Oreteam newsletter 21 11 2014

1

Amidst falling global prices of iron ore and increasing surplus from various

supplying nations, Indian government should take quick measures to at-

least pull down export tax on low grade iron ore which is virtually of very

little use in India.

Government should concentrate on supporting the industry dependent on

the low grade of iron ore. Goa which is would be biggest beneficiary of any

such reduction would earn its lost place in the global markets and the state

would attain a good revenue from both mining and exports. Iron ore mining

and exports are the lifeline of Goa and in the last 2+ years, it is clearly

visible how the industry has fallen apart since the mining ban was im-

posed.

Nearly 95% of the Goan iron ore is low grade and has very fractional use

in the country which makes it more suitable for the Chinese buyers who

prefer to blend it with high cost and high grade ores from other countries.

China is the major buyer of Goan

iron ore but in the last few years due

to the mining restrictions and impo-

sition of high export duty, the ore

has become expensive and uncom-

petitive for the Chinese leading to

huge stockpiles at Goa ports and

jetties.

As per the latest estimates nearly

9.6 million tons of iron ore is still

lying at various points in Goa which

should easily find its way into China

if the export duty is relaxed.

Meanwhile, the government should

also make sure that better grades

which can be utilized within the

country are reserved for domestic

purpose. Hence, the government

should give an opportunity for the

Goan exporters to sell grades below

58% at a reduced or zero export

duty.

OreTeam Mid-Day Bulletin

Global Iron Ore & Steel Research House

A critical aspect which both government and industry should not forget at

this juncture is that the global iron ore prices are falling and this fall is not

going to stop anytime in the near future. In 2014, global iron ore surplus

is estimated to be around 80 million tons while in the next year it would

move upto 150 million tons.

In this manner in the next 5-6 years, the surplus could reach 300 million

tons globally. In the shadow of this surplus, the price of iron ore would

also stay low and could slip to USD 70-80 per ton. The prices could even

go down further if China’s appetite for iron ore reduces but at this mo-

ment the bottom line could be drawn around the USD 70-80 per ton mark

for 62% Fe fines for the near future, on CFR basis.

Comparing the 62% Fe fines price with 58% Fe fines (CFR basis), the

price would by itself state that there isn’t much of a margin left for the

miners and exports of low grades. Today 58% Fe fines are fetching not

more than USD 55-57 per ton (FOB Goa) which would also go down in

the coming years to possibly USD 35-40 per ton (FOB) inline with the

higher grades.

This is the right time and possibly the only time left for the government to

allow the industry to earn a few extra dollars as the global markets are

floating on a thin line of demand-supply equilibrium which is quickly get-

ting burdened by huge oversupplies. If the government delays the deci-

sion further then the future prices may not allow provide any margin to

the exporters, eventually killing the trade itself.

Overall, considering both the price factor globally and the adequate avail-

ability of lower grades in India, the government should reduce or abolish

export duty on low grade iron ore.

If at the same time, government reduces export duty on medium grades

shipped out of the east coast then it could help the railways to move

some of the rakes with cargo to the ports.

Unlike moving empty rakes for coal and iron ore imports. But considering

the domestic restrictions on mining and inadequate availability amidst

rising imports, reducing duty on medium grades might still be little far.

21/11/2014

Volume 386

Govt should reduce export duty on low grade to save the industry

Main Headlines Pg.

Indian government may go for differential export duty on iron ore

2

Jindal Saw’s subsidiary raises INR 775 crores loan

3

Bhartiya Mazdoor Sangh will not support Coal India strike

3

Supramaxes show some up-sides over Pacific demand

4

Steel output in Chinese prov-ince of Hebei fell 5 percent in October

4

Iron ore prices record more corrections; futures hit another contract low

5

Market At Glance 5-6

Snapshot of Metals and Min-eral Stocks and Regional Equities

7

http://www.oreteam.com/

2

primarily exported to China.

The problem with miners of low-grade iron ore stems from the fact that

their product prices are lower but they pay the same export duty that

producers of lump ore have to shell out.

Worsening the situation for low-grade iron ore miners is the plummeting

price of the product in international market following low demand from

China. Falling prices coupled with flat 30 percent export duty have failed

to cheer up miners even as the Goa government has recently started

renewing mining leases following a near two-year ban.

India's export of iron ore have come down drastically to 14.42 million tons

(MT) in the last fiscal compared to 117.37 million tons in 2009-10. Miners

often blame the 30 percent export duty rate for the dip in shipments.

India, which used to be the

third largest country in the

global iron ore export mar-

ket, is now set to become a

net importer of the raw

material.

As per some independent reports, Indian government is likely to introduce

differential export duty on iron ore under which producers of low-grade raw

material will pay lower rates, a move that will help struggling miners, espe-

cially in Goa. This on the lines of what former Chief Minister of Goa sug-

gested.

This Proposal (if implemented) would see government charging different

rates for exports of varied grades of iron ore rather than the present uni-

form rate of 30 percent.

Traditionally, iron ore is priced on the content of iron in the raw material.

Lumps, which contain higher iron ore, cost more than fines that have less

iron content.

Goa produces primarily fines. With hardly any buyers in the country for

them due to domestic steel makers' lack of technical know-how, fines are

Indian government may go for differential export duty on iron ore

for sponge iron, while the pig iron offers were

reported around INR 29,400 per ton and INR

23,900 per ton.

Meanwhile, the domestic scrap offers also jumped

up at the benchmark centers including that of

Mandi Gobindgarh, where the MS and old scrap

offers were reported around INR 28,100 (Ex-

MGG) and INR 26,100 per ton (ex-MGG). At

Alang, the offers for ship breaking scrap were

quoted at INR 22,700 per ton (ex-works).

In the finished steel products, the long steel offers

for rebar showed drastic gains of INR 1,000 per

ton at Delhi and adjoining towns, while some up-

side was experienced across the whole of north-

ern region.

Wire rod offers were broadly unchanged. Mean-

while, the flat steel segments for both hot and cold

rolled products remained somewhat steady across

all the major demand centers.

Some bullishness came back to the spot steel mar-

kets in India, which opened with gains across some

of the demand centers on Friday in the semi steel

and long steel segments, suggesting that the inter-

est is coming back. Earlier, the markets have con-

tinually weakened as the steel prices found no

support from the fundamentals amid the absence of

buying from construction and engineering units.

During the initial session of trade, the secondary

steel prices including that of mild steel ingots and

billets moved up at the major demand centers with

the respective offers being reported around INR

31,700 per ton and INR 32,200 per ton at Mandi

Gobindgarh (ex-MGG) and INR 27,800 per ton and

INR 28,300 per ton at Raipur (ex-works), respec-

tively.

Among intermediary steel making products, both

the sponge iron and pig iron prices also depicted

sideways movement. At Mandi Gobindgarh and

Raipur, the respective spot offers were reported

around INR 24,000 per ton and INR 20,800 per ton,

Spot steel prices record some upsides

EXCHANGE RATES TODAY

Currency ~INR

1 USD 61.88

1 EUR 77.70

1 CNY 10.11

1 GBP 97.09

1 AUD 53.30

1 JPY 0.52

USD to other Major Currencies

1 USD 6.12 CNY

1 USD 1.16 AUD

1 USD 117.90 JPY

1 USD 0.64 GBP

LME Billet Prices

21.11.2014

Daily Price

($/dmt)

Price Change

(%)

Cash Buyer 455 0.00

Cash Seller & Settlement

465 0.00

3 Months Buyer 455 0.00

3 Months Seller 465 0.00


3

Jindal Saw’s subsidiary raises INR 775 crores loan

Africa region. The company is committed to developing long-term busi-

ness relations in MENA region.

Loan deal was primarily supported by the regional banks and financial

institutions. Commercial Bank of Dubai, Commercial Bank International,

Emirates NBD and Mashreqbank were involved in structuring, organizing

and executing the transaction, while Alpen Capital (ME) Ltd. was the

financial advisor.

Jindal Saw recently indicated that its subsidiary, Jindal SAW Middle East

FZC, has raised INR 775 crores loan from various financial institutions in

the region. "JSME, a subsidiary of Jindal SAW, has closed a club facility of

AED 465 million for its long-term and growth capital requirements," the

company said in a statement.

JSME, which has a capacity of 3.5 lakh tons per annum, has the largest

facility in Abu Dhabi to produce ductile iron pipes of various sizes used in

water transportation and sewage systems in the Middle East and North

DVC fails to clear investor plan for Purulia project

bidders.

Facing acute funds crunch, the DVC was planning to bring in equity part-

ners for the 2X600 MW Phase-I and 2X660 MW Phase-II (Raghunathpur

Thermal Power Project). DVC's funds crunch was the result of out-

standing dues of INR 11,122 crores from different consumers including

the Jharkhand State Electricity Board which alone owes the public under-

taking INR 8,511 crores.

Total debt burden of the DVC stands at INR 30,000 crores. DVC also

failed to get the Centre's nod for a capital infusion of INR 3,900 crores to

come out of the dire financial mess.

Damodar Valley Corporation board has failed to invite Expression of Inter-

est for a strategic investor in the proposed 2,500 MW Raghunathpur

power plant at Purulia. It was indicated that the board could not clear the

agenda to invite EoI after West Bengal’s Power Secretary Mr. Gopal

Krishna objected it.

State government of West Bengal is a shareholder in the power-cum-

irrigation utility along with government of Jharkhand and the Central gov-

ernment.

Recent board meeting’s main agenda was to lay down plan for inviting EoI

for Raghunathpur Thermal Power Project from PSUs and private, state

government to allow carrying out of due-diligence by new prospective

Bhartiya Mazdoor Sangh will not support Coal India strike

cent stake in public sector miner.

Earlier, Coal India Ltd. had indicated that the impact of the proposed

day’s industrial action by the workers will not be alarming.

The management was banking on the possibility that BMS will boycott

the strike and its supporters joining work. BMS has influence in South

Eastern Coalfields, Western Coalfields and partially in the Central Coal-

fields.

On Thursday, Bharatiya Mazdoor Sangh (BMS) indicated that it will not

join the proposed strike by Coal India employee unions on 24th November

(coming Monday), depicting a split opinion among the unions over the

issues like disinvestment and allowing merchant mining to private compa-

nies. BMS felt that the industrial action is not the right process to get their

demands met.

Four major worker unions INTUC, HMS, CITU and AITUC have served a

notice for one-day token strike on November 24, demanding scraping of

the enabling clause in the Coal Mines Ordinance-2014, which allows com-

mercial mining by private companies, and divestment of at least 10 per-

US weekly coal output steadies in mid-November

Furthermore, the coal production in east of the Mississippi River totaled

7.9 million short tons (a rise of 3.9 percent from the last week) and in

west of the Mississippi River totaled 11 million short tons (about 2.7 per-

cent lower from the previous week), for the mentioned period.

US produced approximately 85.6 million short tons of coal in the month of

October, which is about 5.6 percent higher (year-on-year). However, this

production estimate is around 2.8 percent ore than the output recorded in

September.

According to the recently released figures by Energy Information Admini-

stration (EIA), the weekly estimated coal production in the US (including

thermal and metallurgical coal) stood around 18.9 million short tons for the

week ending on 15th November, 2014.

Moreover, the estimated output unchanged from the last week’s figure of

18.9 million short tons, while it was about 0.9 percent higher than the pro-

duction estimate in the comparable week of 2013. Country’s year-to-date

coal production totaled at 867.6 million short tons.


4

Supramaxes show some upsides over Pacific demand

ter rates following the lack of activity in the Pacific region due to sluggish

coal demand and little growth in tonnage in the Atlantic region where

milder winters have weighed on the demand fundamentals.

Baltic Panamax Index (BPI) ended couple of points down at 1,053 points

as the average daily earnings slipped by $14 to $8,428.

Meanwhile, the small sectors (supramaxes and handysizes) showed

some improvement with few fresh inquiries arising out of Pacific basin.

Baltic Supramax Index (BSI) closed 22 points higher at 926 points as the

average daily earnings ended up gaining $238 to end at $9,687, on

Thursday. Similarly, the handysize segment showed some upsides in the

Asian region.

Freight markets in dry bulk segment showed more gains on Thursday,

however, this time it was primarily on the back of the increments seen in

smaller supramax rates.

Baltic Dry Index (BDI), gauge of the global freight for dry bulk went up by

26 points to close at 1,332 points, coming back to the month prior levels

as the sentiments improved marginally.

Time charter rates of large capesize vessels used for mainly carrying bulk

commodities like coal and iron ore saw positive adjustments with more

uncertainties around the demand bringing some buoyancy, as the average

daily earnings advanced by $666 to $23,521, while the Baltic Capesize

Index (BCI) could only add 3 points to end at 3,130 points.

Moreover, the panamax segment showed marginal downtrend in the char-

Steel output in Chinese province of Hebei fell 5 percent in October

total steel output, produced just about 14.49 million tons of crude steel

during the month of October, reducing its share to around 21.5 percent

from the total of 67.51 million tons.

Moreover, the daily crude steel production fell 3.3 percent on the month

in October, reaching 2.18 million tons, its lowest rate this year.

Considering the recently compiles data by National Bureau of Statistics,

the steel output in Chinese province of Hebei, which happens to be the

biggest producer fell by 5 percent in October (from the previous month) as

steel mills were forced to shut down operations during the Asia-Pacific

Economic Cooperation (APEC) summit in Beijing.

Hebei’s steel production, which contributes to about quarter of China’s

Tugboat workers strike at Port Hedland called off

prise agreement proposed by Teekay Shipping.

Teekay Shipping had already reached agreement with members of the

Maritime Union of Australia and Australian Maritime Officers Union; how-

ever, their agreements will be brought in line with the agreement ratified

by AIMPE.

Following an agreement between Tugboat engineers and Teekay Shipping

over the working conditions and wage revision, the threat of industrial

action slated for tomorrow was warded off at world’s biggest iron ore ex-

porting terminal, Port Hedland.

Seemingly, the members of the Australian Institute of Marine and Power

Engineers (AIMPE) have withdrawn notice of the four hour strike planned

for 22 November. Earlier in the week AIMPE rejected a replacement enter-

China’s HSBC flash PMI for manufacturing comes at 50

temporary drag on industrial production and inventory demand continued

to decline significantly, while government investment in infrastructure

might be the main stabilizer of growth.

Recent National Bureau of Statistics data showed that China's industrial

output grew 7.7 percent year on year in October, down from an 8 percent

in September.

For the first ten months, the industrial production growth decelerated to

8.4 percent (year-on-year), down 0.1 percentage points from the first nine

months of 2014.

On Friday, HSBC's November preliminary purchasing managers' index

(PMI) for China has dropped to a six-month low of 50. HSBC flash manu-

facturing PMI for November dropped 0.4 from the October final reading of

50.4.

A reading above 50 indicates expansion, below contraction. Additionally,

HSBC flash China manufacturing output index for November dropped to a

seven-month low of 49.5 from 50.7 in October.

Break-down of the data showed that the Asia-Pacific Economic Coopera-

tion (APEC) meetings that were held in Beijing earlier this month exerted a


5

Iron ore prices record more corrections; futures hit another contract low

tralian PB fines shipment of 170,000 tons was listed at $70.50 per ton,

while the bids against it were $65 per ton and $67 per ton (CFR China

basis), showing increasing spread between bids and offers.

In the previous session, sea-borne iron ore prices slipped marginally as

the corrections rocked port based secondary markets. Despite of inactive

trade from the steel mills, the offers slipped by 10-20 Yuan per ton at

some of the ports, whose sentimental impact could cross over to the

domestic iron ore prices as well.

Looking at the paper markets, iron ore and steel futures extended more

losses amid supply glut and receding physical markets. The most traded

iron ore contract for May delivery at Dalian Commodity Exchange was

trading 1.5 percent lower at 469 Yuan per ton. Moreover, the most traded

rebar contract for May delivery at Shanghai Futures Exchange dropped

0.8 percent to 2,427 Yuan per ton.

Future markets have seen a continual downtrend in the week thus far,

hitting new contract lows for both iron ore and steel almost every day.

Participants are anticipating more declines in both steel and iron ore due

to the combined impact of slowdown in Chinese economy and increased

sea-borne supplies of iron ore.

Markets opened with the bearish sentiments as there was little respite for

the trade as a parameter for China’s factory output showed more signs

weakness. Physical transactions were sparse and inquiries were few, thus

bring very little view on the direction as bids continued to be lower.

HSBC flash manufacturing PMI for November dropped 0.4 from the Octo-

ber final reading of 50.4 to 50. A reading above 50 indicates expansion,

below contraction. Moreover, HSBC flash China manufacturing output

index for November dropped to a seven-month low of 49.5 from 50.7 in

October.

OreTeam’s Iron Ore Price Indices were trading at $65 per ton for FOB

Vizag 63.5/63-percent Fe fines and at $48.50 per ton for FOB WCI 58-

percent Fe fines, in the early trade on Friday. At CBMX platform, an Aus-

Market At Glance

(In INR per ton) Region Specifications Mid Day Price Morning Price Mid Day Price

20-Nov-14 21-Nov-14 21-Nov-14

MS INGOT

MGG Excise Duty & Taxes Extra 31300 31700 31700

Raipur Excise Duty & Taxes Extra 27600 27800 27800

Ghaziabad Excise Duty & Taxes Extra 30700 31100 31100

Durgapur Including Excise Duty & Taxes 32900 33000 33000

Alang Excise Duty & Taxes Extra 27200 27800 27800

Ludhiana Excise Duty & Taxes Extra 31800 32300 32300

R'kela Including Excise Duty & Taxes 27100 27700 27700

Kolkata Including Excise Duty & Taxes 33200 33300 33300

Hyderabad Excise Duty & Taxes Extra 29500 29000 29000

Mumbai Excise Duty & Taxes Extra 29800 29800 29800

Billets


Kandla Excise Duty & Taxes Extra 27500 28100 28100

Alang Excise Duty & Taxes Extra 27700 28300 28300

R'kela Excise Duty & Taxes Extra 27600 28200 28200

Raigarh Excise Duty & Taxes Extra 28300 28600 28600




6

(In INR per ton) Region Specifications Mid Day Price Morning Price Mid Day Price

20-Nov-14 21-Nov-14 21-Nov-14

L.C. Ingot




Wire Rod (5.5

mm) Raipur Including Excise Duty &

Taxes 39500 39500 39500

Girdirs (150*75) MGG Including Excise Duty &

Taxes 42200 42200 42200

HRC (2.5 mm)

Mumbai Ex-Works 45000 45000 45000

Delhi Ex-Works 43000 43000 43000

Bellary Excise Duty & Taxes Extra 39800 39800 39800

Kolkata Ex-Works 44600 44600 44600

Ludhiana Ex-Works 43000 43000 43000

Pig Iron




Durgapur Excise Duty & Taxes Extra 23000 23000 23000

Chennai Excise Duty & Taxes Extra 23500 23500 23500

Cuttak Excise Duty & Taxes Extra 23000 23000 23000

Sponge Iron




R'kela Excise Duty & Taxes Extra 19000 19300 19300

Durgapur Including Excise Duty & Taxes 23000 23000 23000

Kandla Excise Duty & Taxes Extra 21000 21000 21000


Bellary Excise Duty & Taxes Extra 17800 17800 17800

Scrap

MGG (Old scrap) Including Excise Duty & Taxes 25700 26100 26100

Alang (Ship Break-ing)

Excise Duty & Taxes Extra 22500 22700 22700

Raipur (End Cutting) Excise Duty & Taxes Extra 24000 24000 24000

MGG (MS Scrap) Including Excise Duty & Taxes 27700 28100 28100

Chennai (MS Scrap) Excise Duty & Taxes Extra 22600 22600 22600

Mumbai (MS Scrap) Excise Duty & Taxes Extra 24500 24500 24500

Iron Ore Pellets

Barbil 63% Fe EXW Price 8000 8000 8000

Raipur 63% Fe EXW Price 8700 8700 8700

Bellary 63% Fe EXW Price 8100 8100 8100


7

Snapshot of Metals and Mineral Stocks and Regional Equities

Date: 21.11.2014, IST 02:44 PM

Name Symbol Change Open High Low

Tata Steel Limited TATASTEEL -3.60 (-0.77%) 467 472.5 460.1

NMDC Limited 526371 +1.05 (0.72%) 146.5 147 144.2

Steel Authority of... SAIL -1.80 (-2.11%) 85 86 83.05

JSW Steel Limited JSWSTEEL -20.70 (-1.71%) 1205.1 1216.9 1183

Jindal Steel & Power... JINDALSTEL -3.15 (-2.15%) 145.35 147.9 141.55

Sesa Sterlite Ltd 500295 +1.85 (0.79%) 236.55 239.2 233.55

Coal India Ltd COALINDIA -0.80 (-0.23%) 345.2 348 343.55

Sarda Energy & Miner-als... SARDAEN -7.30 (-3.33%) 217.15 218.4 211.7

Kamdhenu Ispat Lim-ited 532741 +3.90 (7.21%) 54.1 58 53.9

Adhunik Metaliks Lim-ited 532727 +0.40 (1.29%) 31.4 31.9 31.1

Reliance Power Lim-ited 532939 -0.80 (-1.11%) 71.8 72.9 70.75

Hindustan Zinc Ltd 500188 +0.45 (0.28%) 163 164.4 162.55

Maruti Suzuki India Ltd 532500 +17.90 (0.54%) 3335.6 3355 3308.05

Adani Power Ltd 533096 -0.30 (-0.65%) 45.75 46.7 45.5

NTPC Limited 532555 +1.20 (0.84%) 142.4 144.1 142

Gujarat NRE Coke Ltd. 512579 +0.01 (0.14%) 7.1 7.2 7.08

Sandur Manganese & Iron... 504918 -7.45 (-1.20%) 620.05 622.95 611.15

Larsen & Toubro Lim-ited LT +22.85 (1.39%) 1640 1673.75 1630

Orissa Sponge Iron and... 504864 -5.95 (-4.37%) 130.15 138 130.1

Tata Sponge Iron Ltd 513010 -15.10 (-2.13%) 707.1 716 690

Essar Ports Ltd 500630 -1.10 (-1.14%) 91.4 98.5 91.4

Uttam Galva Steels Ltd. 513216 +1.05 (1.53%) 69.5 70.45 69.05

MSP Steel & Power Ltd 532650 -0.10 (-0.61%) 17.4 17.4 15.3

Bhushan Steel Ltd 500055 -1.70 (-1.65%) 103.5 104.25 101.4

Kanishk Steel Indus-tries... 513456 -0.41 (-4.92%) 7.93 7.93 7.93

Kalyani Steels Limited 500235 -2.90 (-1.75%) 163.7 168.4 162.45

Mukand Limited 500460 -1.10 (-2.12%) 51.25 52.75 50.1

The Shipping Corp. of... 523598 -0.75 (-1.18%) 65 65.15 63


8

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Oreteam newsletter 21 11 2014

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