ata Steel, Wipro among world's most ethical: Survey

Mumbai, March 18 (IANS) Tata Steel and Wipro have been named among the world's most ethical companies by the American think tank, Ethisphere Institute, company officials said.

These are the only two Indian companies to have featured in the 2012 list of World's Most Ethical Companies prepared by US-based Ethisphere Institute.

"It is a great honour for Tata Steel to be recognised under such an important and prestigious parameter. Ethical business principles and practices have been the key differentiators of Tata Group and Tata Steel since inception," said H. M. Nerurkar, managing director, Tata Steel.

Ethisphere's annual list of the World's Most Ethical Companies (WME) recognises companies that truly go beyond making statements and conduct business ethically by translating words into action.

The Ethisphere Institute's annual WME Companies list revealed that 145 companies in countries like the US, Great Britain, Japan, Portugal and India stood out for setting high standards of employee behaviour and conduct.

Ethisphere evaluated about 5,000 global companies, including those in Standard & Poor's 500 index, on reputation, corporate citizenship, culture and other qualities.

Marubeni eyes stake in Australian iron ore mine

TOKYO —

Japanese trading house Marubeni intends to take a 12.5% stake in one of the world’s biggest iron ore mines in Australia for some $1.6 billion, according to a report.

Marubeni aims to sign a deal by the end of March for the stake in the Roy Hill iron ore project in the state of Western Australia, owned by Hancock Prospecting Pty, the Nikkei newspaper said.

South Korean steelmaker Posco is also planning to take a 15% stake in the project, which could start production in 2014 with an annual output expected around 55 million tons, Nikkei said.

The Japanese government will consider providing financial assistance for the project, as the nation relies on imports for all its iron ore needs, the newspaper added.

Steel sector's hope for infrastructure status belied

Domestic steel industry's hope for infrastructure status remained unrealised, but some Budget relief measures kept it placated. The industry has been lobbying for it for some time for securing long-term support.

Mr H. M. Nerurkar, MD of Tata Steel, said industries like steel that have high capital outlays and have high contribution towards creating infrastructure, should have been categorised as infrastructure industry too. Steps to control imports of HR and CR coils and low quality CRGO will help boost domestic steel industry, he felt.

Budget initiatives taken to reduce duties (by five percentage points — from 7.5 per cent to 2.5 per cent) on equipment for setting up or expansion of iron ore beneficiation and iron ore pellet plants, would provide incentive to use iron ore fines which are at present not being utilised fully. According to Mr Sachin Sehgal, Director of OreTeam, a New Delhi-based research house, with the iron ore export tax staying at the same position and some relief given to the value addition process, the industry focus would remain on the domestic market. Budget did not impose any export duty on iron ore pellets. This is an indirect encouragement for pelletisation exercise for the local players.

Mr M.N. Rai, Executive Director of SAIL's raw materials, division told Business Line that the proposals would save project costs. Mr P. Madhusudan, Director -Finance of RINL, said the Budget proposal would reduce the project cost by around 5 per cent.

AusGroup unit formalises Karara Iron ore contract
AusGroup subsidiary AGC Industries, fabrication, construction and integrated services company, has formalised its construction contract with Karara Mining Limited (KML) for an iron ore project in Western Australia.

The A$160m ($168.3m) contract entails structural, mechanical and piping installation works at KML's Karara Iron Ore project, about 210km east of Geraldton.

Following the award of the early works contract last March, the project is currently in its construction phase with the first production of magnetite concentrate due to commence in September 2012.

With this contract award, AusGroup's order book now stands at A$441m ($464m).

Zacks Industry Outlook Highlights: ArcelorMittal, AK Steel Holding, Nucor and U.S. Steel

But the recovery has been swift and forceful. According to the World Steel Association, world crude steel production was a record 1,527 million tons in 2011, outperforming the 2010 record of 1,414 Mt, a 6.8% jump.

Steel industry’s demand for level-playing field met in Budget

Steel makers’ long-pending demand to give them a level-playing field vis-à-vis imports gets rewarded in the Budget with the Finance Minister raising import duty to 7.5 per cent from 5 per cent earlier.

“The Finance Minister’s decision to enhance basic customs duty on non-alloy, flat-rolled steel to 7.5 per cent from five per cent and duty reduction on imported plant & machinery for setting up iron ore beneficiation from 7.5 per cent to 2.5 per cent will help to keep our costs competitive,” Essar Steel’s CEO and MD Dilip Oommen said.

The steel industry had been demanding an increase in the import duty of HR and CR coils for quite some time now. In the run-up to the Budget, all leading domestic steel makers had written to the Finance Ministry requesting to double the import duty to 10 per cent.

They viewed duty hike would help protecting the interests of the domestic steel industry and putting a brake on growing imports from China, Russia, Korea and Brazil among other countries.

India imports around six million tonne steel a year. Till January of the current fiscal, it was marginally down at 5.59 million tonnes, against 5.62 million tonnes in the year ago period. The domestic consumption grew by 5.5 per cent to 57.24 million tonnes in the same period.

Tata Steel Managing Director H M Nerurkar said steps to control imports of HR and CR coils and low quality CRGO will help to boost domestic steel industry.

“Initiatives taken to reduce duties on equipment for setting up or expansion of iron ore beneficiation and iron ore pellet plants will provide incentive to use iron ore fines which are at present not being utilised fully,” he added.

SAIL Chairman C S Verma said increase in customs duty for flat carbon steel and reduction in import duty for equipment required in mining and minerals sector -- all the measures are positive for steel industry.

AK Steel Issues 1st Quarter Outlook

AK Steel Holding Corporation (NYSE:AKS - News) issued guidance for the first quarter of 2012 and also provided a brief idea of what investors might see in the second quarter of 2012. The company apprehends that there would be a loss in the first quarter of 2012 in the range of 11 cents per share to 15 cents per share.

The loss would however be lesser than the loss of 26 cents reported by the company in the fourth quarter of 2011. The Zacks Consensus Estimate for the first quarter of 2012 is a profit of 3 cents per share.

The company’s shipments are estimated to fall by about 7% from the last quarter to 1.31 million tons in the first quarter of 2011. However, AK Steel forecasts the average per ton selling price to be higher compared with the sequential quarter due to an increase in spot market pricing and also an improving product mix. The company also expects its last in first out (:LIFO) credit for the upcoming quarter to be lower than what it had recorded in the fourth quarter.

The company forecasts that the automotive market in the second quarter of 2012 will perform well benefiting the company. The company further anticipates that the shipments will also be more in the second quarter and the operating rate will also be higher.

AK Steel expects the raw material costs to be lower in the second quarter versus the first quarter of 2012. As a result, the company expects to deliver profits in the second quarter.

In January 2012, AK Steel posted its fourth-quarter 2011 results, net sales of $1,509.2 million on the shipments of 1,409,900 tons versus $1,390.6 million on shipments of 1,359,900 tons in the prior-year quarter. It was ahead of the Zacks Estimate of $1,481 million.

Average selling price for the quarter was $1,070, up 5% year over year, but down 8% sequentially. In 2011, sales were $6,468.0 million, up 8% year over year. Shipments were 5,698,800 tons versus 5,660,900 tons in 2010.

AK Steel is uniquely positioned to focus on products with high margins. Electrical steel continues to be the company’s strongest product line, with demand recovering in the U.S. and abroad, though at a slower rate. The company is operating its plants at above 80% capacity and is well positioned to serve the end markets when the demand rebounds.

The company experienced a tough fourth quarter due to the economic downturn and escalating raw material prices. However, currently the company is witnessing increased demand for its carbon steel products and thus has been raising prices in the spot market to recover high steelmaking input costs.

The company is also witnessing improved demand from the automotive sector. However the uncertain economic environment and higher raw material costs remain concerns.  All said, we feel that the company will perform better in the first quarter of 2012 compared with the previous quarter.

Schnitzer Announces Earnings Date and Preliminary Results For the Second Quarter of Fiscal 2012

Schnitzer Steel Industries, Inc. (Nasdaq:SCHN - News) will report the financial results for its fiscal 2012 second quarter, which ended on February 29, 2012, on Thursday, April 5, 2012, and will webcast a conference call to discuss the performance at 11:30 a.m. Eastern on the same day. In advance of its full earnings release, Schnitzer is providing preliminary results for its second quarter of fiscal 2012.

Schnitzer expects fully diluted earnings per share for the second quarter to be approximately $0.28 - $0.35. Weaker market conditions resulted in segment operating margins that were lower than anticipated due to falling sales prices in the latter half of the quarter. The Company expects to report strong operating cash flows primarily as a result of a reduction in working capital levels due to sales volumes exceeding scrap purchase volumes which lowered inventories. Total debt to total capital is expected to approximate 27%, down from 31% at the end of the first quarter of fiscal 2012.

In our Metals Recycling Business, operating income per ferrous ton is expected to be $14-15, approximately 30% higher than the first quarter of fiscal 2012, but below the outlook in our first quarter earnings release primarily due to lower selling prices as a result of softer demand than anticipated in the latter part of the quarter. As expected, December was impacted by lower priced customer shipments that had carried over from the first quarter. Improved demand drove higher prices in January. However, the mild winter weather conditions coupled with the impact of weaker market conditions drove selling prices lower for February shipments. As a result, operating margins for the quarter as a whole were compressed. Despite seasonally weaker buying patterns, we shipped approximately 1.3 million ferrous tons and 165 million nonferrous pounds in the quarter due to strong production.

In our Auto Parts Business, operating margins are expected to be 10-11% due to the impact of the weaker selling prices for scrap and cores later in the quarter and higher vehicle purchase costs due to tight supply markets for end of life vehicles. Stronger parts sales and customer admissions benefitted from mild winter conditions. APB’s results include $2 million of additional legal costs which negatively impacted margins by 200 basis points.

In our Steel Manufacturing Business, volumes increased slightly from the first quarter as expected. However, operating results are expected to be slightly less than breakeven, approximating results in the second quarter of 2011.

While volatile pricing trends resulted in margin compression in the first half of fiscal 2012, long-term global demand for recycled steel continues to be strong as evidenced by the growth in US export activity, capacity expansions of electric arc furnaces, and increasing use of scrap metal to minimize environmental emissions. Schnitzer’s expanded operating platform is strategically positioned to benefit from strong global demand for recycled metals and realize enhanced operating leverage from investments in our North American supply chain and in nonferrous separation technologies.

The webcast of the call and the accompanying slide presentation may be accessed on the Schnitzer Steel website under the Investors section's Event Calendar at www.schnitzersteel.com/events. The call will be hosted by Tamara Lundgren, President and Chief Executive Officer, and Richard Peach, Senior Vice President and Chief Financial Officer.

 

Analysis: Steelmakers eye gas to cut costs, drive exports

NEW YORK (Reuters) - America's steel industry, for decades a symbol of industrial decline, is betting on natural gas to make it more competitive against foreign producers.

U.S. Steel Corp (NYS:X) and Nucor Inc (NYS:NUE - News), the two largest U.S. steel producers, are changing their traditional manufacturing processes as relatively cheap domestic natural gas supplies become more plentiful.

Some experts believe the new techniques will not only allow steelmakers to cut costs and lower selling prices at home, but also give U.S. companies a chance to compete with Japanese, South Korean and European rivals for a slice of the export pie.

"Gas is very positive for steel; it really lowers the cost of the product," said Michael Locker of Locker Associates, a consultant for steel companies.

U.S. Steel Chief Executive John Surma said in an interview that using natural gas in some stages of production can cut the use of more expensive coking coal by some 10 percent.

He estimated that factoring in costs such as labor, energy and transportation, the overall savings would be $6 to $7 per ton of steel. U.S. Steel produces 23 million tons per year.

Christopher Plummer, managing director of Metal Strategies, an industry consultant in West Chester, Pennsylvania, said the global average cost of producing a ton of steel is about $600 to $700. Russian steelmakers produce at the bottom of the cost curve, averaging about $500 per ton. Americans are in the middle at about $625 to $675 per ton. The most expensive are the Japanese and Koreans, at $650 to $750 per ton.

While a savings of about 1 percent may not sound like much, every little bit counts for companies in an industry that has been struggling with steep rises in raw material costs, such as coking coal, iron ore and scrap metal.

"You do an analysis of our costs and they are much higher than five years ago," said Surma, whose company posted a net loss of $226 million for the fourth quarter -- its fifth in the last eight quarters. "The capital cost to increase our ability to inject greater quantities of natural gas into our blast furnaces is minimal, but the potential savings certainly start to add up when you are producing 20 million tons or more of steel every year."

A GAME CHANGER

With natural gas prices at 10-year lows because new fracking technology has opened up huge deposits in the Northeast United States, most domestic steelmakers are looking to use more of it.

"There is a new focus on natgas," said Larry Kavanagh, president of the American Iron and Steel Institute's Steel Market Development Institute. "Until the recent discovery, we believed coal-based technologies would dominate the future. Now the game has changed in the near term."

Nucor, for instance, has dropped plans to build a traditional blast furnace in Louisiana and instead is constructing a gas-fired plant to produce direct reduced iron, or DRI, a key ingredient in its steel-making process.

The $750 million facility will convert natural gas and iron ore pellets into high-quality DRI used by Nucor's steel mills, along with recycled scrap, to produce 2.5 million tons of steel a year. Like U.S. Steel, Nucor produces about 23 million tons of steel a year. According to Nucor officials, the DRI offers a carbon footprint that is one-third of that for the coke oven/blast furnace, and at less than half the capital cost.

Nucor may be better placed than U.S. Steel to reap the benefits of lower-cost gas because it is a so-called mini-mill operator, which melts recycled steel or pig iron in electric arc furnaces. Electricity is expensive, but costs can be cut by substituting natural gas to fire the furnace. U.S. Steel is an integrated manufacturer that largely makes steel the old-fashioned way, by cooking iron ore and coking coal in a blast furnace. Thus, there is a limit on the amount of natural gas it can substitute for coal.

Nucor has not said how much it expects to save on the cost of a ton of steel by using more natural gas.

Of course, there is no guarantee that natural gas prices will stay low forever; but increases are likely to be more limited than in the past because of the increased production. In the past, prices were volatile and in 2005 were as high as $14 per million British thermal units (BTU), compared with slightly above $2 per million BTU today.

But John Anton, director of steel services for the global forecasting company IHS, said he believes there is little risk that steel companies will get burned should gas prices rise again.

"DRI cannot stand high gas prices; but with fracking technology, we see low prices around $4 lasting for 30 years and under $8 for the next 80 years."

Nucor, which posted a $137 million profit for the fourth quarter, is using a variety of measures to lock in current low prices. President and Chief Operating Officer John Ferriola said the company has long-term gas contracts at its DRI plant in Trinidad with an average cost of about $2 per million BTU.

In addition, Nucor and U.S. Steel are using hedging techniques to protect themselves against potential price rises.

GROWING EXPORTS

Surma said the shift to natural gas could give U.S. Steel, a 110-year-old symbol of American industrial power, a competitive edge in the 21st Century.

Coke prices have risen sharply in the last five years as demand from Asian steelmakers has increased with the China-driven infrastructure building boom.

Although U.S. Steel cannot completely replace coke with natural gas, Surma said the company will try to use gas as much as possible. "We plan to keep pushing the envelope because the economics of gas are just so good," he said.

Steel Market Intelligence analyst Michelle Applebaum said U.S. steelmakers have taken many steps to boost their competitiveness since the 1970s, when they were hobbled by high labor and pension costs and tepid demand. "The U.S. has cut a third of the capacity over the last 30 years to keep the industry alive," she said. "It has made the companies very competitive and the U.S. is very well positioned for exports."

Indeed, U.S. steel exports have recovered to pre-recession levels. The American Iron and Steel Institute forecast exports this year will reach 13.7 million tons, up from 13.45 million tons in 2011 and 9.3 million tons in 2010.

Anton of IHS expects most of the growth to be in Europe and Mexico in the near term. Further out, demand will grow in Asia and Africa. He expects U.S. steel manufacturers to increase their market share at home as well as abroad.

"Overall import penetration into the U.S. is about 20 to 25 percent of steel consumption. We see that falling to the low teens by the end of the decade," he said.

Jim Mahoney, general manager of New Process Steel, a private steel purchaser based in Apodaca, Mexico, said his company buys most of its steel in the United States, Canada and Mexico.

"Steel is a commodity like anything else; it's no different from a consumer choosing where to buy gas (gasoline)," he said. "Once you deal with the issues of convenience and reliability, it comes down to price."