Essar Steel joins race to bid for Severstal’s US unit

Essar Steel has joined the race to bid for a US unit of Severstal, Russia’s largest metal producer, as the Ruias-promoted company prepares to build capacity overseas after acquiring raw material assets in the US.

So far, steel major US Steel, the Renco Group and Aurora Capital Corp have expressed interest in bidding for Severstal’s American units. Severstal has put its three units in the US on the block — Sparrows Point in Maryland, Warren at Ohio and the Wheeling plant in West Virginia. While Severstal is looking for buyers for the three plants, according to people connected with the development, Essar is keen only on the Sparrows Point unit.

An Essar Steel spokesperson said: “As a group, we keep looking at growth opportunities in the businesses that we are in. However, it is not our policy to comment on any specific proposal.” The Ruia Group has interests in the US through its $1.6-billion steel plant in Minnesota and coal mines in Trinity. Essar owns iron ore mines at Minnesota and has also built a sponge iron plant to be used as feedstock for the 4-million tonne Algoma plant in Canada.


Indian steel ministry not in favor of higher import duty on steel

BL reported that the Indian steel ministry is not in favor of hiking import duty of steel to tackle the problem of cheap imports.

Mr PK Misra steel secretary while peaking at a FICCI steel summit said “We are not in favour of creating artificial barriers for import. By putting artificial barriers for imports the consumer will suffer. The industry should build up capacity to stop the imports.”

He added that imports have also gone up because of the gap between supply and demand.

He told “While steel consumption this year has grown by 9.7% the production has only grown by 2.7%.”


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Tata Steel hedges against ore uncertainty

Tata Steel Ltd’s quest to secure iron ore supplies for its European steel facilities has achieved a key milestone. It will invest Canadian $300 million, or Rs. 1,350 crore, for buying an 80% stake in the direct shipping ore (DSO) project of New Millennium Capital Corp. (NMCC), a Canadian mineral explorer.

The joint venture will use the money to develop the mine, and in return, will supply all the output to Tata Steel.

The DSO project is expected to start supplies in 2012 to Tata Steel, which will pay benchmark world prices to the company. Thus, it will not get preferential pricing, though it may able to negotiate for longer term contracts.

The big iron ore mining companies, such as BHP Billiton Ltd and Rio Tinto Plc, have shifted to a quarterly pricing system. But Tata Steel will get assured supplies of specified grades, and it can also optimize on freight costs due to proximity to its European operations.


Tata Steel may sell South Africa plant

Prices of steel will continue to remain high, said Tata Steel MD H M Nerurkar. “As the cost of inputs like iron ore and coal will remain high, steel prices will also remain firm,” he said.

While availability of iron ore and coal would be a matter of concern to increase production of steel in the country, at present, there is enough iron ore to meet the domestic demand, Nerurkar said.

If the consumption level goes up further, India will need to import raw materials. At present, per capita consumption of steel in India is around 55 kg per annum compared to average global consumption of 150 Kg.

Nerurkar also said that Tata Steel is in talks with some buyers to sell its South African unit. The unit turned profitable in 2009-10 when it made a net profit of Rs 43 crore, after incurring a loss of Rs 180 crore in the previous fiscal.

Steel consumption is expected to increase on the back of high economic growth, which, in turn, will create huge opportunities for steel manufacturers. To tap those opportunities, Indian companies are acquiring iron ore and coal mines outside India. Tata Steel is also spreading its wings to acquire mining assets in Australia, Africa and the US. Nerurkar said the company has secured exploration rights of iron ore mine in Ivory Coast with large reserves.

Tata Steel is also developing an iron ore mine in Canada in a joint venture with a local company New Millenium Capital Corporation and production is expected to start in 2011. Iron ore from this project will be supplied to group subsidiary Corus. In the JV, Tata Group owns 27.4% and has the option to increase it to 80%. The company is also planning to acquire a coal mine in Mozambique in Africa.