Latin America's Business Information Leader
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Metals Perspectives - a weekly summary
January 9 - January 15 2010
Click to read the online version:
http://www.bnamericas.com/perspectives_home.jsp?idioma=I§or=8&id_email=170283334
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In this issue:
* Weekly Wrap
* Q & A:A brighter year ahead for São Paulo scrap processors
Valentin Aparicio Escamilla
President
Sindinesfa
Brazil
* Analysis: Have conflicts of interest caught Acepar in a smear campaign?, Paraguay
* Coming Up
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** WEEKLY WRAP **
The CEO of Brazilian steelmaker CSN, Benjamin Steinbruch, visited Portugal this week to try and convince the majority shareholders of cement manufacturer Cimentos de Portugal (Cimpor) to sell up.
CSN, Brazil's third largest steelmaker, has been attempting since December to purchase the Lisbon-based cement maker.
¿The worst that could happen would be for the majority shareholders not to accept and eventually CSN would have to make a new offer," SLW market analyst Pedro Galdi said.
Cimpor majority shareholders are construction firm Teixeira Duarte with 22.9% and French cement manufacturer Lafarge with 17.3%.
Manuel Fino, an individual, holds a 10.7% stake, Caixa Geral Depósitos owns 9.6% and Banco Comercial de Portugal pension fund has a 10% stake.
Last week, Cimpor's board rejected the 3.86bn-euro (US$5.5bn) offer from CSN.
"The administration considers the offer hostile because it is opportunistic, irrelevant and disturbing,¿ Cimpor said at the time.
According to a 64-page document drafted by the Cimpor board, there are four reasons for rejecting the offer.
The board said the proposal significantly undervalues Cimpor, CSN does not offer a premium to shareholders, Cimpor has a proven history of entrepreneurial success and is strongly committed to continuing its strategy of adding value to its shareholders and lastly, if the offer were to be accepted it would compromise Cimpor's future development.
According to Link brokerage steel market analyst Leonardo Alves, shareholders will likely follow the board's recommendation and won't sell shares valued at 6.40 euros when CSN is offering 5.35 euros.
Steinbruch said he found his company's offer "aggressive" but was open to discussing the bid with Cimpor shareholders.
CSN was previously offered Lafarge's 17% stake in Cimpor and then decided to make a bid for the entire company.
Cimpor is one of the world's largest cement companies with production capacity of 35Mt/y. It has operations in Portugal, Spain, Brazil, Peru, China, India, Mozambique, South Africa, Cape Verde, Egypt and Morocco, among others.
Also this week in Metals:
Brazil
- Australian authorities approved the second and final stage of Brazilian steelmaker CSN's purchase of a stake in Australian coal producer Riversdale Mining.
- Brazilian steelmaker Gerdau's Ameristeel subsidiary in Oklahoma decided to continue the idling of its Sand Springs mill despite the efforts of local government authorities to resume production.
Chile
- AFP Habitat, a Chilean private pension provider that has a stake in local iron and steel group CAP, hopes the steelmaker will hold a public bidding process to choose a partner to participate in its iron ore mining business CMP.
Peru
- Peru's energy and mines ministry said that it was confident that Doe Run Perú, which owns the halted La Oroya smelter in Junín, will reach an agreement with its concentrate providers by end-January.
Venezuela
- The Venezuelan basic industry and mining ministry (Mibam) has submitted financial and feasibility studies to workers at aluminum reducer Alcasa, where production lines 1 and 2 where recently shut down, for projects that could help replace the idled lines.
RESULTS & FIGURES
US aluminum maker Alcoa reported an attributable net loss of US$277mn for the fourth quarter of 2009, a reduction from the US$1.19bn net loss posted in 4Q08 but slipping from profits of US$77mn in 3Q09.
In Venezuelan a Sintraluminio union official said that output at state aluminum products company Aluminios Carabobo (Alucasa) could drop by 40% because of the production lines that were shut down at aluminum smelter Alcasa.
André Dias, the CEO of Brazilian specialty steels distributor GGD Metals, said the company is expecting a booming first quarter propelled by strong sales to the automobile and appliance sectors and a significant recovery in the heavy machinery market.
Chile's state copper commission Cochilco raised its forecast for the average copper price this year to US$3.10/lb from its previous estimate of US$2.70/lb, the organization's director of research and public policy Ana María Zúñiga announced.
Meanwhile, Mexican seamless tube producer Tenaris Tamsa, which supplies the oil sector, expects to increase its production by 60% this year thanks to a third plant it is opening up in Veracruz.
UK-based metals consultancy GFMS forecast a leap in gold prices to above US$1,200/oz by the second quarter of 2010 and that prices will hit new records as growing levels of investment cash enter the gold market early in the year.
According to the latest figures from the Brussels-based International Stainless Steel Forum (ISSF), global crude stainless steel output fell by 15.0% year-on-year in the first nine months of 2009 to 17.9Mt.
However, production in the third quarter began to show a recovery, growing 12.5% to 7.06Mt as compared to 3Q08.
Output in the Americas sank 22.9% to 1.48Mt in the nine-month period.
By Harvey Beltrán
Related Companies
* C.V.G. Aluminio del Caroni S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12063§or=0
* Tubos de Acero de México A.C. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13813§or=0
* Compañía de Acero del Pacífico S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14193§or=0
* Comisión Chilena del Cobre - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14223§or=0
* Companhia Siderúrgica Nacional - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14245§or=0
* Alcoa Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=770767§or=0
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** Q & A **
* A brighter year ahead for São Paulo scrap processors
Valentin Aparicio Escamilla
President
Sindinesfa
Brazil
Valentin Aparicio Escamilla is the incoming president of São Paulo scrap iron organization Sindinesfa. Starting January 24, the executive begins his four-year term. In this interview, Escamilla talks about the future of scrap iron recycling in Brazil and some of the group's main concerns in 2010.
In addition to presiding Sindinesfa, Escamilla is also the president of Santo André, São Paulo state-based Apariciofer, a family-owned scrap iron business which was started by Escamilla's father, Antonio Aparicio Olea in the 1960s.
BNamericas: How do you see the year for the scrap iron sector in Brazil?
Escamilla: We will start to rebound in 2010 after a dismal 2009, especially in the first half. And I say that because we are expecting production growth in the capital goods, consumption and durable goods markets. These sectors will certainly propel metallic scrap commercial activity. The growth I believe is directly related to the latest positive economic indicators in Brazil and the quest to obtain sustainable development.
BNamericas: Are there worries in the sector about scrap iron imports?
Escamilla: The increase in imports surprised us and worries local scrap processors who supply steel mills and foundries and offer quality scrap at competitive prices. Each imported kilo of ferrous scrap equals one kilo of non-recycled metallic material. As a result, this increase in inflows results in excessive waste in landfills, generating a number of social and environmental problems. Similar to other segments in the economy, the scrap iron sector has been making an effort to pursue growth. For us, it's hard to understand why there is an excessive number ships bringing iron scrap, without discussing this with different entities in the production chain and the federal government.
It's worth noting that imports exacerbate the difficult situation of the recyclable materials chain. It's also worth noting that imports compromise investments in the chain.
BNamericas: How were scrap sales in 2009?
Escamilla: In August we began to see sales rebound after an extremely slow period in the first half. However, this inflow of recyclable materials from abroad will make it difficult for the sector to attain similar results to before the crisis.
BNamericas: How about Brazilian exports? Some people in the market say exports saved the sector in 2009, especially in the first half. Would you agree?
Escamilla: In 2009, a number of scrap iron processors and collectors began exporting as a way to survive. Exports became the only alternative at the time as the economic crisis worsened. Without a doubt we can say that exports were the salvation of the entire supply chain and helped minimize the negative impact of the global economic crisis, especially in regard to steep and continuous price decreases and falling metallic scrap consumption.
BNamericas: What is the difference between the organization you will preside [Sindinesfa] and Inesfa? How many members are there in Sindinesfa?
Escamilla: Before pointing out the differences between these two organizations, it's worth noting that both entities advocate the interests of the scrap iron sector. Sindinesfa [Sindicato do Comércio Atacadista de Sucata Ferrosa e Não Ferrosa do Estado de São Paulo] was constituted with the objective of uniting and protecting scrap iron processors in the state of São Paulo. Sindinesfa has 33 member companies which account for 35% of the scrap iron supply directed to steel mills and smelters. At the same time, Inesfa [Instituto Nacional das Empresas de Preparação de Sucata Não Ferrosa e de Ferro e Aço] was founded in 1975 with a mission to unite, promote and defend the interests of scrap iron processors in all of Brazil. Inesfa also promotes and discusses sector issues and preparation techniques of ferrous and non- ferrous scrap, emphasizing the importance of recycling in a global economic context.
BNamericas: What are the main hindrances for the sector in 2010?
Escamilla: Currently our main obstacle is having to cope with excessive imports of ferrous scrap. In many cases, the exact amount imported is unknown. In addition, we cannot be precise about when these imports are arriving and how often.
BNamericas: How does Sindinesfa support its members? What is the entity doing to increase competitiveness of member companies?
Escamilla: Sindinesfa and Inesfa were responsible for the suspension of PIS labor taxes, Pasep and Cofins, federal law 11,196, of November 21, 2005. In addition, Sindinesfa is partnering with the São Paulo state commercial federation and is also seeking partnerships with Brazilian development bank BNDES and a number of financial institutions. The idea is to obtain financing with special conditions for our members.
About the organization :
São Paulo- based scrap iron association Sindinesfa (Sindicato do Comércio Atacadista de Sucata Ferrosa e Não Ferrosa do Estado de São Paulo) was constituted with the objective of reuniting and protecting scrap iron processors in the state of São Paulo. Sindinesfa has 33 associated companies which account for 35% of the scrap iron supply directed to steel mills and smelters.
By Claudio Mendonça
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** ANALYSIS **
Have conflicts of interest caught Acepar in a smear campaign? - Paraguay
In early November last year, the government of Paraguay requested that an arbitration tribunal be set up to study the history of and circumstances under which state steelmaker Acepar was transferred to private control in 1997 in order to terminate or at least change the company's purchase and sale agreement.
Oddly, the decision to set up the tribunal was made despite the fact the company and the government had already reached agreements on issues such as how much the state would be paid for the plant and on Acepar's supposed breach of an agreement to be self-sufficient in the supply of charcoal.
Both parties had also agreed on the investments that Acepar would make, keeping all jobs and guaranteeing the supply of steel for the local metallurgical industry.
According to Acepar manager Néstor Méndez, the company had also received "all the guarantees and the encouragement it needs to continue investing in the country."
SUPPOSEDLY INTERESTED
In a recent interview with BNamericas, Méndez said that Chilean iron and steel manufacturer [2]CAP[/*2] was interested in taking over Acepar.
A group of legislators linked to the ruling party in Paraguay have also been holding meetings with Brazilian company Ciafal to stimulate interest in taking over the company, should Acepar be nationalized.
There is also major media pressure coming from local newspaper ABC, which is also interested in allying with Brazilian parties to take over the company.
Likewise, a group of socialist-leaning legislators are using the company as a rallying point to encourage President Fernando Lugo to take control of Acepar the way that Hugo Chávez and Evo Morales have done with companies Venezuela and Bolivia and show that the state can retake control of privatized companies.
CHANGING THE RULES
In another notable development, the agreement between Grupo Taselli, which controls Acepar, and the government of Paraguay was also changed.
According to the agreement, the US$29mn cost of purchasing Acepar was to be paid in five installments of all a little more than US$5mn plus interest each, with the last payment due on November 10, 2009.
"However, on November 10 we went to the national treasury to pay the last installment and the finance ministry told us that they would not receive the last payment and, of course, would not give us the stocks [which the government was withholding until all installments were paid], even if payments were completed," Méndez said.
He said that he could not fathom why the government suddenly changed its course, "and in light of how things played out, we believe that a number of officials might not be able to explain it either."
SMEAR CAMPAIGN?
The government decision to ask for the contract privatizing Acepar to be revoked leads to the conclusion that Acepar may be the target of a smear campaign.
This conclusion has stirred up suspicion that there is a group of people or organizations that will work, on different levels, to undermine the company, lead it into the most severe crisis possible and by doing so justify its re-nationalization and later re-privatization to one of the parties that have already expressed their interest.
Acepar, it seems, is caught up in the middle of a number of conflicting interests, with various parties wanting to getting a slice of a company which, according to its general manager, is quite healthy, has investments underway, wages up to date, social benefits unique in this type of company, and profits of more than US$13mn over the last few years.
By Harvey Beltrán
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** COMING UP **
January 17, 2010:Second round of presidential election.
Chile
January 18, 2010:Martin Luther King, Jr. Day, US markets closed.
Regional
January 27, 2010:New president Porfirio Lobo to be sworn in.
Honduras
January 27-28, 2010:The World Steel Association will hold a steel technology challenge as part of its Steel University program.
The challenge will last 24 hours and during this time participants will create a steel plate for earth moving machines.
Regional
www.steeluniversity.org
January 27, 2010:Russia's Rusal, the world's largest producer of aluminum and alumina, plans to raise up to US$2.6bn in a Hong Kong IPO.
Guyana, Jamaica
February 07, 2010:Presidential and congressional elections.
Costa Rica
February 11, 2010:Vale to hold conference call on Q4 2009 results, which will be released after markets close February 10.
Brazil
February 15, 2010:Washington's Birthday/Presidents' Day, US markets closed.
Regional
February 22, 2010:Molybdenum processor Molymet expects its molybdenum to begin trading on the London Metal Exchange.
Chile
2Q10:State steelmaker Empresa Siderúrgica Nacional slated to launch production.
Venezuela
April 02, 2010:Good Friday, most markets closed.
Regional
May 31, 2010:Memorial Day, US markets closed.
Regional
mid-2010:Operations due to start at Sumitomo Metals and Vallourec's 600,000t/y pipe JV.
Brazil
July 05, 2010:US holiday marking Independence Day.
Regional
September06, 2010:Labor Day, US markets closed.
Regional
October 03, 2010:Presidential elections.
Brazil
November 01, 2010:All Saints Day, most Latin American markets closed.
Regional
November 25, 2010:Thanksgiving Day, US markets closed.
Regional
December 24, 2010:Christmas holiday (observed), US markets closed.
Regional
1Q10:A state-owned seamless steel tube plant under construction in Bolívar state is due to start production this quarter at an initial capacity of 280,000t/y.
Venezuela
Click here to view the most important conferences and events in your sector of interest. http://www.bnamericas.com/conferences_home.jsp?idioma=I§or=8
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Featured Reports
* Cinver: Investment Review - December 2009 Edition - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1002034§or=0
* Celfin: COMPAÑIA MINERA MILPO (BUY, Initial Opinion): Zinc and Copper Growth Play - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1004633§or=0
* Cochilco: World Copper Market Review - The Year in Review - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1000974§or=0
* BCRP - Ingresos del Gobierno General Crecen 1,6% en Términos Reales - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1003395§or=0
* Celfin: Asset Allocation - Pension Funds (November 2009): trending abroad - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1002614§or=0
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
TO UNSUBSCRIBE
To take yourself off this email list please reply to this email to mailto:info@BNamericas.com and write "UNSUBSCRIBE" in the subject line of the email.
CUSTOMER SERVICE
Please contact BNamericas at mailto:info@BNamericas.com or at the address below if you have any questions/comments about changing your email format, subscriptions, additional copies, corporate discounts, advertising, media monitoring or require information about other Business News Americas services.
FOR YOUR EYES ONLY
Reproducing, forwarding, faxing or electronically transmitting this newsletter in whole or in part in any form or medium without the expressed written permission of Business News Americas is prohibited. If you would like other colleagues, regional offices or a partner company to receive the BNamericas news service or would like more details about publishing BNamericas content on your intranet or internet site, please contact us at mailto:info@BNamericas.com or call us on (56-2) 941-0300.