and yesterday sold USD 36.5 million of new shares to buy out a founding holder and study merger and acquisition opportunities.
Rio Tinto Group, the world’s third largest mining company, last month agreed to buy Riversdale to secure reserves of coking coal. Rio’s bid has sparked interest in Mozambique’s mining industry, which has already attracted investment from Brazil’s Vale SA and BHP Billiton Ltd, the world’s two biggest mining companies.
Sourced from Bloomberg

China enterprises invest USD 6 billion to acquire overseas mines

Sunday, 16 Jan 2011

China Knowledge reported that Chinese enterprises spent USD 6.61 billion in the acquisition of overseas mines last year.
To acquire the overseas assets, several large sized Chinese enterprises launched overseas mergers and acquisitions last year including Aluminum Corp of China, or Chinalco, Jinchuan Group Ltd and Wuhan Iron and Steel Corp.
Jinchuan Group, the most active buyer among the Chinese companies has acquired three overseas mines for a total of more than USD 500 million.

The largest investment was contributed by Shandong Iron & Steel Group Co Ltd whose investment in an iron ore project in Africa worth USD 1.5 billion while Chinalco which teamed up with Australian mining company Rio Tinto to develop the Simandou iron ore project in Guinea for USD 1.3 billion was the second-largest project in the mining industry in terms of investment size.

Mr Jeremy South the person in charge of Deloitte Mining division in China said that Chinese enterprises were prudent with overseas M&A and they often seek cooperation with other companies while investing in overseas mines.

Courtesy news by China Knowledge)

Mergers & Acquisitions: CIC Energy agrees to offer from India’s JSW Energy

India’s JSW Energy has agreed to buy developer CIC Energy for C$7,42 a share in cash, in a transaction that has the support of the Toronto- and Botswana-listed company’s board.
CIC Energy owns the Mmamabula coal and power station project, in Botswana. Shares in the company jumped 33% last week after a trading halt was lifted, to C$6,91.
The announcement is the second investment by JSW in Southern African coal this year, after buying a stake in JSE-listed coal junior South African Coal Mining Holdings.
The offer, which values CIC at about C$422-million, represents a 203% premium to the volume-weighted average trading price for the company’s shares on the TSX for the 30-trading-day period ended September 14, the day before CIC announced it had received the takeover proposal.
However, the price is below the non- binding C$7,75 a share that CIC had previously indicated it could receive after entering exclusive negotiations last month.
“We believe that the terms of this offer provide fair value for CIC Energy shareholders in the current environment,” CIC chairperson and CEO Warren Newfield said in a statement.
“With South Africa’s increasingly apparent shift in energy policy, the outlook for coal-based power producers looking to supply South Africa has weakened.”
CIC has been waiting for an agreement to supply about 75% of the electricity from the Mmamabula project to South African utility Eskom.
But South Africa published a draft second Integrated Resource Plan in early October, outlining the country’s energy plans from 2013 onwards, which appeared to exclude plans to source coal-fired energy from projects in the rest of sub-Saharan Africa until after 2020.
CIC announced on October 8 that it had entered into exclusive negotiations on a take- over by an unnamed “multibillion-dollar conglomerate” which could buy between 51% and 100% of the company, at a nonbinding price of C$7,75 a share.
The October exclusivity agreement followed the announcement about a month earlier that the company had received an indicative proposal “from a multibillion- dollar Indian conglomerate with interests which include coal mining and power generation”.
CIC said last week that it had received a positive fairness opinion on the JSW offer from financial adviser Deutsche Bank Securities, and that the company’s directors and officers of CIC Energy had agreed to enter into lock-up agreements with JSW to tender their shares into the offer.
Under the agreement between the two companies, JSW must launch its offer by December 20, subject to due diligence, no material adverse change and shareholders representing at least 20% of CIC’s outstanding shares, including the officers and directors, having entered into lock-up agreements.
The offer will require government and regulatory approvals and approval by shareholders representing at least two-thirds of CIC Energy shares on a partially diluted basis.
CIC has agreed not to solicit other transactions, and JSW will have the right to match any superior offer. CIC will, under certain circumstances, also pay a break fee of about C$10,5-million if the acquisition is not completed.

News via miningweekly.com by Liezel Hill, 3rd December 2010
Edited by: Martin Zhuwakinyu