Dry Bulk Shipping VIII

[lamborghini]

China unveils plans for huge steel plant

Businessday - China has unveiled plans to build one of its largest steel plants at a cost of $US30 billion ($A35.93 billion), state media reported.

The plant is to be located in Fangchenggang, a port city in Guangxi region in China's south, the Economic Information Daily said.

It will require a total investment of 204.9 billion yuan ($US30 billion), the report said.

"The setup of the steel-making port base in Guangxi is expected to improve the efficiency of iron ore imports," Su Aik Lim, an analyst with Fitch Ratings in Beijing, told AFP.

It can reduce the transportation costs for steel products sold in China's central and western markets, given that the country's large steel makers now cluster in the north and east, he said.

The facility is the result of a joint venture between Wuhan Iron and Steel Group and the Guangxi regional administration's agency for the management of state assets, according to the paper.

The plant is expected to have an initial annual capacity of ten million tonnes, but that will eventually rise to 30 million tonnes a year, it said.

The Xinhua news agency said the first production line would become fully operational in 50 months, adding the plant was part of a major investment drive launched in 1999.

[squaretimes]

GEOJEDO, South Korea: Day and night on this tiny island at the southern tip of the Korean Peninsula, workers at Samsung Heavy Industries' overcrowded shipyard assemble giant steel blocks into huge cargo carriers and oil-drilling ships.

Churning out one ship a week and still sitting on 40 months' worth of orders, Samsung appears to have only one concern: the lack of space for building more vessels.

But analysts say that the seemingly buoyant shipbuilding industry may soon be heading into a multiyear downturn, and that bold efforts to buy up other shipbuilders - currently led by Hyundai Heavy Industries and STX Shipbuilding - could backfire in a costly way.

Analysts say that new ship orders are dwindling and shipbuilding shares have not yet hit bottom. The slowing global economy is hurting worldwide trade and rising steel prices are squeezing shipbuilders' profit margins.

"The industry's major peak has certainly passed," said P.J. Yoon, an analyst at Samsung Securities. "Those who buy will assume the burden of weathering a down cycle." http://www.iht.com/articles/2008/09/...ess/deal05.php

[lamborghini]

Rio Tinto approves $293 million for continued Canadian iron ore expansion and studies

Rio Tinto continues to advance its three-phased strategy that would see the Iron Ore Company of Canada's annual concentrate production expand by 50 per cent to 26 million tonnes by 2011. Rio Tinto today approved the $193 million capital expenditure (Rio Tinto share $102 million) magnetite plant expansion to an annual capacity of 22.8 million tonnes.

Rio Tinto has also approved $75 million (Rio Tinto share $44 million) for completion of a feasibility study on the third-phase expansion, to extend annual capacity to 26 million tonnes and purchase of long-lead items.

Overall, taking into account earlier preparatory work, a total of US$768 million has now been committed to the expansions.

"The iron ore market remains tight and our substantial reinvestment in our operations in Canada and worldwide demonstrates the confidence we have in that market," Rio Tinto chief executive iron ore and IOC chairman Sam Walsh said.

[lamborghini]

(Businessday) - XSTRATA Copper has bought a 17.83 per cent stake in Indophil Resources one week after it let a $540 million bid for its Philippines joint venture partner lapse.

Xstrata bowed out of a bidding war following a higher offer from a consortium backed by the Hong Kong investment bank Crosby Capital Partners and Indophil's managing director, Richard Lauffman.

After yesterday's $82 million purchase of the Indophil stake from its largest shareholder, Lion Selection, the Anglo-Swiss miner holds 19.9 per cent of the Philippines explorer.

The Crosby consortium's bid is contingent on acceptances from 90 per cent of Indophil shareholders, and it is understood Xstrata has indicated it is unlikely to accept the offer of $1.28 cash and 2c of scrip in a new exploration company.

But the Herald understands the Crosby group may approach buyers of copper concentrate - possibly in China - over the next week about a possible joint bid for Indophil, which would help remove some of the financing risks presented by achieving acceptances of less than 90 per cent.

Xstrata and Indophil are joint venture partners in the $US4 billion ($4.9 billion) Tampakan copper-gold project, with Xstrata being the majority partner.

The purchase of Indophil would cement Xstrata's ability to market all of the copper production, which could be up to 460,000 tonnes a year.

Lion, which had a 24.72 per cent stake in Indophil before selling most of it to Xstrata, is understood to have accepted Xstrata's offer of $1.17 a share because it was worried Crosby's bid would lapse if Xstrata was able to buy a blocking stake..

Those concerns pushed Indophil shares down 42.5c to 76.5c yesterday. An Indophil shareholder said he was incensed by Lion's decision to sell out, which he deemed particularly surprising in light of the $8 million difference between the Crosby offer and the price paid by Xstrata.

After Indophil made a failed bid for Lion earlier this year, the mining investment house decided to return cash to shareholders by selling its stakes in the Newcrest Mining-operated Cracow goldmine, in Indophil and in the Zambian miner Albidon.

But the Cracow and Albidon sales failed after a deterioration in the equity market.

This week Lion said it planned to return $1 a share to investors, but that was based on a plan to sell its entire stake in Indophil, not just 17.83 per cent.

Xstrata's decision to take a 19.9 per cent blocking stake in Indophil indicates it remains interested in the company, but under the Corporations Act it is forbidden from making another full takeover bid for at least six months.

[lamborghini]

Vale tipped to outperform BHP and Rio

(Businessday) - Vale has fallen 26% so far this year in Sao Paulo, heading for the first annual decline since 2000. Now analysts say the world's largest iron-ore producer is poised for its best performance in a decade.

Vale may double in the next year, three times the expected gains for the world's biggest mining companies, BHP Billiton and Rio Tinto, according to the median of six analysts' forecasts compiled by Bloomberg.

While Deutsche Bank, Credit Suisse and Goldman Sachs predict iron-ore prices will rally 20% in 2009, Rio de Janeiro-based Vale will benefit more than its competitors as demand from Chinese steelmakers rises and freight rates fall.

BHP and Rio won bigger price increases from China this year than Vale because they ship most of their ore from Australia, not Brazil.

"Vale is set to outperform its peers,'' Credit Suisse's Roger Downey, the top-ranked metals and mining analyst in Latin America last year by Institutional Investor magazine, said. "Iron ore is the metal that's most likely to surprise the market.''

Vale will jump 98% to 74.17 reais in 12 months from its closing price of 37.50 reais yesterday on the Sao Paulo stock exchange. The company's shares rose more than 80% on an annual basis three times - last year, in 2002 and in 1999, when they surged 222%.

Rio Tinto's shares will increase 34%, and BHP will rally 29%, estimates show. Rio Tinto has dropped 5.8% in London trading this year, while BHP has advanced 2.3% in Sydney.

Higher iron prices would help Vale more than other producers, said Tony Robson, an analyst at Toronto-based BMO Capital Markets. The metal will account for 67% of Vale's sales next year, compared with 35% for Rio and 22% for BHP, he said.

In the first half, Vale sold $US9.89 billion of iron ore, or 54% of revenue, company filings show. Rio Tinto generated $US3.74 billion from iron ore, or 31% of its total, and BHP had $US3.58 billion, or 14%.

Vale, owned by the government until it sold shares to the public in 1997, trades at a discount to its peers. Vale's American depositary receipts sell for 6.8 times forecast 2009 per-share profit, compared with at least 7.3 for BHP and Rio.

"Now is the time'' to buy, said Deutsche Bank analyst Jorge Beristain in New York, who was second in the Institutional Investor ranking. Moody's Investors Service cited the "strength of the iron-ore market over the next year'' when it raised the rating on Vale's debt to Baa2, the second-lowest investment grade, from Baa3, last week......read more