Iron and Steel Defy Gravity Predictions as Asian Steelmakers Plot New Projects

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). With Australia's major iron ore diggers and exporters targeting increases in production of around 20% in 2006 and prices for the ore now predicted to move upward by another 10%, the prospects for steelmaking projects, which have induced the ore boom, are looking vigorous throughout Asia. The drive of China's consumption is key to the iron/steel scenario. China was a net importer of steel in August even after a domestic peak steel production tonnage in the same month.

The Taiwanese Samoa Qian Ding Group (SQDG) (Taipei) has just announced that it will invest $650 million in a stainless steel production plant in Vietnam’s southern Ba Ria-Vung Tau province. Vietnam’s ministry of industry has said that the Taiwanese company will be 100% owners of the plant, which will have an annual production capacity of 720,000 tons per year, making it the largest stainless steel production plant in Southeast Asia. Approximately 80% of the plant’s production output will be exported to the Chien Sing steel manufacturing factory in Taiwan, which currently produces 150,000 tons of stainless steel per annum. A Memorandum of Understanding (MoU) was signed by SQDG and the ministry of planning for a 50-hectare site in the My Xuan A Industrial Zone in May of this year. The plant will will employ over 700 people and will add to Vietnam’s exports with projected annual gross revenues of $1.4 billion and profits of $120 billion. The stainless steel plant will join a cluster of steel factories in Ba Ria - Vung Tau Province, which has a 500,000-ton billet factor, a 405,000-ton cool-rolling steel factory and a 105,000-ton galvanized steel factory.

Upstream steel development projects are encouraged by the country’s steel development strategy that is aimed to reduce reliance on imported raw materials.

The Vietnam Steel Association (VSA) has said that steel industry planners are actively seeking a developer for a hot roll coil (HRC) factory for which a gap in the industry exists. A project is being developed to build the first HRC plant adjacent to the Thach Khe mine in the central Ha Tinh Province, reports Vietnam News. This mine is on the site of Vietnam’s largest iron ore reserves. ArcelorConsultants have completed an advanced feasibility study, which is now being assessed by government agencies. The project is estimated to require a $3 billion investment and would produce 4.5 million tons of flat steel products per annum.

BHP Billiton (NYSE:BHP) (Melbourne, Australia), which is rumored to be in joint venture talks with South Korea’s POSCO (NYSE:PKX) (Pohan, South Korea) concerning the $12 billion steel mill planned for India’s Orissa province, has said that India has the potential to become the world’s number three iron ore supplier if it can consolidate and centralize its 120 small mining companies, which each produce about two million tons per annum. Improvements in the mining and steel industry were already enabling the exploitation of lower grades of ore. Don Carroll, BHP’s Country President for India said, "We believe India could easily double its iron ore reserves." Currently, BHP sells India about 7 million tons of coking coal per annum for the steel industry.

Jindal Power and Steel (JPS) (New Delhi) is reportedly keen on the idea of joining the country’s new steel project boom with a 5 million tons per year steel mill and a captive power plant in the industrial power belt of Jamshedpur. The managing director of JPS, Naveen Jindal, has said that the company will need 300 million tons of iron ore and 500 to 600 million tons of coal over the next thirty years to feed the proposed DRI (direct reduction of iron) plant.

A MoU has been signed with the state government for the construction of the integrated steel plant and Jindal commented in mid-September that $2.1 billion to $3.2 billion would be needed through 2015 to start production and establish a township. The company is currently assessing ore, coal and water supplies before making a final decision at the end of September.

JPS has another MoU with Orissa to establish a 2 million-ton grassroot steel plant in Angul. It has iron ore mines in Orissa and Chhattishgarh. The company also has steel pants in Hissar, Haryana and Chhattisgarh. At Raigarh it has a plant producing 500,000 tons per annum and plans to expand this to 2.5 million tons per annum by the end of 2006.

Among the steel majors in India, Tata (Bombay) and Mittal (Rottedam, Netherlands) are active with planning investments of $22 billion through 2020 to raise production capacity to 33 million tons per annum. Tata will construct three grassroot plants in India with a combined capacity of 23 million tons per annum and is acquiring a 2 million tons per annum plant in Southeast Asia in late 2005 or early 2006.

For related news items see June 29, 2005 - Posco and Tata Commit $18 Billion to Indian Steel Projects - Mittal to Come and July 19, 2005 India’s Steel Production in High Growth Phase with Three New Projects to Add 17 Million Tons

In Malaysia, the Lion Group (Kuala Lumpur) is investing $1.3 billion through 2010 in the development of an integrated steel mill complex in the central Selangor state. This will raise current steel production in Selangor from the current 4.8 million tons per annum to 7.8 million tons. The company already has two steel mills, Amsteel 11 and Megasteel Bhd, at the 600-acre site near the town of Banting.

Iron and steel appear to be defying predictions of falling prices or plateaus even in an unclear general economic environment. South Korea’s crude steel production was up a marginal 0.2% for the first eight months of the year despite a relative slump in the general economy. Output for the period was 31.33 million tons. Despite forecasts of a 20% fall in iron ore prices following efforts to slow down China’s growth rate, the country’s steel production is now expected to grow by 8% in 2006 and 2007, which will be paralleled with an annual 10% rise in ore prices. Australia’s BHP is planning to raise ore production from 104 million tons to 118 million tons in 2006 and Rio Tinto’s Australian mines will increase production to 170 million tons in 2006 from 140 million tons in 2005.

Chinese steel consumption is being fed with domestic production and imports. In August, the country produced 30.5 million tons of steel, which is equivalent to 359 million tons per annum, or roughly a third of total world production. This August, statistics showed a 28% rise year-on-year and pig iron output grew 30%. With consumption in China growing at an estimated 25% to 30%, the country was a net steel importer of 530,000 tons of steel in August.

If Hollywood, or Bollywood, made an old time, high-hat, good versus bad western, the scene would be set in one of the world’s gigantic iron ore pits, rather than in one of those quaint old shafts dug into a mountain where the lure was gold or silver. The script would definitely feature the good guys and the bad guys from China, India and Australia selling and buying their souls, for no more than 16 tons of coal, iron ore or steel, in the company store.

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