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Coal India board to meet on 10 July: reports

Coal India board will meet on July 10 to finalise various issues, including changes in the penalty clause of new model FSAs, according to reports.

Reports stated that the board meeting which was earlier scheduled for July 5, has been shifted to July 10 now.

Last month, the Prime Minister's Office (PMO) is learnt to have asked CIL, among other things, to go in for import of coal through state-owned agencies like the STC and MMTC, report says.

There are reports that CIL, which missed the revised production target last fiscal and produced 435 million tones of coal, has set production target of 464 MT for 2012-13.

Fitch affirms SAIL at 'BBB-'; Outlook negative

Fitch Ratings has affirmed Steel Authority of India Limited's (SAIL) Long-Term Foreign Currency Issuer Default Rating (FC IDR) at 'BBB-' with Negative Outlook and its National Long-Term rating at 'Fitch AAA(ind)' with Stable Outlook.

The ratings reflect SAIL's leadership in the domestic steel industry with an established brand, strong credit metrics, a presence in almost the entire range of mild steel products and its large reserves of quality iron ore. It also derives substantial cost benefits from its 68% captive power generation through its own and joint venture power plants.

SAIL's ratings also reflect a favourable outlook on its products given growth in the domestic infrastructure, auto and white goods sectors. However, slower growth in India could constrain domestic steel demand. The lack of self-sufficiency in coking coal remains a risk, as the company imports 70% of its coking coal requirements.

SAIL is implementing a large Rs. 700bn capex programme scheduled to be completed by the financial year ending 31 March 2013, for the expansion and modernisation of its steel plants and mines development. The capex will increase SAIL's crude steel capacity to 21.4 million tonnes (mt) from the existing 13.4 mt. However, SAIL is experiencing time overruns in capex implementation, having only spent Rs. 403.22bn until end-March 2012 and committed to incur a further Rs. 120bn in FY13.

In Focus Stories

Q1FY13: What to expect from Metals & Mining this quarter?

Domestic steel prices during the quarter were marginally higher on a qoq basis. The marginal increase in domestic steel prices was largely due to a depreciating Rupee against the Dollar, as global steel prices declined sharply in Q1 FY13. Chinese HRC export steel prices after rising to US$650/ton by the end of March ’12 declined below the US$600/ton mark as demand for the metal remained subdued globally. Average Selling Prices (ASPs) for the steel players to improve 1-2% on a qoq basis as the impact of price hikes announced would be seen with a lag. Demand in India too remained low due to a sluggish demand from the steel consuming sectors; Automobile, consumer durables and infrastructure. As a result, steel volumes for the steel players are expected to decline on a qoq basis. We expect Sesa Goa’s iron ore volumes to be lower on a yoy basis due to lower contribution from Karnataka mines and restriction of truck movement in Goa. Coal India’s offtake is expected to increase from 106mn tons in Q1 FY12 to 114mn tons on the back of higher output and increase in availability of rakes.

During the quarter, base metal prices declined the most as the European debt crisis and demand slowdown in China led to a sell-off in most of the metals. On a qoq basis, the decline was highest in aluminium (8.7%), followed by lead (5.9%), copper (5.7%) and Zinc (5%). As seen in the ferrous space, the impact of the decline in domestic metal producers was cushioned by the deprecation of the rupee. In fact only aluminium prices are lower on a qoq basis in Rupee terms, rest all metals are higher on a qoq basis. For Sterlite A) HZL zinc volumes are expected to remain lower qoq following the closure of the Vizag unit and lower metal ore grades. B) Lead volumes to remain flat. C) Silver volumes to rise due to higher contribution from new refinery D) Power volumes to increase on account of higher PLFs in SEL. E) Copper and aluminium volumes are expected to be marginally lower qoq. Volumes for both Hindalco and NALCO are expected to be marginally lower on a qoq basis.

Q1 FY13 would be marginally better than Q4 FY12 on the operating margins front. Margins would expand due to 1-2% increase in steel realizations and lower coking coal costs. Coking coal prices have been in the declining trend over the last one year. EBIDTA/ton for Tata Steel Europe would improve significantly on account of lower raw material costs and impact of price hikes announced in Q4 FY12. Coal India’s profitability would increase due to many one-off items were booked in Q4 FY12. E-auction sales volume is expected to decline qoq as the company’s focus was to supply coal to the power producers.

For the non-ferrous space, margins are expected to decline on a sequential basis due to a decline in metal volumes and subdued realisations. An increase in Tc/Rc margins would also lead to margin expansion for both copper division of both Sterlite and Hindalco.
JSPL on account of its raw material integration and strong volume growth is our top pick in the ferrous space. From the non-ferrous space Hindustan Zinc and Coal India from the mining space are amongst our top bets.

Domestic News

Hindalco to raise Rs 90bn for Odisha project: reports

Hindalco Industries, AdityaBirla Group's flagship firm, is planning to raise Rs90bn for biggest greenfield project in Odisha, according to reports.

Reports stated that the Hindalco senior executives are scheduled to announce their plans at an investor meet scheduled this week.

If completed, this proposed exercise would also make the current fiscal year one of the most hectic fund raising year for Hindalco as the company completed a Rs. 15bn bond issue last week, says report.

Coal India offers 70 MT pithead coal to power producers: report

Coal India Ltd is planning to liquidate 70 million tonnes of pithead stock, according to reports.

Reports stated that three private producers which includes Sterlite Industries, Adani Power, and China Light and Power (CLP) — have responded to a recent CIL offer to all 89 power stations in the country to lift coal on ‘as is where is’ basis.

The initiative should boost CIL’s bottomline beginning the second quarter; says report.

There are reports that profits have taken a hit of Rs 60bn annually (Rs 1,500 quarterly impact) due to rise in wage cost and other employee-related expenses.

Karnataka recommends approval of 8 iron ore mines

Karnataka government has recommended approval of eight iron ore mines in the state with a total capacity of 5.5 million tonnes per year, according to reports.

Reports stated that the recommendation includes a 2.2 million-tonnes-per-year mine operated by Sesa Goa in the state.

The court had partially removed the mining ban earlier this year by allowing mining by category A mines, those with 50 hectares and with less or no illegalities, says report.

Moil hikes ore prices by 12.5-15%

Moil Ltd. has informed that in line with the business practice of quarterly revision in the prices of manganese ore, the Company has increased prices of different grades of manganese ore in the range of 12.5% to 15% for the quarter July-Sept. 2012.

Moil's stock has appreciated post the announcement. Moil is up ~3% at Rs. 287.50.

GVK expects financial closure for Alpha coal project by March 2013: reports

Water shortage at Nagda plants: Grasim Industries

Global News

Adani to start digging Australia mine in 2013: report

Adani Enterprises is planning to start building its first Australian coal mine in July 2013, at an expected cost of around $4 bn, according to reports.

Reports stated that Adani expects to complete a bankable feasibility study for the Carmichael mine by the end of this year.

Adani has been approached by pension funds and private equity investors interested in buying minority stakes in the Carmichael project, report says.