Empire with No Clothes
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Essar Global buys Minnesota Steel
MUMBAI: In just under a week, the Ruias who control the Essar group have run up a shopping bill of $4 billion buying up two steel companies in North America.
Barely 48 hours after they entered into an agreement with Canadian steelmaker Algoma Steel, the Ruias have made yet another acquisition in the US. On Wednesday, Essar Global, the investment arm of the group, executed an agreement to acquire Minnesota Steel LLC, a US-based company for $100 million.
Minnesota currently has operations in iron ore mining and has made plans to invest $1.65 billion to setup an integrated steel making facility - a first of its kind in the US. Essar will pay close to $100 million in a phased manner as it stands today.
The $1.65 billion that will be needed to build the steel making unit with an annual capacity of 2.5 million tonnes, will be deployed over two years. A vital aspect of this acquisition is that Minnesota controls iron ore reserves in excess of 1.4 billion tonnes.
Apart from the obvious advantage that Essar will gain from this acquisition of building a presence in the North American market, the fact that Minnesota owns iron ore resources is an advantage for the group. An industry expert said, "Essar will not only have an assured supply of raw matrial for the Minnesota Steel unit, but will also feed the Algoma Steel plant, which is at a distance of 200 km from the mines."
Essar Global Chairman, Shashi Ruia said his company was looking forward to expanding operations into North America. "Our investment in Minnesota Steel gives us a cornerstone in the North American market. From this we will further expand our global steel business," he said. Essar has also lined up investments in Iran, Trinidad and Tobago and Vietnam in the steel business.
Essar's buyout of two relatively small companies in North America signals the desire of Indian steel companies to grow in size. Earlier, Tata Steel made paid $12.9 billion to acquire UK-based Corus, which came after steel majors like Mittal Steel consolidated their businesses a few years ago.
MUMBAI: In just under a week, the Ruias who control the Essar group have run up a shopping bill of $4 billion buying up two steel companies in North America.
Barely 48 hours after they entered into an agreement with Canadian steelmaker Algoma Steel, the Ruias have made yet another acquisition in the US. On Wednesday, Essar Global, the investment arm of the group, executed an agreement to acquire Minnesota Steel LLC, a US-based company for $100 million.
Minnesota currently has operations in iron ore mining and has made plans to invest $1.65 billion to setup an integrated steel making facility - a first of its kind in the US. Essar will pay close to $100 million in a phased manner as it stands today.
The $1.65 billion that will be needed to build the steel making unit with an annual capacity of 2.5 million tonnes, will be deployed over two years. A vital aspect of this acquisition is that Minnesota controls iron ore reserves in excess of 1.4 billion tonnes.
Apart from the obvious advantage that Essar will gain from this acquisition of building a presence in the North American market, the fact that Minnesota owns iron ore resources is an advantage for the group. An industry expert said, "Essar will not only have an assured supply of raw matrial for the Minnesota Steel unit, but will also feed the Algoma Steel plant, which is at a distance of 200 km from the mines."
Essar Global Chairman, Shashi Ruia said his company was looking forward to expanding operations into North America. "Our investment in Minnesota Steel gives us a cornerstone in the North American market. From this we will further expand our global steel business," he said. Essar has also lined up investments in Iran, Trinidad and Tobago and Vietnam in the steel business.
Essar's buyout of two relatively small companies in North America signals the desire of Indian steel companies to grow in size. Earlier, Tata Steel made paid $12.9 billion to acquire UK-based Corus, which came after steel majors like Mittal Steel consolidated their businesses a few years ago.
Cheetah786
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The sale announced yesterday by the Anglo-Dutch steel maker Corus of its aluminium assets for pounds 826m is filled with ironies. Three years ago, failure to sell these very same assets cost the then chief executive, Tony Pedder, his job. About the only thing the company had going for it back then was the surplus in its pension fund which, almost uniquely for a FTSE 100 stock, persists to this day, thanks to the low life expectancy of steel workers.
In all other respects, it looked a busted flush. Not even the boom in China then getting under way seemed capable of rescuing this relic of the British steel industry from the corporate scrap heap. At just 3.75p, the share price reflected it too. The man Mr Pedder was trying to sell to was one Philippe Varin, then with the French aluminium producer Pechiney. Today M. Varin is the chief executive of Corus, and it is not just with the aluminium interests that he's succeeding where Mr Pedder failed.
He's also managed to get two years of profitable trading under his belt, which for those who remember British Steel's propensity to collapse into ruinous loss the moment there was a cyclical downturn in the economy is quite an achievement.
The shares too have recovered much of the ground lost in the last downturn. Back then, Mr Pedder was defeated in his attempt to sell the aluminum interest by a combination of the supervisory board that looked after the interests of Corus's Dutch arm, and the related works council, both of which believed the assets were being sold only to pay for the bottomless pit of British losses.
This time around the supervisory board has agreed, though there are still mutterings of discontent from the works council, which disapproves of the breakup of the aluminium interests implicit in the sale to Aleris Inter-national. Even so, we have to assume that it's largely a done deal. What does M. Varin do for an encore?
M. Varin would like us to think that the turnaround achieved over the past three years is all down to his "restoring success" programme of restructuring, and to some extent it is. He's on track to deliver all the cost cuts promised. He's also gone some way to closing the competitive gap with European rivals.
However, much of the improvement is the result of soaringprices, which in turn have been caused by the boom in China. M. Varin has also had the following wind of favourable exchange rate movements. The pound has been relatively strong against the dollar, in which most of the company's raw materials are priced, but weak against the euro, in which most sales are priced.
But what happens now? A cyclical downturn of the type we've seen sooften before, plunging the company into fresh crisis, seems all too possible. Prices have begun to ease markedly over the past six months. Demand from China is beginning to abate and, in any case, rapid growth in China's own steel industry is fast removing the need for imports from the rest of the world. Against that, demand in the US remains robust and it continues to recover in Europe.
Yet to believe the steel industry is finally freed from its cyclical past would be a triumph of hope over experience. Worryingly, Corus's competitive gap with others has been widening again in recent months, thanks to higher energy prices. This doesn't bode well for the company's prospects in a downturn.
Corus's relatively small size in a fast consolidating global steel industry makes it an obvious target for others. If Lakshmi Mittal fails with Arcelor, Corus might be next on his hit list. Politically, Corus would be less of an uphill struggle than Arcelor, even if shareholders might prove equally uncomfortable with Mittal paper.
Alternatively, Corus might fancy the role of consolidator itself, choosing to buy or merge with one of the low-cost producers of India or Brazil. That really would be back to the future. Another of Mr Pedder's failures was a planned merger with CSN of Brazil, which collapsed in mutual acrimony in 2002.
Pension dbcle: too late for action now
Saying no to 85,000 pension scheme members who have just been stripped through no fault of their own of the prospect of a comfortable retirement is hardly the most appealing of political tasks. In the circumstances, John Hutton, Secretary of State for Work and Pensions, managed it as well as could be expected, yet though the decision may be defensible from the taxpayer's point of view, the political damage is likely to be considerable.
It may sound callous, but on purely practical grounds Mr Hutton is right to reject the Ombudsman's findings of maladministration. Whether he's also right to deny reasonable compensation in circumstances where there is such a strong moral case for it is a different issue. The Government's handling of the crisis also seems to have been particularly cack-handed, making a bad situation much worse than it had to be. The fallout could yet prove disastrous for Labour as it seeks to decide the future of pensions.
In all other respects, it looked a busted flush. Not even the boom in China then getting under way seemed capable of rescuing this relic of the British steel industry from the corporate scrap heap. At just 3.75p, the share price reflected it too. The man Mr Pedder was trying to sell to was one Philippe Varin, then with the French aluminium producer Pechiney. Today M. Varin is the chief executive of Corus, and it is not just with the aluminium interests that he's succeeding where Mr Pedder failed.
He's also managed to get two years of profitable trading under his belt, which for those who remember British Steel's propensity to collapse into ruinous loss the moment there was a cyclical downturn in the economy is quite an achievement.
The shares too have recovered much of the ground lost in the last downturn. Back then, Mr Pedder was defeated in his attempt to sell the aluminum interest by a combination of the supervisory board that looked after the interests of Corus's Dutch arm, and the related works council, both of which believed the assets were being sold only to pay for the bottomless pit of British losses.
This time around the supervisory board has agreed, though there are still mutterings of discontent from the works council, which disapproves of the breakup of the aluminium interests implicit in the sale to Aleris Inter-national. Even so, we have to assume that it's largely a done deal. What does M. Varin do for an encore?
M. Varin would like us to think that the turnaround achieved over the past three years is all down to his "restoring success" programme of restructuring, and to some extent it is. He's on track to deliver all the cost cuts promised. He's also gone some way to closing the competitive gap with European rivals.
However, much of the improvement is the result of soaringprices, which in turn have been caused by the boom in China. M. Varin has also had the following wind of favourable exchange rate movements. The pound has been relatively strong against the dollar, in which most of the company's raw materials are priced, but weak against the euro, in which most sales are priced.
But what happens now? A cyclical downturn of the type we've seen sooften before, plunging the company into fresh crisis, seems all too possible. Prices have begun to ease markedly over the past six months. Demand from China is beginning to abate and, in any case, rapid growth in China's own steel industry is fast removing the need for imports from the rest of the world. Against that, demand in the US remains robust and it continues to recover in Europe.
Yet to believe the steel industry is finally freed from its cyclical past would be a triumph of hope over experience. Worryingly, Corus's competitive gap with others has been widening again in recent months, thanks to higher energy prices. This doesn't bode well for the company's prospects in a downturn.
Corus's relatively small size in a fast consolidating global steel industry makes it an obvious target for others. If Lakshmi Mittal fails with Arcelor, Corus might be next on his hit list. Politically, Corus would be less of an uphill struggle than Arcelor, even if shareholders might prove equally uncomfortable with Mittal paper.
Alternatively, Corus might fancy the role of consolidator itself, choosing to buy or merge with one of the low-cost producers of India or Brazil. That really would be back to the future. Another of Mr Pedder's failures was a planned merger with CSN of Brazil, which collapsed in mutual acrimony in 2002.
Pension dbcle: too late for action now
Saying no to 85,000 pension scheme members who have just been stripped through no fault of their own of the prospect of a comfortable retirement is hardly the most appealing of political tasks. In the circumstances, John Hutton, Secretary of State for Work and Pensions, managed it as well as could be expected, yet though the decision may be defensible from the taxpayer's point of view, the political damage is likely to be considerable.
It may sound callous, but on purely practical grounds Mr Hutton is right to reject the Ombudsman's findings of maladministration. Whether he's also right to deny reasonable compensation in circumstances where there is such a strong moral case for it is a different issue. The Government's handling of the crisis also seems to have been particularly cack-handed, making a bad situation much worse than it had to be. The fallout could yet prove disastrous for Labour as it seeks to decide the future of pensions.
Skull-Buster
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the sad thing is...that on one hand there are a handful of extremely rich indian families such as TATAs, Birlas, Ambanis, Mittals and one the other hand there are those 350 million poor people. inequality in india is very high.
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Families?
They are corporates, who dont have monoply. They run in a free market and have suceeded in the competition, they are thus flush with funds. It is not as if the govt is donating money to these organisations or promoting monopolies in their respective trades.
They are corporates, who dont have monoply. They run in a free market and have suceeded in the competition, they are thus flush with funds. It is not as if the govt is donating money to these organisations or promoting monopolies in their respective trades.
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