India's Steel Price Kerfuffle Continues: Amid signs that some steel companies are backing away from further price increases, India's political leaders continued this week to warn producers about the consequences of rapid price escalation. Tata Steel and JSW Steel both announced on Wednesday that they will not raise prices in the immediate future. JSW's Sajjan Jindal said his company won't raise prices for four months. B. Muthuraman, managing director of Tata Steel, said his company will not raise prices for two to three months. SAIL, the Steel Authority of India, made a similar pledge earlier.

The announcements came after Dr. Manmohan Singh, India's prime minister, visited steel plants and warned the industry about the "temptation of seeking windfall gains from market manipulation in a period of excess demand." The industry, the prime minister said, should "eschew short-term gains that hurt consumers and disrupt the stability of the process of economic growth." Because India's economy is still developing, he said, there is tremendous potential for steel companies to also grow in the coming years.

Muthuraman said the "only sure way to contain steel prices is to urgently create new steel capacities in India matching or even exceeding the fast pace of demand growth unleashed by our liberalized economy."

Nippon Would be White Knight for Sumitomo, Kobe, POSCO: Akio Mimura, chairman of Nippon Steel, says in an interview that his company would "immediately act to block" any attempt by others to take over Sumitomo Metal Industries, Kobe Steel or POSCO, the South Korean steelmaker. "While I personally support the idea that unfriendly takeover bids should be an option open to any company, I also consider (playing the role of a white knight) a reasonable way to prevent a company with important technology and infrastructure from being acquired," Mimura said in an interview with Nikkei Veritas, reprinted by the Japan economic journal. "Particularly when a possible takeover by a foreign entity threatens to hurt the national interest." In the case of POSCO, he said, Nippon would act because "we have deepened our partnership to a degree that is making us indispensible to each other."

Mimura said Nippon Steel's extensive network of stock crossholdings with other Japanese metals companies works in its favor only if the involved companies "enhance corporate value. If a company is involved in negative cross-shareholding practices under which the partners are not putting their money to good use, this could erode the firm's corporate value, putting it in a position to become an easy M&A target." He said that because Nippon's current stock price "is not linked to our business fundamentals and is staying at an unjustifiably low level... we might be facing growing M&A risks... No one knows that will happen next year and the year after that."

Nippon Steel, Mimura said, needs "to have a certain level of output to survive the global competition." So it will expand into foreign markets, with immediate plans to add three production lines outside of Japan for automotive steel plate, and new blast furnaces under consideration in Thailand and Brazil. "We do not rule out the possibility of engaging in M&As if they are friendly deals and offer favorable terms," he said.

Olympic Steel Expands: Olympic Steel, Inc., says it will build a 100,000-square-foot service center in Sumter, South Carolina. Michael Siegal, chairman and CEO, said the new facility will complement the company's North Carolina operations, acquired in 2006, and expand processing capabilities in the southeast. Olympic expects to complete the service center by the end of the year and will employ 65 people there.

Outokumpu Expands Distribution Network: Outokumpu Oyj, the Finnish maker of stainless steel, said it will buy the SoGePar Group, an Italian distributor now owned by the Borromeo family, for US$222.4 million. SoGePar operates stainless steel service centers in Castelleone, Italy, and Rotherham, U.K. It also has distribution operations in Italy, the U.K., Belgium, Finland, France and Ireland. The group's 2007 sales were US$889.5 million. "The acquisition is a determined step towards Outokumpu's strategic ambition of building a more stable and profitable business model for the group," said Karri Kaitue, the company's deputy CEO.

Rio, BHP Win Huge Price Increases: By now, you've heard of the big price increases for iron ore negotiated by Rio Tinto and BHP Billiton, after months of talks, with Baosteel on behalf of the Chinese steel industry. Bao agreed to pay 85% more for contracted iron ore during the next fiscal year. The increase was larger than the 65% to 71% price jump negotiated by CVRD of Brazil (now known as Vale), which means the Western Australian ore will carry with it a freight surcharge that the two mining companies had sought since last year. The Australian newspaper said the surcharge was about A$7.43 per ton.

Baosteel's acceptance was a dramatic end to the protracted and difficult negotiations. The deal sets a benchmark for contract prices between Rio, BHP and other steel users. For example, the Japan Economic Journal reported that Nippon Steel Corp. and other major Japanese steelmakers have accepted Rio Tinto's demands to double prices for Australian iron ore. The newspaper says joining Nippon Steel in accepting that pricing will be JFE Steel Corp., Sumitomo Metal Industries Ltd., Kobe Steel Ltd. and Nisshin Steel Co.

Xinhua, the official Chinese news agency, said Chinese steel producers imported 1.34 billion tons of iron ore between 2003 and 2007, equal to 42% of total world consumption.

South Africans Investigate Evraz, Others for Alleged Price Fixing: The South African Competition Commission has raided the offices of Cape Town Iron and Steel Works, a subsidiary of Murray & Roberts, and of Highveld Steel & Vanadium, which is owned by Evraz, the Russian steelmaker. The commission also raided the offices of the South African Iron and Steel Institute in Pretoria and said that it searched the offices of ArcelorMittal SA, Scaw Metals, and others for evidence of price collusion. "The probe seeks to establish whether or not the ability to charge and maintain high prices is due to collusive conduct," said Thulani Kunene, who heads the commission's enforcement division.

"It is well known in the steel industry that Highveld follows Mittal in its pricing and although parallel conduct may not always imply concerted practice, it is suggestive of collaboration between the two companies," the commission said. Evraz said it has not been involved in price fixing. It said pricing in South Africa is consistent with global trends and is caused by rising raw material costs.

Baosteel takes 80% Stake in Big New Venture: Baosteel Group said it will pay $5.2 billion for an 80% stake in the new Guangdong Iron & Steel Group, a venture that includes Shaoguan Iron & Steel Group and Guangzhou Iron & Steel Group, which will hold the remainder of the equity. Plans call for a new steel plant to be built in Zhanjiang, a port city in Guangdong, the Shanghai Daily reported.

SeverStal Wins Bidding War for Esmark: OAO SeverStal of Russia raised its bid for Esmark, Inc., by $2.25 a share, to $19.25, just edging out a bid by Essar of India, and enough to win acceptance of the merger by Esmark's board. That board had previously been in favor of Essar. Including debt, the value of the transaction is about $1.25 billion. Essar has previously loaned Esmark $110 million to tide it over until its proposed merger could be completed. Now, Esmark says SeverStal will purchase that loan.

POSCO to Source Iron in North Korea?: The Indonesian news service, Antara, says that Posco, the South Korean steelmaker, is negotiating with North Korea to purchase coal and iron ore. The report cited the company as saying that Kim Dong-jin, president of POSCO-China Holding Corp., visited Pyongyang this week to discuss doubling coal purchases this year.

Kaiser to Invest in Tennessee Plant: Kaiser Aluminum says it will spend $19 million to expand its cold-finished rod, bar and related aluminum product capacity at its Tennalum plant in Jackson, Tennessee. The additional capacity is expected to be in production by the end of next year, Kaiser said.