March 15, 2010

 

 

Indian Car Sales Surge 31% in February

 

Company	Feb '09	Feb '10	Growth%
Maruti Suzuki	70625	84765	20.02
Hyundai Motors	21215	31001	46.12
Mahindra	14720	18280	24.18
General Motors	4921	11111	125.78
Honda Siel	5579	6275	12.47
Toyota	2976	5993	101.37
Fiat	1309	2335	78.38
MRPL	1008	537	-46.72
Total	122353	160297	31.01

BHP Billiton to sell coking coal on short-term contracts :: March 10

 

Recently, world’s biggest mining company BHP Billiton Ltd offered customers three options for coking coal contracts. The first is for 50 percent supplies priced annually and 50 percent quarterly; the second is supplies divided between quarterly and semi annual contracts; and the third is for all prices to be set quarterly. This is the first time that the company sells coking coal on short term contracts as a three month supply and might be a signal for the iron ore contract to follow according to market's prediction. Previously, coking coal and iron ore suppliers benchmark prices were help from April 1 for an annually fixed price but now the situation might change. The four decade old iron ore pricing system was fractured last year after Chinese mills failed to reach agreement with suppliers.

  

 

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  New furnaces at Kobe Steel may revolutionize iron making - Mar 9

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  To the untrained eye, it was just a pile of metal. But a shipment of iron nuggets that arrived at Kobe Steel Limited's Tokyo head office in late January may have heralded a revolution in the world's steel industry that some are hoping will help save the planet.
  
  The unremarkable looking nuggets, each 5 to 25 millimeters in diameter, were the fruition of 15 years of research and development, originally sparked by a botched experiment by Kobe Steel workers in 1994 that does not use the blast furnaces that have dominated the industry for centuries.
  
  The new furnaces are nearly 50 times faster and can use cheaper coal and lower quality iron ore than the traditional process. Crucially, Kobe Steel says, carbon dioxide emissions are reduced by about 20%. Industry insiders hope the technology can help square the circle of reducing carbon dioxide emissions while allowing rapid industrialization in emerging economies such as China and Brazil.
  
  The revolutionary iron was produced on January 12th 2010 at a new plant in Minnesota, United States, which was jointly built by Kobe Steel and Steel Dynamics Inc. At the heart of the new process is a rotary hearth furnace that is 60 meters in diameter. Low quality iron ore and low cost, ordinary steam coal are used to produce high purity iron nuggets. The high quality coal used to make the coke which powers a blast furnace is unnecessary.
  
  Production only takes 10 minutes compared to an average of eight hours in a blast furnace and results in much reduced carbon dioxide emissions. Although the rotary hearth furnace produces only one-sixth of the output of a large blast furnace, it requires relatively little investment to build, which the technology's proponents say will suit emerging economies.
  
  Kobe Steel's technology, if widely adopted, would create a new market for low grade, low value iron ore which cannot be used in blast furnaces. Abandoned mines might find a new lease of life. That would cool down the overheating iron ore market.
  
  (Sourced from www.asahi.com)

   
   
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• BHP Billiton, Rio Tinto, Vale want 50% hike in long-term iron ore contract prices -Mar 5
• BEIJING: Global miners have upped the ante in their forthcoming negotiations with Chinese steel mills by seeking a 50 percent increase in the long-term contract iron ore prices for 2010-11. The tough stance adopted by BHP Billiton, Rio Tinto and Vale could put further pressure on the sagging bottom lines of Chinese steel mills, said industry sources. Rio Tinto has asked for a 50 percent hike over the 2009 benchmark price, while BHP wants the ore it supplies to some steel mills to be priced at spot rates. Vale on the other hand is keen on a flat 50 percent increase based on the difference between the spot price and the 2009 benchmark price, said an executive who heads the iron ore department of a large State-owned steel mill. "Baosteel, which is leading this year's ore talks, would wait and see how Japanese and South Korean steel mills react to the proposal before taking a decision in this regard as they do not want to be blamed subsequently for the steep rates," said the source. "If other Asian steel mills accept the new ore prices, then Chinese steel mills will have no other choice but to accept the same as stopping production is not in the best interests of the industry." China failed to reach an agreement last year with BHP, Rio and Vale after China's chief negotiator, the China Iron and Steel Association, insisted on a 45 percent discount over 2008 prices, rather than the 33 percent cut accepted by other Asian steel mills. Domestic steel mills subsequently turned to the spot markets for ore supplies and many mills signed individual contracts with the big three miners after accepting the 33 percent cut without making it public. Industry analysts said steel mills would be forced to accept the 50 percent price hike, even though it may squeeze their profits further. Official data shows that the average profit ratio of Chinese steel mills declined to 2.2 percent in 2009, down 53.4 percent from the previous year. Chinese steel mills have always been disadvantaged in the annual iron ore price talks due to the low concentration of the industry and galloping demand. Steel output is expected to rise 8.6 percent this year to 621.5 million tons thanks to the government's 4 trillion yuan stimulus plan. Steel mills increased iron ore imports by 42 percent to a record 628 million tons last year, further boosting expectations of an increase in the annual contract prices. Meanwhile spot iron ore prices surged to a record high this week, further complicating the negotiations.Prices of 63.5 percent iron ore rose to an 18-month high at $142 per ton including freight on Monday, more than double the benchmark prices settled in 2009. Investment bank Morgan Stanley raised its forecast this week for 2010 prices to go up by 60 percent compared with a 20 percent increase earlier. "Our company will feel the heat if this year's contract prices go up by 50 percent. We will be forced to increase delivery prices of steel products to offset the high raw material costs," said the managing director of a Jiangxi-based steel company. "It is not clear whether the market would digest the product price hikes as steel stocks are still high." Steel stocks in 26 major Chinese cities rose to 15.86 million tons on Feb 22, up 51 percent from a year ago, according to data from Mysteel.com

 

•  India could emerge as the fourth-largest manufacturing economy of the world, if the sector grows by 11 per cent for the next 15 years, a report said.
   
  The country's manufacturing sector, which 13th largest in the world, expanded at 6.8 per cent over the last 10 years (1999-2009). The US is the largest manufacturing economy followed by China, Japan and Germany.
  The CII-BCG report on Indian manufacturing sector said that to become the fourth largest manufacturing hub, the gross assets would need to increase by Rs 55-80 lakh crore by 2025.
  Exports growth would also need to accelerate to 18-20 per cent from the 11 per cent seen in the last decade and labour productivity should also increase substantially, it said.
  "Finally, India will have to produce many more world beaters from the manufacturing sector with 3-4 fold increase in the number of Indian manufacturing companies with annual revenue in excess of $1 billion from 25 today and 4-5 firms with annual revenue in excess of $100 billion," it added.
  Manufacturing contributes 15 per cent of India's GDP, 50 per cent of exports and 12 per cent of the workforce.
  The report further India will also have to develop a strong enabling infrastructure, exploring new avenues of growth and higher productivity and competitiveness.
  "Indian manufacturing has the potential to be the driving force in India’s economic development... Success, however, will require strong commitment, careful planning and willingness to make bold moves on part of both the government and industry...," it added.
  On the labour policy for manufacturing industry, the CII-BCG report said India has strong labour laws protecting worker rights, however, these same rights are seen to constrain the growth of large scale manufacturing and also introduce rigidity in the labour market.
  "If India has to achieve its growth aspirations, it is critical the policy interventions be made in labour laws be revised to facilitate higher scale, productivity and flexibility while protecting worker rights," it said.
  The government today also announced that a national manufacturing policy would be announced by August 
• Feb factory growth at 20-month high: PMI

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  India's manufacturing industry in February grew at its fastest pace in 20 months, expanding for the third month thanks to expanding output and new orders, a survey showed.

   

  The HSBC Markit Purchasing Managers' Index , based on a survey of 500 companies, rose to 58.5 in February, its strongest reading since June 2008, from 57.7 in January.

  A reading above 50 means activity is expanding.

  "At 58.5, the headline index is consistent with ongoing double-digit gains in industrial production which in turn is likely to mean that spare capacity is being eaten into rapidly," said Robert Prior-Wandesforde, Senior Asian Economist at HSBC.

  "Although the output prices balance surprisingly dropped back in February, while remaining consistent with price gains, there is more and more evidence of emerging supply-side constraints in labour and product markets."

  The new orders index rose to 64.0 from January's 62.9.

  "While new export orders grew less strongly in February than January this didn't prevent the overall new orders series from hitting a high in the current upturn," said Prior-Wandesforde. "The same was also true of output growth, which has rarely shown such strength since the series began in April 2005."

  In the 2010-11 federal budget released on Friday, the government said it expected Asia's third-biggest economy to grow faster than the 7.2 per cent it forecast for this fiscal year ending on March 31. It sees growth accelerating to 8.5 per cent in the 2010-11 fiscal year.

   

  Non ferrous metals in India

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  IRIS quoted the leading credit rating agency Crisil as saying that the impact of Union Budget 2010 to 2011 is neutral on the non ferrous metals industry as the rise in costs on account of increase in excise duty and levy of cess on coal is likely to be passed on.
  
  Increase in the CENVAT rate from 8% to 10% will result in an increase of around INR 2,000 to INR 2,500 per tonne on aluminium, zinc and lead prices and INR 7,000 to INR 8,000 per tonne on copper prices. The levy of cess of INR 50 per tonne on coal will result in marginal rise in cost of aluminium production.
  
  However, with an expected increase in demand, we expect the increase in costs to be passed on to buyers.
  
  (Sourced from IRIS)
   
  Budget to boost demand in auto, realty: Motilal Oswal

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  Domestic financial major Motilal Oswal Financial Services, in its budget review, has said that the Union Budget would boost demand in auto and real estate as concessions in the income tax would give more disposable income in the hands of the investors.

  The brokerage has also raised its weightage on domestic themes that include financials, autos and infrastructure. Among the large cap stocks, the brokerage is bullish on HDFC Bank, Bank of Baroda, Bajaj Auto, Maruti, BHEL, ACC, Cipla, ITC, Unitech, and Idea.

  "The most important positive has been concessions on personal income tax, which will release significant amounts for discretionary spending. This will boost demand for autos, real estate and various savings products," says the report. Movement to DTC and GST from April 2011 will be key reforms to watch for, it goes on to add. The brokerage also expects oil sector reforms to be announced in the first half of the current calendar year.
  
  While the brokerage says that the partial withdrawal of the stimulus measure through a two per cent hike in excise duty was on expected lines, the additional hike in duty on auto fuels and steep hike in excise duty for tobacco was unexpected.
  
  It also feels that a high disinvestment target of Rs 40,000 crore would call for stake sale in several state-owned companies over the next 12 months while the revenues of Rs 35,000 crore from 3G auction would be crucial for achieving growth estimates.
  
  Motilal Oswal is expecting earnings growth to return strongly, with an EPS CAGR of over 20 per cent in FY10-14, with FY11 EPS likely to grow by 31 per cent. "This coupled with the several reforms that the government proposes over the next 12 months would provide several investment opportunities," it explains

   
   

 

 

 

• Russian scrap market is tight, prices up
• Higher demand pushes silico-manganese price up in Europe
• Scrap import prices heading toward $400/t cfr east Asia
• Impasse in China FeCr import market as offers soar
• Ferro-alloy prices firm up, minor metals wait for direction
• Chinese Magnesium and antimony markets still quiet, tungsten relatively chaotic
• New furnaces at Kobe Steel may revolutionize iron making
• Economic growth to keep metal prices strong
• SinterCast Introduces New CGI Process Control Package

 

 

Partially rolling back the fiscal stimulus, the government raised excise duty by 2 per cent across the board