Companies & Sectors
Japan crisis: Steel supply may be choked in Asian markets, prices may go up

Japan exports around 40MT of steel every year and the production disruption will reduce its exports. Raw material prices may soften due to lower production in the country over the near term

The recent earthquake and tsunami that created havoc in Japan, the second largest steel producer in the world, may drive prices a tad higher on the back of massive demand for reconstruction activities and soften raw material prices due to lower production in the country over the near term.

The 9.0 magnitude earthquake on the Richter scale and the subsequent tsunami has devastated Japan's north coast and had forced the country's steelmakers-Nippon Steel Corporation, JFE Holdings and Sumitomo Metal Industries Limited-to shut their plants in the region.

However, the earthquake and tsunami in north Japan would not have much impact on the country's steel production as the region produces around 20 million tonnes (MT), out of its total production of 110MT per annum.

"Around 15%-20% of steel production has been affected due to the tsunami in Japan and there is still uncertainty over the resumption of operations at their plants and it's difficult to gauge the impact (now). The country would need a large amount of steel for reconstruction work; this will improve sentiments for steel prices in the near term," an analyst from a Mumbai-based research firm told Moneylife, preferring anonymity.

In a 14th March report, Morgan Stanley has said that the earthquake and tsunami may tighten steel supply in Asian markets and lift prices in the region. Japan exports around 40MT of steel every year and production disruption would reduce export of steel, adds the report.

However, on the raw material side, prices may come down in the wake of lower production of steel in Japan.


"Coking coal prices would not be impacted so much as prices of the commodity are being firmed up due to lower supply in international markets. However, iron-ore prices would slip because of lower production activities in the country, which is one of the top three iron-ore importers of the world," added the analyst.

Japan accounted for 12.8% of global iron-ore shipments in 2010.

However, an analyst from Bank of America Merrill Lynch, in a research report said, "We expect steel prices to drop in the Asia-Pacific region in the near term. The lower steel price would be driven by lower raw material prices (iron ore & coking coal) after a weaker demand from Japan in seaborne market."

"Miners are likely to move some of contracted volumes with Japanese steel mills to spot market sales, adding downward pressure to prices of steel-making raw material," added the Bank of America Merrill Lynch analyst.

Prices of iron ore have already dropped by around 15% from their highest of $200 per tonne in mid-February due to lower purchase from Chinese buyers.

However, major Indian iron-ore producers like Sesa Goa and National Mineral Development Corporation may not see any impact on export activities, as both these companies export only around 5% of iron ore out of their total production into Japan.

China and South Korea would be benefited due to a drop in shipments from Japan amid huge need of steel in the country for reconstruction and rebuilding works in Japan.

"Exports of steel products from China and South Korea are expected to rise. India would not be benefited as we are a net importer of the metal," said the analyst.

Currently, India imports around 2MT to 3MT of steel ever year and most of it comes from China.

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RCom, TELibrahma to offer Cricket video updates

Reliance Communications has partnered with TELibrahma to deliver video updates and replays from the ICC World Cup Cricket matches on mobiles for all cricket lovers

Telecom service provider Reliance Communications has partnered with mobile solutions provider TELibrahma to deliver video updates and replays from the ICC World Cup Cricket matches on mobiles for all cricket lovers.

With this partnership, TELiBrahma would deploy bluetooth device in stadiums and enable consumers to receive video highlights when they are watching the match in the stadium, RCom said in a statement.

"We believe it would help consumers to catch the missing action. This opportunity will help brands to deliver what is relevant to consumers at the place where it matters and on a device that creates the impact," the TELiBrahma president, PR Satheesh, said.

The tie-up will also enable RCom consumers to view the highlights and action replays of cricket matches for free.

The solution is supported on more than 80% of the mobile phones in India and works across phone models, operators and geographies.

On Wednesday, RCom ended 1.98% up at Rs102.95 on the Bombay Stock Exchange, while the benchmark Sensex gained 1.05% to 18,358.

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Hero Honda promoter pledges further stake

Hero Investments Pvt Ltd has pledged further shares of the company to IL&FS Trust Company Ltd, raising an estimated Rs200 crore

Promoter of Hero Honda, Hero Investments Pvt Ltd (HPIL), has pledged further shares of the company to IL&FS Trust Company Ltd, raising an estimated Rs200 crore.

In a filing to the Bombay Stock Exchange (BSE), Hero Honda said HIPL has pledged an additional 13,18,653 shares aggregating 0.66% stake in the company on 7th March.

On the basis of the closing price of the company's shares on the BSE on 7th March, the value of the pledge stake is around Rs200 crore.

With the transaction, IL&FS Trust Company has now increased its stake in the two-wheeler maker to 5.98% from 5.32% before. In the first week of this month, HIPL raised an estimated Rs1,585 crore by pledging 5.32% stake with IL&FS Trust Co.

On 9th March, the company also raised Rs900 crore by pledging shares to Axis Trustee Services Ltd.

HIPL is one of the main shareholders of Hero Honda, holding 17.33% stake in the company as on 31 December 2010.

The BM Munjal led Hero Group is raising funds to finance the buyout of Honda's 26% stake in Hero Honda for Rs3,841.83 crore.

The group also said it will raise funds from private equity firms, including Bain Capital and Lathe Investment, estimated to be around Rs4,500 crore to finance its buyout by selling stake in HIPL. It has already sought government clearance to bring in foreign investment of up to Rs4,500 crore in HIPL.

On Wednesday, Hero Honda ended 0.22% down at Rs1,517.45 on the BSE, while the benchmark Sensex gained 1.05% to 18,358.

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