Iron in the Indian soulPublished by MAC on 2006-07-23
Iron in the Indian soul
23rd July 2006
This week's Indian update casts a critical - and unapologetically alarmist - eye over recent "developments" in the country's iron/steel sector.
In Orissa alone, the state government has signed no less than 43 memoranda of understanding (MOUs), lining up nearly US$3 billion worth of projects with a capacity of more than 58 million tonnes iron ore - a majority of which is likely to be exported.
Although the neighbouring state of Chhattisgarh claims it will use its own rich iron ore reserves for domestic "value adding"only, this seems a thoroughly unrealisic prospect. The majority of the deposits lie in the Baster region which over many months has been at the centre of an horrendous and bloody conflict between Naxalities (Maoists) and the state, in which both sides have committed atrocities.
Judging by several statements, the Naxalite leadership justifies its war "for" (but often "upon") the indigenous (Adivasi) communities in the region as affording "protection" of their mineral deposits from exploitation.
We lead off this round-up with an analysis, published last week in the influential Financial Express, pointing out that the iron ore "rush" is prompted not so much by India's internal growth requirements, but by steel manufacturers looking for cheap raw materials to feed both offshore and onshore plants.
Says the Financial Express: "[D]omestic demand will have to rise to over 13% every year from today to 2020 to be able to absorb the new capacity planned. " If all the deals now on the table go through, the country's iron ore could be exhausted in just fifty years.
That's less (by a decade) than the period over which India's poor were supposed to benefit from industrialisation as promised by Pandit Nehru on the nation coming to independence in 1947.
It's clearly impossible for all the projects now on the drawing board to make it to the production stage. But this fact alone will not save thousands of indigenous, dalit and other peoples from further incursions onto their land.
And it will inevitably foment increased resistance, leading to brutalities such as that suffered by protestors against Tata Steel's steel plant construction at Kalinganmagar, last January.
In the meantime, all manner of exploiters have entered what is effectively a three-cornered ring: huge overseas companies, such as Mittal-Arcelor and Posco - and now the UK-Dutch firm Corus, vying with Indian state enterprises (such as SAIL); and smaller outfits often illegally plundering deposits, and establishing rogue sponge iron smelters, while politicians are accused of taking bribes (eg. in Karnataka).
As if this wasn't enough, both Tata and Jindal - India's most prominent steel manufactures - have now embarked on missions abroad, to feed their appetities. Tata recently proposed a US$3 billion deal to the government of Bangladesh which would involve, not only setting up steel plants (probably sourced by iron from India) and power stations but also buying up the country's coal reserves at a price that opposition politicians and others have damned as derisory. (Thanks largely to such protests the Bangladesh government has now postponed signing an agreement with Tata).
Jindal has also just secured access to one of Latin America's most important iron ore deposits at Mutun in Bolivia. Virtually all this will be exported, despite Bolivian president Evo Morales' earlier pledge to "nationalise" the country's mines.
Central to the steel industry's global ploys are moves made by Mittal-Arcelor, by far the most important player in the sector. The company now possesses enough economic clout to bid for smaller companies (as it did when acquiring Luxemburg's Arcelor a few weeks back).
In a few years time, we may wake up to discover that less than half a dozen companies own virtually all the iron on this planet, with Mittal firmly leading the conquest.
Ironically, this prospect doesn't seem to worry some Indians. In the fond - but mistaken - belief that L N Mittal is a true citizen of the nation (in fact he lives in the UK and his company is registered in Rotterdam) they have taken him to their heart.
Now, despite the damage he has done elsewhere, and accusations of corruption currently dogging him in Liberia, he is going straight to the heartland of the country he quit in order to exploit greener (often literally) fields abroad.
[Commentary by Nostromo Research, London July 23 2006.]
India’s iron ore rush
Steel makers crowd into India chasing its cheap iron ore reserves.
Is there enough for everybody? Financial Express July 15 2006 Here’s a simple statistic: if all the new announcements for steel plants in India actually get set up on ground, the country will have new facilities toting up 175 million tonnes —over 4.6 times today’s installed steel-making capacity. Players such as South Korea’s Posco and the Rotterdam-based Mittal Steel, now Mittal-Arcelor, lead the race with plans to set up 12-million-tonne steel plants each in Orissa as also Russian steel major MMK, which has announced a 10-million-tonne factory in the state. Anglo-Dutch steel maker Corus is also said to be eyeing Indian shores.
With a boom in housing, infrastructure, automobiles and white goods, domestic steel consumption is at an all-time high of about 39 million tonnes and has been growing at a strong 7%-8% annual clip but even this robust growth will not be enough to absorb the steel the new plants will produce. In fact, domestic demand will have to rise to over 13% every year from today to 2020 to be able to absorb the new capacity planned. That clearly is a tall order and prospects of steel exports not clear yet. Which begs the question: is it the growing demand for steel in India or something less sublime like iron ore driving these investments?
Industry insiders point out that the flurry of steel projects in recent months is linked to the need to secure precious iron ore resources. Almost 1.6 times the amount of iron ore is required to manufacture a tonne of steel. And India is attractive on account of its iron ore deposits, which significantly brings down the cost of production of steel.
Says Seshagiri Rao, director, finance, Jindal South West (JSW) Steel: “Input costs are almost 60% abroad as opposed to about 45% in India. Labour is also cheap here, almost 4%-5%, as opposed to 25% in international steel-producing markets. On an average the operating profit margins of Indian steel companies is about 30%. For international steel companies the figure is far lower.” Adds Sachin Wankhede, steel analyst at Care Ratings, Mumbai: “India is actually a benchmark for global steel players as far as manufacturing of steel goes. This is so because of the presence of iron ore in the country.”
According to the National Mineral Development Corporation, India’s proven iron ore reserves are about 18 billion tonne while other estimates put it at 20-24 billion tonne. Of this, Orissa and Jharkhand alone have about 4.1 billion tonne (the state’s geological and mining departments say that the proven reserves are higher at 5.5 billion tonne) and 3.2 billion tonne of iron ore reserves respectively. Chattisgarh, on the other hand, has reserves of about 2.2 billion tonne. Going by the steel capacity announcements made by both Indian and foreign players the demand for and pressure on these scarce resources is considerable. For instance, Sanak Mishra, chief executive officer of Mittal Steel Jharkhand Ltd says his company would need about a billion tonne of iron ore to manufacture 12 million tonne of steel over a 50-year-period.
Posco executives, on the other hand, maintain that about 600-million tonne of iron ore is what they require for their steel operations over 30 years. Going by the number of steel memoranda of understanding signed by the Orissa and Jharkhand governments, which is about 43 and 39 respectively, the iron ore requirement for steel operations in these states alone would be between 6-6.5 billion tonne over a 30-year period. (See below: "The story from ferrous country".)
Tata Steel and the Steel Authority of India — the largest private and public sector steel companies in the country —have captive mines to take care of their expansion needs in the country (paid for at a cess of just Rs 27 a tonne). That is not so with other organised players. For instance, Essar Steel has no backward linkages to iron ore mines, while JSW Steel, Jindal Steel and Power Limited (JSPL) and Ispat have partial linkages to the same. Says Vikrant Gujral, vice-chairman and chief executive officer, JSPL, “Our Raigarh unit in Chattisgarh has captive iron ore mines supporting it, while our proposed units at Orissa and Jharkhand would have to have the same.” JSPL is looking to add 6-million-tonne and 5-million-tonne steel plants in Orissa and Jharkhand and is believed to have bagged mining leases there.
Rao of JSW Steel, meanwhile, which is undertaking expansion work at its Vijaynagar unit in Karnataka increasing capacity from 2.5 million tonne to 3.8 million tonne, subsequently going up to 7 million tonne, says that about 40% of its ore requirement at the moment is generated in-house. The balance has to be procured from the open market. “This obviously increases our costs,” he says. Indeed, the prospect of escalating input costs looms large over steel majors that have significant capacities to set up, but have no mines to support their ventures. “Prices of iron ore in the open market have been firm and will continue to be so as demand grows,” says Kanan Shah, steel analyst at Networth Stockbroking. Price of a tonne of iron ore is about Rs 3,100 in India, while the cost of mining a tonne of iron ore is just about Rs 1,100 and lesser at around Rs 300 for captive mines. With the global iron ore market controlled by a few mining companies including CVRD, Rio Tinto and BHP Billiton a reduction in price is not in the offing. “These players determine the price of the ore in the open market. So there is no way one can escape them,” says Amit Agarwal, steel analyst at Bric Securities.
Iron ore exports have been traditionally higher than domestic consumption—standing at 80.9 million tonne and 65.9 million tonne in 2005 —which the government is keen to alter. But with players such as Posco allowed to export iron ore, which the company says is only up to the extent it will import necessitated by the low quality of Indian ore, has upset steel-makers in the industry. Mishra of Mittal Steel Jharkhand, meanwhile, says that the MoU signed with the Jharkhand government last year was actually “devoid of the subject of iron ore resources”. “That is because there was a legal dispute going between SAIL and the Jharkhand government over the Chiria deposits, which we have expressed an interest in. We are open to alternative deposits as well,” he says .
The fear of depletion of precious iron ore reserves drags, but the bigger issue, says a steel ministry official, is one of ‘sufficiency’. “The problem is that when you enter into a lease for a 30-50 years, you increase the chance of rent-seeking behaviour among the lessees and keep out others who may be able to use the resource more efficiently,” he says, adding the solution may be to go in for shorter lease-terms.
Depletion is not a worry to be brushed aside. At 18 billion tonne, India lags behind countries such as Australia (40 billion tonne). Brazil, on the other hand, has iron ore deposits of 17 billion tonne. The production of iron ore, for the record, increased by 21% in 2005 moving from 120.6 million tonne (in 2004) to about 146 million tonne. If the 175 million tonne steel-making capacity actually comes on stream (in addition to the current 38 million tonnes), India’s iron ore deposits could run out in as less as 50 years. There is always the possibility of discovering new reserves but that’s still in the realm of uncertainty.
As the rush into iron ore mining in India gathers pace, a more realistic and market-linked pricing will surely emerge displacing sweetheart deals between steel companies and governments. Until then, the lure of iron ore will continue to draw the big steel players to India.
The story from ferrous country
Financial Express (online)
15th July 2006
The Orissa government has signed as many as 43 memoranda of understanding in the steel sector lining up a total investment of over Rs 137,156 crore (nearly $3 billion) of projects with a capacity topping 58 million tonnes. Of the 5.43 billion iron ore reserves in the state, about 3.11 billion tonnes are under lease-hold of various mining companies. Mines with reserves of nearly 800 million tonnes have been earmarked for Steel Authority of India Ltd (SAIL), state-run miner Orissa Mining Corporation, Mid-East Steel Corporation, and Orissa Sponge Iron Ltd.
Thus mines with reserve of 1.52 billion tonnes are available with the state government to distribute to the MoU companies as captive mines. As against this, the 43 MoU companies require some 2.78 billion tonnes of iron ore to feed their projects over a 30-year period. There is a shortfall of over 1.25 billion tonnes of iron ore.
However, the state steel and mines minister, Padmanav Behera, says the problem will be sorted out when new iron ore reserves are found in the state. Moreover, he adds, Bhubaneswar will look at mining leases - covering about 1.5 billion tonnes of iron ore reserves- that have come up for renewal.
These include mining leases of Tata Steel, SAIL, Essel Mining, OMC Ltd, among others. Out of the 43 new MoUs, six projects are in the large league: Posco, Tata Steel, Hy-Grade Pellets Ltd (Essar Group), Bhusan Steel and Strips Ltd, Jindal Steel & Power Ltd and Sterlite Iron and Steel Company Ltd. The six are proposing to build up a total capacity of 36.10 million tonnes with a total investment of over Rs 108,500 crore.
Orissa wants to be sure that only serious investors come into the state. Mines will be recommended only after 25% of the capital cost in invested and lease will be granted once 50% is invested with financial closure for small and medium projects. For mega projects, the mines will be recommended after placement of the 20% of the farm order and 80% of civil construction. The mining lease will again be granted after financial closure and 50% of investments.
In Jharkhand, the state government has received 450-odd applications for iron ore leases. These include applications from large steel-making plants that account for 51 million tonnes capacity including a 12 million tonne plant by Tata Steel, Jindal South-West's 10 million tonne project, six-million factories by Essar Steel and Jindal Steel & Power. Smaller projects tote up to another 42 milliion tonnes steel capacity.
According to the Jharkhand mines & geology minister Madhu Koda, rough estimates indicate iron reserves available in the state at 3.6 billion tonne and a survey is on to estimate potential new reserves. Says a central steel ministry official: "The Indian Bureau of Mines is also involved in a survey of total iron ore reserves in the country and it is expected that the estimate of reserves will go up 20-25%. Most of this could be in Orissa and Jharkhand."
Experts say that while Jharkhand has several smaller iron ore reserves, it is only the Chiria mines (sub judice, as the state is fighting a legal battle with Iisco and SAIL) which can provide 500-600 million tonne iron ore, as would be needed by a major steel project. It doesn't help steel projects that most of Chiria is under forest cover.
Adhunik Metaliks gets iron ore mines in Orissa
Business Standar, Mumbai
19th July 2006
The Centre has allotted iron ore mines to Kolkata-based Adhunik Metaliks. The mines are at Kulum in Keonjhar district of Orissa.
Manoj Agarwal, managing director, Adhunik Metaliks said today, "The mines would provide huge benefits to the company in terms of assured raw material supply at very low cost. The better quality of iron ore in the mines would result in improved efficiency of plant and better quality of finished products".
The mines are with a rich ferrous content of over 65 per cent and situated 125 kilometres away from the company's plant in Rourkela.
Detail project report for mining is under preparation and the mining operations would commence within 6 to 9 months. With the commencement of mining cost per tonne of iron ore would come down by more than 50 per cent, he said.
Adhunik Metaliks today also announced the acquisition of Unistar Galvanisers and Fabricators, manufacturer of sub-station structures and transmission towers, for an undisclosed amount.
Unistar will be a 100 per cent subsidiary of Adhunik, Agarwal said. The group would also merge Neepaz Tubes, a group company of Adhunik with Unistar Galvanisers.
The company expects to leverage from Unistar strength by forward integrating its existing product line and improve top and bottom line.
After the expansion of its units the company has plans to export 50 per cent of its products to countries like Bangladesh, Bhutan, Nigeria, Algeria etc.
The company has plans to buy mines in Australia by forming a JV there.
"But we are trying to get hold of coking coal mines in India only as in Australian the price is high.", Agarwal said.
The company has commenced work on its upcoming projects, to the size of Rs 437 crore, at its existing plant site in Chandrihariharpur in Rourkela.
At present the company has a manufacturing facility of 2,50,000 tonne per annum of auto grade alloy billets and rolled products which are being backwardly integrated through sponge iron and pig iron making facilities.
For the financial year ended March 2006, Adhunik made a total income of Rs 426.55 crore and a net profit of Rs 33.71 crore. The company for the first time declared a dividend of 5 per cent last financial year.
Workshop opposes Posco port plan on river mouth Pioneer news Service July 21 2006
Farm vs firm to the fore
14th July 2006
BHUBANESWAR: The Orissa Krushak Mahasangh has apprehended severe water crisis for farming activities in seven districts if the State Government goes overboard with its industrialisation plan leading to unbridled mining activities.
The State Government has signed memoranda of understanding (MoUs) with 46 companies for establishment of steel and alumina plants. Besides, MoUs with seven more companies, including one with Arcelor-Mittal, are under the consideration of the Government.
Mahasangh president and former MLA Bibhudendra Pratap Das alleged that establishment of so many plants would lead to increased mining activities in Keonjhar, Sundargarh, undivided Koraput, Kalahandi and Dhenkanal districts.
This would mean more water for industry, less for agriculture, he said adding rivers Bramhani, Baitarani, Ib, Vasundhara and Vansadhara would have no water in summer. He alleged that 50 percent water sources have dried up in Keonjhar district due to mining of iron ore during the last 50 years.
Stating that industrialisation would also affect the groundwater reserves, Das said watertable has gone down by 200 metres in more than 50 percent villages near Talcher because of coal mining. If the Government allows mining of bauxite on the Niyamgiri hills in Kalahandi district for Vedanta Alumina plant, most of the springs on the mountain would also dry up, he claimed.
Minister for Steel and Mines Padmanabha Behera had admitted during the last Assembly session that the State Government was contemplating to provide iron ore for 25/30 years to the companies for establishment of steel plants.
Replying to a question from Gajadhar Majhi (Cong), he had said the State Government was yet to take any decision on leasing out of bauxite mines for alumina plants. Against this backdrop, Das said continuous mining of iron ore for 25 to 30 years would spell disaster for the bio-diversity of the State. Besides water crisis, rapid industrialisation would lead to denudation, he said.
Kendrapara trying to woo Arcelor-Mittal
Statesman News Service, KENDRAPARA
18th July 2006
In sharp contrast to the usual protests against land acquisition, such as the latest one with regard to the proposed Posco steel plant, districts have started vying for industrial projects.
Kendrapara has joined the race, in trying to attract the Arcelor-Mittal group. Prior to this, Ganjam district had demanded the project to be set up on 3,500 acres of land acquired by Tata Steel, which is lying vacant.
Now, an orchestrated campaign of bringing Kendrapara into the state industrial map, is slowly gaining ground. There is a flurry of activities, at administrative and political levels, in this coastal district. With the site for the steel major's industrial venture still undecided, such activities are sending a message that, this region is enriched with viable and litigation-free government land to accommodate mega industrial projects.
Kendrapara district bar association has sent a memorandum to the chief minister and chairman, Arcelor-Mittal group, in this regard.
Bar association president, Mr Debdas Mohanty claimed that, the coastal patch of land of Mahakalpada block bordering Paradip, is the most congenial place for industrial activity.
The late Biju Patnaik had represented and nurtured the Kendrapara parliamentary constituency. But the charismatic leader had failed to keep up to his promise of bringing industrial infrastructure to Kendrapara. Now, the time has come for his son, Mr Navin Patnaik to fulfill his father's promise, the memorandum to the CM said.
"We do have more than 5,000 acres of encroachment-free government land in close proximity of the Paradip industrial zone. The said land, parts of which fall under classified forest land category, is certainly viable for industries. The Mahakalpada tehsil has already been asked to demarcate and make it ready for possible industrial activity," district collector, Mr Jyoti Prakash Das said.
"We have sent the proposal with a specification of the available land, to the state government, and requested them to invite industrial houses for future venture," he said. The public opinion of inviting the Mittal Group to Kendrapara, has also been ventilated to the state government, he said.
Meanwhile, sitting MLAs of the ruling BJD have reportedly taken up the matter with the CM, so that the district, bereft of industrial infrastructure, can have a mega industry. Sandwiched between the mineral-rich hinterland of Keonjhar and Jajpur districts, this coastal district has been a classic example of neglect, with little peripheral development, according to ruling party MLAs.
Chinese inspires Chhattisgarh's new mine policy
Indo-Asian News Service, New Delhi
14th July 2006
Inspired by China, mineral-rich Chhattisgarh has put in place a new mining policy that would ensure value addition rather than mere export of raw material, Chief Minister Raman Singh said here Thursday.
"This would be done either through coal-based power generation or use of iron ore in state-based units," Singh told reporters.
Singh admitted the inspiration for the new policy is China, which does not export any of its high-quality coal but uses it for generating power and creating value for the country.
"If China does not give us its good-quality coal, why should we go in for a one-sided agreement and agree to give them our rich iron ore? The centre will have to agree to this. We are talking in the interest of the nation and not just our state," Singh said.
About 25 per cent of India's iron ore reserves are found in Chhattisgarh, mainly in the hilly pockets of Bastar region.
According to the new mining policy in the process of being implemented, Chhattisgarh has decided there would have to be a greater value addition by the mining companies like state-owned National Mineral Development Corp (NMDC) that holds lease for mines estimated to have 65 percent of the iron ore deposits in the state.
"For the last 40 years, NMDC has been exporting raw iron ore and we have been getting just Rs 18-20 per tonne as royalty. Now we have decided that value addition has to be done in the state so that we get better revenue and the industry gets a boost," said Singh. NMDC has been directed to cut short its export of iron ore from the state by 40 per cent and cater more to the demands of the local industries.
This is being done through a joint venture NMDC entered into earlier this month with the Chhattisgarh Mining Development Corp (CMDC) for opening a new block in Bastar region that has 350 million tonnes of iron ore reserves.
"The iron ore mined from this Block 13 would be processed and supplied to local industries. This could lead to more industries finalising plans to set up operations in the state," said Singh. He disclosed that the state government has also urged the central government to give "royalty on an ad valorem (percentage) basis instead of the tonnage basis" to ensure more revenue for the state. In the case of coal, the state government has framed a new policy for coal-based power plants under which developers would have to give the state 30 percent of the power generated and 7.5 per cent of power at the cost price.
This would ensure that Chhattisgarh gets 30 percent share of the 2,000 MW power generation plans for which memorandum of understanding have been signed including with corporate groups like Tata and Essar.
"The power developers have accepted our new policy and this would mean not only availability of more power at low prices to industries within the state but also an annual saving of Rs 1.2 billion to Rs 1.4 billion," Singh said.
Chhattisgarh rejects sponge iron, power plant proposal
17th July 2006
By Sujeet Kumar, Raipur
The Chhattisgarh government has rejected a proposal by National Mineral Development Corporation (NMDC) to set up a sponge iron plant and a 10-MW power plant in the Bastar region, saying the state-owned firm had not lived up to a decade-old promise for a steel plant in the same area.
NMDC, India's largest iron ore producer and exporter, had pushed a proposal earlier this month for a 200,000 tonne-per-annum-sponge iron plant and a power plant at Nagarnar, 16 km from Bastar district headquarters, Jagdalpur.
NMDC has iron ore mining facilities in Bastar's Bailadila hilly areas since 1968 and has been currently excavating nearly 75 percent of its total annual iron ore from Bailadila's three major iron ore deposits.
It set up a joint venture this month with the state-government owned Chhattisgarh Mining Development Corporation (CMDC) for opening up a new block, Deposit No.13, in Bailadila that has around 350 million tonnes of the world's best quality iron ore stocks.
NMDC said it was also contemplating a pellet plant in the Bastar region in a joint venture with the Rashtriya Ispat Nigam Limited (RINL).
"The Chhattisgarh government has rejected the proposal in totality as NMDC has failed to keep up its previous written promise for setting up a Romelt-technology-based 1.5 million tonne-per-annum steel plant at Nagarnar, for which the government handed over 403 hectares land to the NMDC in 2002 overcoming stiff protest by locals," a top industry official told IANS.
NMDC had in the late 1990s announced plans to set up a steel plant at Nagarnar for which it was to manage the Romelt technology, used for extracting iron from any iron-bearing wastes of mines, from its foreign collaborator - Moscow Institute for Steel and Alloys (MISA).
"The Chhattisgarh government is in no way interested in NMDC's fresh proposal. How can the government allow it to build a sponge iron unit at Nagarnar, the same site that the company had selected 10 years ago for setting up a steel plant. NMDC later said the Romelt technology proposal had been deadlocked with MISA," the official added.
BULLDOZING ALONG THE MITTAL PATH
Mittal deal triggers Liberia divisions
By Dino Mahtani in Lagos, Financial Times
30th June 2006
In a country such as Liberia, recovering from a devastating civil war, the prospect of one of the world's biggest companies backing a $900m investment would ordinarily be a cause for celebration.
Instead, Liberia's deal with Mittal Steel, signed last year under an interim power-sharing government, has caused sharp divisions in the west African country and is now a subject of inquiries by police in the Netherlands, where Mittal is based.
Mittal Steel has categorically rejected any allegations of misconduct and says it won the mining deal fairly in a public tender process overseen by Liberian authorities and ratified according to local law.
Liberia is currently reviewing all contracts signed under its previous government. Senior government officials say the interim government, which gave way to an elected administration this year, did not have the mandate to sign away national assets.
In theory, the deal should be a suitable marriage of interests. Liberia desperately needs investment and Mittal Steel is hungry for in-house supplies of iron ore, the raw material for steel production. Iron ore prices have spiked in the last two years, with CVRD of Brazil, the UK's Rio Tinto and the Anglo-Australian BHP Billiton dominating production.
Iron ore deposits in Liberia and neighbouring Guinea are thought to be some of the richest in the world, and Mittal Steel has estimated it could exploit about 1bn tonnes from deposits in northern Liberia over the coming years.
In return, the company is set to rebuild a main port and the railway linked to the deposits. Iron ore used to be Liberia's principle mineral export before conflict started brewing in the northern county of Nimba in the 1980s. The infrastructure of the state-run iron ore company was used as a base for a death squad and, when war broke out in 1989, iron ore exports plummeted.
Last year, with the war over for two years, Liberia's unelected power-sharing government finally agreed to sign a deal with Mittal Steel that would initially give thegovernment a 30 per cent stake.
In 2004, ministerial officials had prepared to award the contract out to GIHL, a lesser known company run by Pramod Mittal, younger brother of Mittal Steel chairman Lakshmi. The Liberian government incorporated a joint venture with GIHL and was set to sign a mineral development agreement with GIHL in October 2004 after it trumped rival companies that had expressed interest.
The companies included BHP Billiton, Rio Tinto and LNM Holdings, a Mittal Steel company.
Behind the scenes, Mittal Steel was lobbying to get its foot in the door. In September 2004, Lou Schorsch, then president and chief executive of Ispat Inland, at the time Mittal Steel's main US-based company, wrote to John Blaney, US ambassador to Liberia.
Mr Schorsch asked Mr Blaney to facilitate discussions with the Liberian government and to back the bid from the Mittal group. He argued that access to Liberian iron ore could "safeguard in excess of 30,000 jobs in the Chicago area."
Just as GIHL was preparing to sign a contract in October 2004, Gyude Bryant, Liberia's interim president, instructed ministry officials to halt the deal and advertise it more widely. Some ministerial officials disregarded him and carried on dealing with GIHL.
In November 2004, Mr Blaney wrote to Mr Bryant saying the procedures for signing off concessions needed to be more transparent.
Mittal Steel engaged a law firm run by Varney Sherman, a high profile lawyer from Mr Bryant's political party, as a legal representative in Liberia. Mr Sherman was a presidential candidate in elections last year. By early 2005, Mittal Steel was benefiting from a commercial advocacy agreement with the US government, but ministerial officials had chosen to back GIHL again. In March 2005, Mr Blaney wrote again to Mr Bryant to complain about the bidding process for iron ore.
"Rumours are circulating that members of the review committee have been approached to sell their support," wrote Mr Blaney.There followed a series of sharp U-turns in the opposition to Mittal Steel over the coming months. GIHL, which had filed a writ at Liberia's supreme court and taken out legal action against Mittal in the US, suddenly withdrew its cases for "commercial reasons".
A report by a parliamentary committee on land, natural resources and the environment last year concluded that the government had "strayed from the legal process" in the way it handled the contract award. The legislature later ratified Mittal Steel's contract.
In September last year, a day before Mittal Steel obtained its mining licence, the chief clerk of the national assembly wrote to Mr Bryant on behalf of the acting speaker. The letter requested that the bill ratifying Mittal Steel's contract should be sent back to be reconsidered because of "several technical errors".
Three days later, the chief clerk wrote back to Mr Bryant withdrawing his original letter on the basis that a deal with Mittal Steel would "provide job opportunities for many Liberians." A separate motion for reconsideration was never debated.
Mittal looks for 7 sites in Orissa for steel project
Financial Express (online)
19th July 2006
Arcelor Mittal Steel Company is looking at seven possible sites in Orissa for the location of its proposed 12 million tonne integrated steel project.
Preferring to have a port- based steel plant, the company is considering four sites with potential for the development of port along the coast of Bay of Bengal. The coastal sites are Bahuda Muhana and Palur in Ganjam district, Dhamra and Chudamani in Bhadrak district.
Mine rush in Mittal visit
The Telegraph India
Mittal: Committed to the state?
19th July 2006
A senior official of SAIL dashed to Gua and Chiria mines today while a Mittal Steel team visited Ankua and Ghatkuri to explore the possibilities of iron ore reserve.
B.K. Malik, general manager (maintenance) of raw materials division, took stock of mining activities in Gua and Chiria and also discussed the condition of equipment.
Both the mines are under SAIL while the state government wants Chiria mine back to its front so that it could offer iron ore reserves to mega-sector steel investors, including Mittal Steel, with whom it had signed MoUs.
Although SAIL officials did not want to relate Malik's visit with that of the Mittal Steel's, sources said the PSU wants to make it clear that it would comply with the norms set by the Centre to strengthen its resources.
Meanwhile, the Mittal Steel team, on a two-day visit to iron ore mines to explore possibilities, went to Ankua, Kansiabith and Ghatkuri mines in and around Chiria block today.
Mines secretary Santosh Kumar Satpathi said Mittal Steel is looking various sites before zeroing on a particular mine. "Let them make up their mind and apply first," he said.
Mittal Steel Jharkhand general manager Sanjeev Sengupta, who along with a Ranchi-based consultant firm visited the mines, said the purpose of the trip was to survey the iron ore belt since a first hand experience of the area was necessary before setting up any industry.
Sengupta reiterated that Mittal Steel is committed to come to Jharkhand. "That is why we are spending so much time and energy looking for a suitable mine here," he said.
He added that the mines department director (geology) and other district mining officers of Chaibasa had accompanied them today to satisfy the steel major's need.
Meanwhile, Mittal Steel is understood to have placed a fresh demand of getting the geological report of iron ore mines. It is imperative for the state government, claimed Mittal Steel officials, to enable the company in identifying the mines of its choice. However, mines minister Madhu Koda said the company should apply for the lease at the earliest to get these details.
Mittal Plans To Build $8.7 Billion Plant in India
7th July 2006
Mittal Steel Co. is planning to build an $8.7 billion plant in India, to reduce iron-ore costs and gain access to rising Asian demand. The company will build a 12 million ton-a-year plant in Orissa, according to Chairman Lakshmi Mittal.
Mittal is planning the major investment in India as a way to access rising demand and the world's fifth-largest iron-ore reserves. The company expects steel demand in India and China to grow three times faster than in Europe and North America over the next 10 years.
In October, Mittal had announced a $9 billion, 10 million-ton-a year plant in Jharkhand, which neighbors Orissa. India's states Jharkhand, Orissa and Chattisgarh account for 70% of the nation's coal reserves and 55% of its iron ore. The project will be built in two stages of 6 million tons each. No start date for the project has been announced.
Tata Steel should not feel vulnerable: Mittal
Times of India
11th July 2006
NEW DELHI: Lakshmi Niwas Mittal, with son Aditya in tow, spoke business when he landed in the Capital on Friday afternoon. After having given Jharkhand the royal ignore and moved his attention to Orissa, where he announced the setting up of a 12mn-tonne steel plant, the steel tycoon made it very clear that India was very much on his radar.
With an opening investment of Rs 40, 000 crores, Mittal emphasised that he was open to pumping in more investment in the country.
"Although our initial commitment is 12 mn tonne steel plant, we are open to growth. As a policy we would like to consolidate", he said.
"Whoever said that I am not interested in India," he told reporters at a press conference held in the Capital, when asked whether he was interested in Indian companies.
In a veiled threat to the fragmented Indian steel industry, the London-based Indian entrepreneur cited the Chinese example, where consolidation is the mantra.
"Unlike in the 70's, Chinese companies in 2006 are talking of consolidation. The Chinese government has said that they won't allow any small company to survive. Smaller companies will have less and less future as they will not find themselves competitive," Mittal reiterated.
The steel tycoon, who wants to beef up Mittal-Arcelor presence in India, is also looking at setting up greenfield operations in India. He also said that he is open to acquiring mining operations in India.
Dismissing all fears that Mittal entry in the country has sent Tata Steel on a defensive mode, the business giant said that "there was no reason for Tata Steel to feel vulnerable".
Mittal also assured that there would be no job cuts anywhere, following Arcelor-Mittal marriage. "Most Arcelor shareholders will tender shares by July 13," he said.
When asked about whether he had any philanthropy plans like Warren Buffett, Mittal laughed it off by saying that "I am still very young for philanthropy. Let me work for a couple of more years, then I'll think about it".
Mittal Plans $8.7 Bln Plant in India to Tap Iron Ore
7th July 2006
Mittal Steel Co., which a week ago sealed a purchase of rival Arcelor SA in the world's biggest- ever steel transaction, plans to build an $8.7 billion plant in India, to curb iron-ore costs and tap rising Asian demand.
Mittal will build a 12 million ton-a-year plant in Orissa, Chairman Lakshmi Mittal said today in Bhubaneswar. The project, Mittal's second venture in India, will compete with Posco, the world's fourth-biggest steel producer, which is building a $12 billion plant in the eastern state.
Mittal Steel and Posco plan to spend $21 billion over the next seven years in India to tap rising demand and the world's fifth-largest iron-ore reserves. Mittal expects steel demand in India and China to grow three times faster than in Europe and North America over 10 years. Iron ore prices have climbed 19 percent this year after soaring a record 71.5 percent last year.
``If you look at steel consumption, the future growth will be in China and India,'' said Richard Brakenhoff, an analyst at Rabobank NV in Amsterdam. ``In fact, growth per annum will be faster in India than in China. So, it makes sense.'' He has a ``buy'' rating on Mittal Steel shares.
Mittal may want to buy steel companies in Asian countries to profit from economic growth rates of more than 10 percent, Hans Kerkhoven, Mittal's Europe Finance Director, said June 14. China's economy expanded 10.3 percent in the first quarter and India's grew 8.4 percent in the year ended March, the fastest after China among the world's 20 biggest economies.
``We are focusing on India and China, and India is important for us to remain the biggest steel company,'' Mittal said today after meeting Orissa chief minister Naveen Patnaik.
Mittal expects India's steel demand to grow an average 7.3 percent a year over the 10-year period and China's to expand 6.9 percent. Europe's steel demand will only average 1.9 percent a year, North America's 1.8 percent a year and Japan at 1 percent a year, Mittal said in a presentation on March 9.
Mittal in October announced a $9 billion, 10 million-ton-a year plant in Jharkhand, which neighbors Orissa. India's states Jharkhand, Orissa and Chattisgarh account for 70 percent of the nation's coal reserves and 55 percent of its iron ore, according to McKinsey & Co.
Mittal will sign an accord with the Orissa state government in the ``near future,'' Mittal said. The project will be built in two stages of 6 million tons each, he said, without saying when construction work would begin. Mittal, was accompanied by his son Aditya, the company's chief financial officer, and Malay Mukherjee, the chief operating officer.
The Orissa project may precede the Jharkhand plant if the company is able to get the necessary approvals, Mittal said. The progress on the Jharkhand plant has been slow, he said.
``The progress is not satisfactory as we would like it to be,'' Mittal said. ``We're still evaluating our position. Wherever things move faster, we will start there. If we can come to a deal here, we will take up the Orissa project first.''
Delays in allocating mining licenses has undermined India's efforts to secure more overseas investments, leaving the country short of the raw materials needed to feed an economy forecast to grow 8 percent this year. India received $8.3 billion in foreign direct investment in the year ended March. China got $60 billion in overseas investments in 2005.
Last month, Posco said it may scrap the $12 billion project, the biggest overseas investment ever under in India, unless it's granted an exclusive access to iron ore mines. Orissa agreed to allow the steelmaker a lease to mine 600 million tons of iron ore. Permission has yet to come from India's central government, which is reviewing the country's mining laws.
Orissa government will form a panel to ``support'' Mittal's project, Chief Minister Patnaik told reporters.
Mittal last month won an approval from Luxembourg-based Arcelor's shareholders for a 26.9 billion-euro purchase of the European company, ending a five-month bitter feud.
Brothers in an ispat?
[Comment by Nostromo Research, 22nd July 2006]
GIHL (Global Infrastruture Holdings Ltd) is the holding company for Ispat, run by L N Mittal's younger brothers, operating (so far) predominantlay in India.
In 2004, when the older scion of the dynasty set up Mittal Steel - now by far the world's biggest steel producer, Ispat merged with the International Steel Group Inc of the US. Whether there is actually little love between the brothers or, in fact, the three of them are working in tandem, the long-running saga of their competition for one of the world's largest untapped reserves of iron ore in Liberia has now triggered a government investigation of the process, Mittal (elder) is being accused of doing what he did for years ago when he secured Romania's biggest steel procucer, without the company being put out to tender.
In that case, the UK's prime minister of sleaze (Tony Bliar) was found guilty of having directly intervened with the Romanian prime minister, on L N Mittal's behalt (shortly after the steel king had made a big donation to "New Labour"). Now the US ambassador to Liberia is being cited as having pressured the Liberian government, to ditch GIHL on behalf of Mittal's eponymous steel conglomerate.
Background to Lakshmi Mittal: Chairman and CEO of Mittal Steel
Suni systems (2005)
Steel tycoon Lakshmi Mittal, the 56 year old non resident Indian living in Britain, rose into focus this year when he was named the third richest person in the world (net worth $25-billion in 2005) by the Forbes Magazine after Microsoft chief Bill Gates and US investment guru Warren Buffett. He was also listed as the richest person in Britain in the Sunday Times Rich list 2005. Mittal heads the multi national Steel Company Mittal Steel, the largest producer of steel in the world.
Lakshmi Narayan Mittal alias Lakshmi Niwas Mittal was born on June 15th, 1950, in Sadulpur, a village which didn't have electricity until 1960's, in Rajasthan, India. His family moved to Calcutta in West Bengal, where he studied accounting and business at the prestigious St. Xavier’s College. His father Mohan Lal Mittal had set up a small steel mill in Calcutta. After class, Mittal used to work in his father's company.
After finishing his Bachelor of Commerce degree in business and accounting with first class, Mittal began his career in his father's steel firm in the early seventies. Realizing the fact that opportunities in India are limited for him, Mittal moved to Indonesia in 1976 and with his father's backing founded a steel plant, Ispat Indo and made the company a success. There began a saga of triumphs for the shrewd businessman.
His success has largely been built on buying up loss-making state-owned mills and quickly turning them around. He had one of his most notable successes in the late 1989, when he turned around a loss-making government-founded steel firm in Trinidad and Tobago which was losing $1 million a day. Within a year, Mittal had doubled the output and made the business profitable where US consultants and German experts failed to find a solution.
In 1992, he went to Mexico and bought the country's third largest steel producer, Sicartsa for $220 million. This was followed by an acquisition of Siderurgica del Balsas SA at Lazaro Cardenas in Mexico and then more companies in Canada, Germany, Ireland etc. Mittal followed the same strategy in former Soviet republic of Kazakhstan, and took over the state-owned blast furnace steel plant in 1995, renaming it Ispat Karmet. It was a risky proposition even by Mittal’s standards, workers had not been paid for six months. But within a year it was profitable and production has doubled from 120,000 tons a month to 250,000. In 1995, two new companies Ispat International Ltd. and Ispat Shipping were formed to provide technical and commercial services to the Group and to meet its growing shipping needs. The same year, he entered into Europe by acquiring a steel plant in Hamburg, Germany. With this, the capacity of the group reached to 11.2 million tonnes.
Meanwhile in 1994, a partition in the family business group, transferred all the foreign business into Ispat International, under the control of Lakshmi Mittal. The Indian operations remained with his younger brothers P K Mittal and V K Mittal. In 1997, Ispat International, the company that controlled the Group’s steel making operations in Mexico, Trinidad and Tobago, Canada and Germany went for listing in 1997 on the New York and Amsterdam stock exchanges.
The Ispat group went on making major acquisitions.
In 2004, Mittal Steel was formed through the merger of Ispat International and LNM Holdings, at the same time Ispat International merged with International Steel Group Inc. (ISG) an Ohio based company, becoming the world's most global steel producer with a net worth of over $22 billion. Mittal's industrial empire has steel making facilities in 14 countries and stretches from Indonesia to Poland, via Mexico, US, South Africa and Trinidad, North America, Africa, Asia and many European countries. In 2006, after six months of negotiations and major oppositions Mittal steel took over European steel giant Arselor SA for 26 billion euros ($33 billion), becoming the world's largest 100 million tonne steel entity. The merged entity would be called Arcelor Mittal with the Mittal family owning 43.6 percent of the combined group.
Mittal has received accolades for his achievements. In 1996, he was awarded the title 'Steel maker of the Year' by New Steel Magazine in the USA, and he received the Eighth Honorary Willy Korf Steel Vision Award, the highest recognition for world wide achievement in the steel industry in June 1998. The award was presented by the American Metal Market, a specialised publication, and Paine Weber’s World Steel Dynamics in New York., for outstanding vision, entrepreneurship, leadership and success in global steel development, from the American Metal Market and Paine Weber’s World Steel Dynamics. In 2004, he was awarded the 'European Business man of the year' by Fortune Magazine.
Although steel manufacturing remains the group’s mainstream business, they have diversified into shipping and has ventured into coal, power and oil enterprises in Kazakhstan.
Mittal is an active philanthropist and a member of various trusts. The LNM Group Foundation was created in 1998 to support health and education needs of the poor, particularly in India. He resides in a palatial home known as Summer Palace, in London that he bought in 2003 for a residential record of $129 million. On the rare occasions when he is at home, Mittal keeps a disciplined schedule, doing yoga for an hour every day and trying to catch a swim in his indoor pool. His wife Usha runs the Indonesian business and his son Aditya and daughter Vanisha are members of the Board of Directors of Mittal Steel.
The business empire has also been in the news for showering money on his two children. His daughter Vanisha's wedding to Delhi-born investment banker Amit Bhatia in 2004 June is reputed to have cost more than $55-million, with five days of events at some of France's most famous settings, including the 17th century Vaux le Vicomte chateau. For the wedding of his son Aditya in 1998, the Mittal family celebrated at Calcutta's Victoria Memorial, home to mementos of Britain's rule over India.
The Bishops Avenue
Hampstead Garden Suburb London
N2 OAB Great Britain
Phone : 0171 629 7988
Website : www.mittalsteel.com
Karnataka favours blanket ban on iron ore mining
Special Correspondent, The Hindu
19th July 2006
Delegation to seek Prime Minister's help to combat the problem
BANGALORE: The Karnataka Government has favoured a blanket ban on mining of iron ore as an offshoot of the bribery charge against Chief Minister H.D. Kumaraswamy.
Mr. Kumaraswamy said in the Legislative Assembly on Tuesday that the Government would impress upon Prime Minister Manmohan Singh to help the State in introducing certain tough measures to combat the growing incidence of unauthorised mining of iron ore.
In a strongly worded reply to the lengthy debate on the charge against him, the Chief Minister said there was no question of yielding to any pressure. The Government was ready to hold an inquiry into all aspects of iron ore mining, including the manner in which mining permits were issued over a period of time particularly from 2003 when the boom in iron ore export began.
Mr. Kumaraswamy put up a bold face despite the direct allegation against him levelled by the BJP MLC Janardhan Reddy that Rs. 150 crore had been collected from the owners of iron ore companies in Bellary district to be paid as bribe to him (Chief Minister). He, however, refrained from replying to repeated questions on whether he would file a criminal case against the BJP legislator or whether he would sue him for defamation.
The Opposition members led by N. Dharam Singh and M. Mallikarjun Kharge demanded a comprehensive investigation by the Central Bureau of Investigation and with the Government refusing to oblige, they walked out at the end of the reply. While the Opposition argued that the CBI was competent to probe the matter as it involved various agencies, the Chief Minister ruled out a role for the CBI as it had failed in some of the cases referred to it by the State. He said the Government was ready to take a delegation to the Prime Minister and also write a detailed letter to Dr. Singh highlighting all aspects of mining, particularly unauthorised mining in the forest tracts of Bellary and adjoining districts.
Bhupesh Bhandari / New Delhi
Business Standard Online
11th July 2006
Jindal Steel & Power's executive VC and MD on bagging the biggest iron ore mines deal in Bolivia.
Naveen Jindal is not a rock star. Neither is he a post-modern guru, nor a soccer sensation. Still, on June 2, it was because of the 36-year-old youngest son of the late O P Jindal that the people in faraway Bolivia were dancing and jiving on the streets. News agencies were full of reports of the celebrations that went on till late in the day at La Paz and other cities of Bolivia, writes Business Standard.
Jindal’s flagship, Jindal Steel & Power, had been selected by the Bolivian government to develop the coveted El Mutun iron ore mines in the country. Jindal, who is the executive vice-chairman and managing director of the company, had, in turn, announced that he would invest $2.3 billion in developing the mines and in a brand new sponge iron and steel plant.
This is the biggest foreign investment in the country and will provide direct employment to 2,000 Bolivians and indirect employment to another 10,000. The merrymaking in Bolivia does make sense.
A month later, any talk of the Bolivian acquisition is enough to bring a satisfied smile on his youthful face. “I am learning Spanish these days. I always liked the language,” he says, adding, on a more serious note: “It is the only place on earth where you have iron ore as well as gas in abundance.”
We are at TK’s, the oriental grill at the Hyatt Regency, seated at the Tapenyaki counter. Jindal has ordered an appetiser of green salad and I have asked for Miso soup.
The deal gives Jindal control over 20 billion tonnes of iron ore. To put it in perspective, India’s total reserves add up to around 13 billion tonnes. There were several global players in the race for the mines that began some two years ago, including L N Mittal. But it was Jindal who bagged the mines.
La Paz had attached stringent conditions to the bid. But, in the last two months of negotiations, Jindal’s team was able to dilute many of these conditions. Jindal hopes to begin work on the mines early next year. The logistical challenges, Jindal admits, are strong. The mines are 800 km from the nearest port; Jindal plans to evacuate the steel and sponge iron made at the pithead plants through the river Paraguay.
The investment proposed by Jindal in Bolivia is almost four times of his 2005-06 turnover of Rs 2,617 crore ($580 million). Not to forget, he has made an investment commitment of more than Rs 10,000 crore in Chhatisgarh, lined up a six million tonne steel plant in Orissa that could cost around Rs 13,500 crore and signed a MoU with the Jharkhand government for another five million tonne plant at a cost of Rs 11,500 crore. Not a small amount of money.
“How will you find the money,” I ask Jindal as he deftly balances the salad with chopsticks. (He has asked for a knife and fork as well, in case his fingers get tired.)
“Just like L N Mittal does,” says Jindal, adding: “I am fully committed to the Orissa plant. And there are enough people who would like to invest through debt in the Bolivian venture.” He might also look at listing the venture at a later date, Jindal says.
As we speak, the cook, wearing a karate shirt and a headband, starts doing our orders: assorted vegetables and a generous helping of cottage cheese for Jindal and salmon for me. While Jindal watches the salmon change colour from pink to a golden brown, my mind races back to a few years ago when Jindal used to say he wasn’t interested in expanding outside India as the country offered enough opportunities for growth. The traces of Swadeshi were unmistakable.
“Mindsets keep changing,” says Jindal. “But isn’t there a scare that the Areclor-Mittal combine may devour more steel companies,” I probe. “Yes, there is. But I think it is good for the industry. In case of a downside, the larger players will scale down output to hold prices,” says he.
Apart from a steel baron, Jindal is also a Parliamentarian, an ace shooter (he will be leaving for Croatia shortly as a part of the Indian contingent), a polo player and a public crusader for the tricolor (let’s see if he hoists the national flag at his factory gate in Bolivia). The various avatars leave him with little time for himself. “I haven’t been able to take a shower since last evening,” says Jindal.
About time he wore one of the other hats. A day before our lunch, the DMK had arm-twisted New Delhi to give up its disinvestment programme. “Hasn’t it sullied the image of your party,” I ask the Lok Sabha MP from Kurukshetra.
He dismisses the suggestion with a shake of his head: “What was there to give up? It happens everywhere. Like in business, plans keep changing.”
How about a nice trap for him? “The Congress is pressing hard for job reservations in the private sector, while industry is resisting it. Where do you stand?,” I ask him. “I think industry should be consulted before such a step is taken,” the keep-everybody-happy line is delivered to perfection.
But he did create a flutter after getting the Congress ticket in the last general elections when he praised the then prime minister, Atal Bihari Vajpayee. “I see it differently. Just because I am contesting somebody in an elections, doesn’t mean that I shouldn’t speak well of him,” says Jindal.
Our lunch is over. Jindal decides to brave the Delhi sun and walk to his office next door, accompanied by an armed guard from Haryana Police.