Monday, February 25, 2008
Saturday, February 23, 2008
Thursday, February 21, 2008
`Hike in iron ore royalty, export duty will hit mining hard'
The Hindu Business Line : `Hike in iron ore royalty, export duty will hit mining hard'
Phalguna Jandhyala
New Delhi, Feb 20
The Federation of Indian Mineral Industries (FIMI) has said that the proposed move by the Government to increase royalty and export duties on iron ore would adversely affect the mineral's mining industry. Sources in the Mines Ministry told Business Line that the Federation, in a recent memorandum to the Ministry, said that if the proposals were carried out, it would lead to the closure of several mines and in turn, would affect the domestic steel industry. "The members said if the proposals are implemented, then India will be the highest taxed country amongst major iron ore producing regions with the proposed royalty and duty rates and the additional tax burden on exporters will marginalise exports, resulting in the closure of many mines," a source close to the development said. As per estimates, Brazil, the largest iron ore producer with domestic steel production comparable to India, has a royalty of two per cent and no export duty. Similarly, Australia has a royalty of 3.5 to 7.5 per cent, with no export duty, while South Africa has a royalty of only three per cent and also does not impose any export duty. The source said that the Government has proposed a royalty of 10 per cent ad valorem on sales realisation and an export duty of 10 to 15 per cent. Demand projection "The FIMI members said that at the current rate, India should be able to sustain the projected domestic steel demand for close to 200 years and the current iron ore resources of about 25 billion tonnes would last for the next 85 years." He further said that FIMI in the memorandum, has said that with more exploration, development of technology to economically treat lower grade ore and increase use of scrap will further help sustain the need of the domestic steel industry. Government data show that in the last 25 years, while India has increased its iron ore resources by about 45 to 50 per cent, Australia and Brazil have grown their resources ten-fold. "If India were to increase spend on exploration, deploy best-in-class technology and explore new areas, it could add another 20 to 25 billion tonnes of resources," the official said. Currently, India spends only around $5 million on exploration predominantly on coal as compared to $500 million and $150 million in Australia and Brazil respectively. `Not for long' "The FIMI members had also stated that higher profitability of iron ore exporters in recent years is part of a normal industry cycle and in line with that experienced by other sectors. They also said that the current profitability levels will not hold for long as major players from Australia, Brazil and South Africa bring significant new capacity online in the coming years," the official pointed out. He also said that the members feel that the way forward would be to treat iron ore mining as a separate industry. "FIMI has said that by not doing so, a situation similar of what happened to thermal coal will be repeated. They said that despite having an approximate reserves of 80 billion tonnes, power companies would be forced to import around 25 per cent of their requirements by 2012 due to lack of adequate investments in exploration and infrastructure creation," the source said.
Phalguna Jandhyala
New Delhi, Feb 20
The Federation of Indian Mineral Industries (FIMI) has said that the proposed move by the Government to increase royalty and export duties on iron ore would adversely affect the mineral's mining industry. Sources in the Mines Ministry told Business Line that the Federation, in a recent memorandum to the Ministry, said that if the proposals were carried out, it would lead to the closure of several mines and in turn, would affect the domestic steel industry. "The members said if the proposals are implemented, then India will be the highest taxed country amongst major iron ore producing regions with the proposed royalty and duty rates and the additional tax burden on exporters will marginalise exports, resulting in the closure of many mines," a source close to the development said. As per estimates, Brazil, the largest iron ore producer with domestic steel production comparable to India, has a royalty of two per cent and no export duty. Similarly, Australia has a royalty of 3.5 to 7.5 per cent, with no export duty, while South Africa has a royalty of only three per cent and also does not impose any export duty. The source said that the Government has proposed a royalty of 10 per cent ad valorem on sales realisation and an export duty of 10 to 15 per cent. Demand projection "The FIMI members said that at the current rate, India should be able to sustain the projected domestic steel demand for close to 200 years and the current iron ore resources of about 25 billion tonnes would last for the next 85 years." He further said that FIMI in the memorandum, has said that with more exploration, development of technology to economically treat lower grade ore and increase use of scrap will further help sustain the need of the domestic steel industry. Government data show that in the last 25 years, while India has increased its iron ore resources by about 45 to 50 per cent, Australia and Brazil have grown their resources ten-fold. "If India were to increase spend on exploration, deploy best-in-class technology and explore new areas, it could add another 20 to 25 billion tonnes of resources," the official said. Currently, India spends only around $5 million on exploration predominantly on coal as compared to $500 million and $150 million in Australia and Brazil respectively. `Not for long' "The FIMI members had also stated that higher profitability of iron ore exporters in recent years is part of a normal industry cycle and in line with that experienced by other sectors. They also said that the current profitability levels will not hold for long as major players from Australia, Brazil and South Africa bring significant new capacity online in the coming years," the official pointed out. He also said that the members feel that the way forward would be to treat iron ore mining as a separate industry. "FIMI has said that by not doing so, a situation similar of what happened to thermal coal will be repeated. They said that despite having an approximate reserves of 80 billion tonnes, power companies would be forced to import around 25 per cent of their requirements by 2012 due to lack of adequate investments in exploration and infrastructure creation," the source said.
PROCEEDINGS (XIV Lok Sabha) POSCO Project in Orissa...
PART II PROCEEDINGS OTHER THAN QUESTIONS AND ANSWERS (XIV
LOK SABHA)
Title : Shri Basudeb Acharia called the attention of the Minister of Mines to the situation
arising out of recent agreement of Orissa Government with Korean Steel Major POSCO
allowing them to export mineral wealth of the country and steps taken by the Government
in this regard.
SHRI BASU DEB ACHARIA Sir, I call the attention of the Minister of Mines to the
following matter of urgent public importance and request that he may make a statement
thereon :
“Situation arising out of recent agreement of Orissa Government with
Korean Steel Major POSCO allowing them to export mineral wealth of the
country and steps taken by the Government in this regard.”
SHRI BASU DEB ACHARIA : Madam Chairperson, the Memorandum of Understanding
between the Government of Orissa and POSCO of South Korea will facilitate ...(Expunged as
ordered by the Chair) of such scarce mineral iron ore of Orissa. You will be surprised to know
that a huge concession is being given to this particular company. They will set up a steel
plant at Paradeep.
SHRI ARJUN SETHI (BHADRAK): Madam, I would like to draw your kind attention to
his words. The hon. Member, while speaking, has said that 'it will facilitate … of mineral
wealth'. Will it go on record? No Government, whether the Central or State, will …
(Interruptions)
… (Interruptions)
SHRI B. MAHTAB (CUTTACK): If Shri Basu Deb Acharia is going to suggest what
should be the MoU to be entered by the Government of Orissa, let him come up with the
proposal. … (Interruptions)
SHRI BASU DEB ACHARIA : Madam, I have every right to say. If I have used any
unparliamentary words, you can expunge them. I have not used any unparliamentary
word.
SHRI BASU DEB ACHARIA : They will set up a steel plant with capacity of 12 million
tonnes and captive iron ore mines will be given to POSCO[reporter36].
They will extract 600 million tonnes of iron ore from the captive mines. The Steel
Plant will be set up after 33 months from the day of the company getting the licence. Why
such favour is being given to this particular company? They will start extracting iron ore
immediately after the issuance of licence, although the permission and approval of the
Central Government will be required in it.
Out of 600 million tonnes of iron ore, 30 per cent will be exported to Brazil as the
iron ore in Orissa has high percentage of Alumina. On the other hand, they are being
allowed to import similar quantity of iron ore from Brazil, which has lower percentage of
Alumina. Over and above 600 million tonnes, this company will be permitted to export 400
million tonnes of iron ore for their own steel plant in South Korea. It means that 600 million
tonnes per 1,000 million tonnes of iron ore this company from South Korea would get from
Orissa.
Madam, we have 18 billion tonnes of iron ore in our country, and Orissa has 4.5 billion
tonnes of iron ore. Nearly 36 MoUs were signed with various steel manufacturing
companies prior to this MoU. The total capacity for it would be about 40 million tonnes
of iron ore. What was the price at which they were permitted to purchase iron ore from
the Orissa Mineral Development Corporation at the time of signing these 36 MoUs?
They were permitted to purchase iron ore at the market price. What is the price of one
tonne of iron ore today? It is Rs. 2,000. But in the case of POSCO, the cost of extraction
or the total cost of production per tonne of iron ore would be only Rs. 400. Why is there
such a difference in it? Why this particular company is being permitted to take iron ore at
a much lower price? How much will be the loss to the State of Orissa as a result of the
lower price that has been fixed in the MoU? The loss for the Government of Orissa
would be about Rs. 1.20 crore.
Moreover, the steel plant would be set up in the Special Economic Zone (SEZ), and
it would mean that this company would enjoy concessions in income tax, excise duty, and
other taxes. How much would be the loss for the Government of Orissa on this account?
MADAM CHAIRMAN: Mr. Acharia, please be brief. I am saying this because there is
another Calling Attention to be taken up after this. Therefore, please put your question to
the hon. Minister[ak37].
SHRI BASU DEB ACHARIA : I am coming to the question, Madam.
This company first tried to have an MoU with the Government of Brazil. Brazil has
the largest deposits of iron ore. With the same conditions, which the Government of Orissa
has agreed to, the company went to Brazil. But the Government of Brazil did not agree to
those conditions. They agreed to provide iron ore at the market price. The Government of
Orissa has signed an MoU to supply iron ore at a much lower price. Madam, what will be the
benefit for the people of Orissa? A thousand acres of tribal land will be acquired. Total
employment will be only 13,000 as per the statement of the Government of Orissa.…
(Interruptions)
SHRI DHARMENDRA PRADHAN : This is totally wrong information. … (Interruptions)
MADAM CHAIRMAN : I will give time to your leader and he will have his say.
SHRI KHARABELA SWAIN : There is no tribal there. … (Interruptions)
SHRI BASU DEB ACHARIA : In the MoU, rehabilitation and resettlement of tribal people
has not been provided.
SHRI BRAHMANANDA PANDA (JAGATSINGHPUR): He has absolutely no
fundamental idea about what he is talking about.
MADAM CHAIRMAN: Shri Acharia, now there is no point. Please conclude.
SHRI B. MAHTAB : Shri Acharia had himself migrated from Orissa. He should not forget
that fact. I am just reminding him of his ancestors.
SHRI BRAHMANANDA PANDA : The learned Member should have a fundamental idea
of the point before speaking on it.
MADAM CHAIRMAN: Shri Acharia, please conclude now. There is another Member to
speak from your own party. Within two minutes, you will have to conclude.
SHRI BASU DEB ACHARIA : Madam, the Koreans are being given this iron ore despite
India not having enough iron ore reserves even to last for 50 years. Our per capita
consumption is the lowest among the developing nations; it is only 32 kgs. However, the per
capita consumption in China today is 270 kgs. This will not remain at this. Our per capita
consumption will increase. Our demand also will rise. If 30 per cent of the reserves are given
to this particular company, what will happen to the other steel manufacturing companies?
SHRI B. MAHTAB : In China?
SHRI BASU DEB ACHARIA : Already 36 MoUs have been signed. They require huge
quantities of iron ore. I would like to know from the Minister of Mines or the Minister of
Finance, whosoever replies … (Interruptions)
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): The Minister of Mines will
reply.
THE MINISTER OF MINES (SHRI SISH RAM OLA): I will give the reply.
MADAM CHAIRMAN: Shri Acharia, put your questions please.
SHRI BASU DEB ACHARIA : I would like to know from the hon. Minister as to
how the future requirement of our country will be met. Why such a concession has been
given to this particular company? Why POSCO was not offered market price, as has been
offered to the other 36 companies who will set up the steel plants in the State of Orissa? The
capacity will be about 40 million tonnes. Why in their case it is market rate of Rs.2000 or
Rs.3000, but in the case of POSCO it is only Rs.400?
SHRI B. MAHTAB : Who will give this answer? The Minister of Mines is not capable to
answer this question.
MADAM CHAIRMAN: He will say something. I am giving him chance. It is all right.
SHRI B. MAHTAB : This question can only be addressed to the Orissa Government. This
question has no scope to be answered by the Minister of Mines[KMR38].
Now, there is a need for mines policy. Should not there be a detailed discussion?
There should be a detailed discussion on mines policy before MoUs are signed. …
(Interruptions) Before it is exhausted, the Government of India should announce the mines
policy.
MADAM CHAIRMAN : Keep something
for your own party Member. Now, please conclude.
SHRI BHANWAR SINGH DANGAWAS (NAGAUR): According to the rules, he can be
given only 10 minutes.
MADAM CHAIRMAN: I am looking into it.
SHRI BASU DEB ACHARIA : The Minister of Mines has stated in his statement that the
Ministry of Mines will examine the proposal in detail because the Government of Orissa has
not sent the proposal for approval in accordance with law and in consultation with the
concerned Ministry. When an application is received duly forwarded by the State
Government, the views expressed by the hon. Members here in this House today will be
given due consideration. I would like to know from the Minister, in view of the widespread
criticism in the country in regard to the MoU signed by the Government of Orissa and
POSCO.. … (Interruptions)
SHRI B. MAHTAB : All newspapers supported this MoU. … (Interruptions)
SHRI BASU DEB ACHARIA : Apprehensions have been expressed here about the favour
shown to a particular company and the financial loss for the Government of Orissa as well
as the Government of India. Will the Government of India before approving this
proposal... … (Interruptions)
SHRI ARJUN SETHI : Madam Chairman, my point is.... … (Interruptions)
MADAM CHAIRMAN: You will get time.
SHRI ARJUN SETHI : My point is that whenever any subject concerning the State
Government comes before the House, the same is not allowed. … (Interruptions)
SHRI BASU DEB ACHARIA : But people are complaining...… (Interruptions)
There cannot be any conflict of interest between the development of a State and the
nation development. After all, it is all national resource and if Orissa prospers, the national
also will be benefited. It is a national prosperity. So, there cannot be any dispute about
Orissa's prosperity and the national prosperity. But the issue is that the basic national
resource is limited. We should use it judiciously and carefully taking into account particularly
our per capita steel consumption. What is the projection of demand in the perspective plan
for the coming 20 or 50 years or so when India is emerging as the fast growing economy?
Finance Ministry is always claiming that we are emerging as a very fast growing economy.
We are the fastest growing economy. … (Interruptions) Steel is the key sector. carefully
protect your legal interest, your constitutional interest and your economic interest. But what
I want to know from the Union Government is this. According to Section 5(1) of the Mines
and Mineral Development (Regulation) Act, 1957, the Union Government had given the
prior approval[R39].
On what criteria was the approval given? Did they know that there was going to be
a clause of a swap? If that clause of a swap was taken into consideration, whether the
technology concerned was also taken into consideration? It is because, the technology being
brought in our country is not the latest one… (Interruptions) I am one with the claims made
by our steel majors. I am not naming them.
SHRI B. MAHTAB : Why are you not naming them?… (Interruptions)
SHRI RUPCHAND PAL : Many of our public sector and the private sector steel majors
have stated that they are capable of providing this technology but they are not being given
equal status and there is no level-playing field. What is being given to the multinational
company, had it been given to our steel majors, they could have provided Orissa a new steel
plant with the latest technology. But it is not being done, and it is being denied to them.
(Interruptions)
(Interruptions) … *
SHRI RUPCHAND PAL : Madam, I am asking the Union Government whether there has
been a level-playing field or not.
There was a story about the high alumina content and the technology involved in the
process, what is called the Fenic Process. Does it suggest that we, in the process of our
development of the steel technology, are not at a stage where we could match the technology
and resources that are being provided by the current steel major, who badly needs our
precious underground process, which the world over is yet not planned in a judicious
manner, which is being given a go-bye by the Orissa Government and approved by the
Union Government?
I charge the Union Government whether they have applied their mind before giving
prior approval.
SHRI ARJUN SETHI : Madam, I am very much thankful to the hon. Minister of Mines for
narrating, in detail, in his statement about the MoU that has been signed recently by the
Government of Orissa with the Korean steel major, POSCO. The statement of the hon.
Minister reveals everything. It also clarifies whatever allegations or points have been raised
here. This particular MoU could be possible only because the Government of India -- the
hon. Finance Minister is present here -- have allowed 100 per cent FDI in the mining sector.
In consequence of this particular announcement, this MoU could be possible. Otherwise,
no such MoU could be possible. So, only after the policy decision of the Union
Government to allow 100 per cent FDI in the mining sector, the MoU was signed between
POSCO and the Orissa Government. Madam, the statement of the hon. Minister of Mines
specifically says: “However, the Ministry of Mines is yet to receive any proposal for grant of
prospective licence or the mining lease to M/s. POSCO through the State Government of
Orissa[k40].”
I am simply astonished that incidentally all the hon. Members are from West Bengal.
Fortunately or unfortunately, we do not pull your West Bengal. This is the history. … *
SHRI ARJUN SETHI : Madam, my point is that the Orissa Government is very much
competent, with the approval of the Central Government on policy matter, to enter into
MoUs provided those MoUs do not go against the policies of the Central Government. If
this is so, why are they so much worried? Nothing has yet been achieved. The Orissa
Government has not yet sent the proposal to the Central Government. As has been stated
here by the Government, they will look into the details. They will have consultation on
everything. Why are they still so much agitated about this particular MoU? When the
Government of India has declared that hundred per cent foreign direct investment is very
much there, why are they very much opposed to it? If there is anything - I won’t go into the
details - the Government of Orissa is competent enough to discuss that with the
Government at the Centre. At that point of time, the Central Government can decide
everything on merit. So, there is no point in saying that it has gone against the interests of
the country.… (Interruptions)
MADAM CHAIRMAN: Arjun Charanji, you know that, as a leader, if you want to ask
anything from the Union Government, you can do so by putting questions.
SHRI P. CHIDAMBARAM: If you have some questions, just put them… (Interruptions)
SHRI ARJUN SETHI : Madam, I would like to know whether the lease would be governed
by the Minerals and Metals (Regulation and Development) Act. If so, will the hon. Minister
assure the House that the Government would grant licence to the Government of Orissa as
well as the steel major when it conforms to the provisions of this particular Act?
Madam, it has been said that some amount of minerals will be exported to other
countries, that is, Korea and Brazil. It has been pointed out here and incorporated in the
MoU that swap will be permitted up to 30 per cent provided the POSCO equally imports 30
per cent of the minerals[pkp41].
Moreover, it has also been mentioned in that particular MoU that after having gone
into the details etc., if it is found that it has alumina content to the permissible limit, then
there will be no need of exporting or importing. It has been mentioned there.
LOK SABHA)
Title : Shri Basudeb Acharia called the attention of the Minister of Mines to the situation
arising out of recent agreement of Orissa Government with Korean Steel Major POSCO
allowing them to export mineral wealth of the country and steps taken by the Government
in this regard.
SHRI BASU DEB ACHARIA Sir, I call the attention of the Minister of Mines to the
following matter of urgent public importance and request that he may make a statement
thereon :
“Situation arising out of recent agreement of Orissa Government with
Korean Steel Major POSCO allowing them to export mineral wealth of the
country and steps taken by the Government in this regard.”
SHRI BASU DEB ACHARIA : Madam Chairperson, the Memorandum of Understanding
between the Government of Orissa and POSCO of South Korea will facilitate ...(Expunged as
ordered by the Chair) of such scarce mineral iron ore of Orissa. You will be surprised to know
that a huge concession is being given to this particular company. They will set up a steel
plant at Paradeep.
SHRI ARJUN SETHI (BHADRAK): Madam, I would like to draw your kind attention to
his words. The hon. Member, while speaking, has said that 'it will facilitate … of mineral
wealth'. Will it go on record? No Government, whether the Central or State, will …
(Interruptions)
… (Interruptions)
SHRI B. MAHTAB (CUTTACK): If Shri Basu Deb Acharia is going to suggest what
should be the MoU to be entered by the Government of Orissa, let him come up with the
proposal. … (Interruptions)
SHRI BASU DEB ACHARIA : Madam, I have every right to say. If I have used any
unparliamentary words, you can expunge them. I have not used any unparliamentary
word.
SHRI BASU DEB ACHARIA : They will set up a steel plant with capacity of 12 million
tonnes and captive iron ore mines will be given to POSCO[reporter36].
They will extract 600 million tonnes of iron ore from the captive mines. The Steel
Plant will be set up after 33 months from the day of the company getting the licence. Why
such favour is being given to this particular company? They will start extracting iron ore
immediately after the issuance of licence, although the permission and approval of the
Central Government will be required in it.
Out of 600 million tonnes of iron ore, 30 per cent will be exported to Brazil as the
iron ore in Orissa has high percentage of Alumina. On the other hand, they are being
allowed to import similar quantity of iron ore from Brazil, which has lower percentage of
Alumina. Over and above 600 million tonnes, this company will be permitted to export 400
million tonnes of iron ore for their own steel plant in South Korea. It means that 600 million
tonnes per 1,000 million tonnes of iron ore this company from South Korea would get from
Orissa.
Madam, we have 18 billion tonnes of iron ore in our country, and Orissa has 4.5 billion
tonnes of iron ore. Nearly 36 MoUs were signed with various steel manufacturing
companies prior to this MoU. The total capacity for it would be about 40 million tonnes
of iron ore. What was the price at which they were permitted to purchase iron ore from
the Orissa Mineral Development Corporation at the time of signing these 36 MoUs?
They were permitted to purchase iron ore at the market price. What is the price of one
tonne of iron ore today? It is Rs. 2,000. But in the case of POSCO, the cost of extraction
or the total cost of production per tonne of iron ore would be only Rs. 400. Why is there
such a difference in it? Why this particular company is being permitted to take iron ore at
a much lower price? How much will be the loss to the State of Orissa as a result of the
lower price that has been fixed in the MoU? The loss for the Government of Orissa
would be about Rs. 1.20 crore.
Moreover, the steel plant would be set up in the Special Economic Zone (SEZ), and
it would mean that this company would enjoy concessions in income tax, excise duty, and
other taxes. How much would be the loss for the Government of Orissa on this account?
MADAM CHAIRMAN: Mr. Acharia, please be brief. I am saying this because there is
another Calling Attention to be taken up after this. Therefore, please put your question to
the hon. Minister[ak37].
SHRI BASU DEB ACHARIA : I am coming to the question, Madam.
This company first tried to have an MoU with the Government of Brazil. Brazil has
the largest deposits of iron ore. With the same conditions, which the Government of Orissa
has agreed to, the company went to Brazil. But the Government of Brazil did not agree to
those conditions. They agreed to provide iron ore at the market price. The Government of
Orissa has signed an MoU to supply iron ore at a much lower price. Madam, what will be the
benefit for the people of Orissa? A thousand acres of tribal land will be acquired. Total
employment will be only 13,000 as per the statement of the Government of Orissa.…
(Interruptions)
SHRI DHARMENDRA PRADHAN : This is totally wrong information. … (Interruptions)
MADAM CHAIRMAN : I will give time to your leader and he will have his say.
SHRI KHARABELA SWAIN : There is no tribal there. … (Interruptions)
SHRI BASU DEB ACHARIA : In the MoU, rehabilitation and resettlement of tribal people
has not been provided.
SHRI BRAHMANANDA PANDA (JAGATSINGHPUR): He has absolutely no
fundamental idea about what he is talking about.
MADAM CHAIRMAN: Shri Acharia, now there is no point. Please conclude.
SHRI B. MAHTAB : Shri Acharia had himself migrated from Orissa. He should not forget
that fact. I am just reminding him of his ancestors.
SHRI BRAHMANANDA PANDA : The learned Member should have a fundamental idea
of the point before speaking on it.
MADAM CHAIRMAN: Shri Acharia, please conclude now. There is another Member to
speak from your own party. Within two minutes, you will have to conclude.
SHRI BASU DEB ACHARIA : Madam, the Koreans are being given this iron ore despite
India not having enough iron ore reserves even to last for 50 years. Our per capita
consumption is the lowest among the developing nations; it is only 32 kgs. However, the per
capita consumption in China today is 270 kgs. This will not remain at this. Our per capita
consumption will increase. Our demand also will rise. If 30 per cent of the reserves are given
to this particular company, what will happen to the other steel manufacturing companies?
SHRI B. MAHTAB : In China?
SHRI BASU DEB ACHARIA : Already 36 MoUs have been signed. They require huge
quantities of iron ore. I would like to know from the Minister of Mines or the Minister of
Finance, whosoever replies … (Interruptions)
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): The Minister of Mines will
reply.
THE MINISTER OF MINES (SHRI SISH RAM OLA): I will give the reply.
MADAM CHAIRMAN: Shri Acharia, put your questions please.
SHRI BASU DEB ACHARIA : I would like to know from the hon. Minister as to
how the future requirement of our country will be met. Why such a concession has been
given to this particular company? Why POSCO was not offered market price, as has been
offered to the other 36 companies who will set up the steel plants in the State of Orissa? The
capacity will be about 40 million tonnes. Why in their case it is market rate of Rs.2000 or
Rs.3000, but in the case of POSCO it is only Rs.400?
SHRI B. MAHTAB : Who will give this answer? The Minister of Mines is not capable to
answer this question.
MADAM CHAIRMAN: He will say something. I am giving him chance. It is all right.
SHRI B. MAHTAB : This question can only be addressed to the Orissa Government. This
question has no scope to be answered by the Minister of Mines[KMR38].
Now, there is a need for mines policy. Should not there be a detailed discussion?
There should be a detailed discussion on mines policy before MoUs are signed. …
(Interruptions) Before it is exhausted, the Government of India should announce the mines
policy.
MADAM CHAIRMAN : Keep something
for your own party Member. Now, please conclude.
SHRI BHANWAR SINGH DANGAWAS (NAGAUR): According to the rules, he can be
given only 10 minutes.
MADAM CHAIRMAN: I am looking into it.
SHRI BASU DEB ACHARIA : The Minister of Mines has stated in his statement that the
Ministry of Mines will examine the proposal in detail because the Government of Orissa has
not sent the proposal for approval in accordance with law and in consultation with the
concerned Ministry. When an application is received duly forwarded by the State
Government, the views expressed by the hon. Members here in this House today will be
given due consideration. I would like to know from the Minister, in view of the widespread
criticism in the country in regard to the MoU signed by the Government of Orissa and
POSCO.. … (Interruptions)
SHRI B. MAHTAB : All newspapers supported this MoU. … (Interruptions)
SHRI BASU DEB ACHARIA : Apprehensions have been expressed here about the favour
shown to a particular company and the financial loss for the Government of Orissa as well
as the Government of India. Will the Government of India before approving this
proposal... … (Interruptions)
SHRI ARJUN SETHI : Madam Chairman, my point is.... … (Interruptions)
MADAM CHAIRMAN: You will get time.
SHRI ARJUN SETHI : My point is that whenever any subject concerning the State
Government comes before the House, the same is not allowed. … (Interruptions)
SHRI BASU DEB ACHARIA : But people are complaining...… (Interruptions)
There cannot be any conflict of interest between the development of a State and the
nation development. After all, it is all national resource and if Orissa prospers, the national
also will be benefited. It is a national prosperity. So, there cannot be any dispute about
Orissa's prosperity and the national prosperity. But the issue is that the basic national
resource is limited. We should use it judiciously and carefully taking into account particularly
our per capita steel consumption. What is the projection of demand in the perspective plan
for the coming 20 or 50 years or so when India is emerging as the fast growing economy?
Finance Ministry is always claiming that we are emerging as a very fast growing economy.
We are the fastest growing economy. … (Interruptions) Steel is the key sector. carefully
protect your legal interest, your constitutional interest and your economic interest. But what
I want to know from the Union Government is this. According to Section 5(1) of the Mines
and Mineral Development (Regulation) Act, 1957, the Union Government had given the
prior approval[R39].
On what criteria was the approval given? Did they know that there was going to be
a clause of a swap? If that clause of a swap was taken into consideration, whether the
technology concerned was also taken into consideration? It is because, the technology being
brought in our country is not the latest one… (Interruptions) I am one with the claims made
by our steel majors. I am not naming them.
SHRI B. MAHTAB : Why are you not naming them?… (Interruptions)
SHRI RUPCHAND PAL : Many of our public sector and the private sector steel majors
have stated that they are capable of providing this technology but they are not being given
equal status and there is no level-playing field. What is being given to the multinational
company, had it been given to our steel majors, they could have provided Orissa a new steel
plant with the latest technology. But it is not being done, and it is being denied to them.
(Interruptions)
(Interruptions) … *
SHRI RUPCHAND PAL : Madam, I am asking the Union Government whether there has
been a level-playing field or not.
There was a story about the high alumina content and the technology involved in the
process, what is called the Fenic Process. Does it suggest that we, in the process of our
development of the steel technology, are not at a stage where we could match the technology
and resources that are being provided by the current steel major, who badly needs our
precious underground process, which the world over is yet not planned in a judicious
manner, which is being given a go-bye by the Orissa Government and approved by the
Union Government?
I charge the Union Government whether they have applied their mind before giving
prior approval.
SHRI ARJUN SETHI : Madam, I am very much thankful to the hon. Minister of Mines for
narrating, in detail, in his statement about the MoU that has been signed recently by the
Government of Orissa with the Korean steel major, POSCO. The statement of the hon.
Minister reveals everything. It also clarifies whatever allegations or points have been raised
here. This particular MoU could be possible only because the Government of India -- the
hon. Finance Minister is present here -- have allowed 100 per cent FDI in the mining sector.
In consequence of this particular announcement, this MoU could be possible. Otherwise,
no such MoU could be possible. So, only after the policy decision of the Union
Government to allow 100 per cent FDI in the mining sector, the MoU was signed between
POSCO and the Orissa Government. Madam, the statement of the hon. Minister of Mines
specifically says: “However, the Ministry of Mines is yet to receive any proposal for grant of
prospective licence or the mining lease to M/s. POSCO through the State Government of
Orissa[k40].”
I am simply astonished that incidentally all the hon. Members are from West Bengal.
Fortunately or unfortunately, we do not pull your West Bengal. This is the history. … *
SHRI ARJUN SETHI : Madam, my point is that the Orissa Government is very much
competent, with the approval of the Central Government on policy matter, to enter into
MoUs provided those MoUs do not go against the policies of the Central Government. If
this is so, why are they so much worried? Nothing has yet been achieved. The Orissa
Government has not yet sent the proposal to the Central Government. As has been stated
here by the Government, they will look into the details. They will have consultation on
everything. Why are they still so much agitated about this particular MoU? When the
Government of India has declared that hundred per cent foreign direct investment is very
much there, why are they very much opposed to it? If there is anything - I won’t go into the
details - the Government of Orissa is competent enough to discuss that with the
Government at the Centre. At that point of time, the Central Government can decide
everything on merit. So, there is no point in saying that it has gone against the interests of
the country.… (Interruptions)
MADAM CHAIRMAN: Arjun Charanji, you know that, as a leader, if you want to ask
anything from the Union Government, you can do so by putting questions.
SHRI P. CHIDAMBARAM: If you have some questions, just put them… (Interruptions)
SHRI ARJUN SETHI : Madam, I would like to know whether the lease would be governed
by the Minerals and Metals (Regulation and Development) Act. If so, will the hon. Minister
assure the House that the Government would grant licence to the Government of Orissa as
well as the steel major when it conforms to the provisions of this particular Act?
Madam, it has been said that some amount of minerals will be exported to other
countries, that is, Korea and Brazil. It has been pointed out here and incorporated in the
MoU that swap will be permitted up to 30 per cent provided the POSCO equally imports 30
per cent of the minerals[pkp41].
Moreover, it has also been mentioned in that particular MoU that after having gone
into the details etc., if it is found that it has alumina content to the permissible limit, then
there will be no need of exporting or importing. It has been mentioned there.
Tuesday, February 19, 2008
The Telegraph - Survey finds Orissa ‘poorest’ in India
The Telegraph - Calcutta (Kolkata) | Nation | Survey finds Orissa ‘poorest’ in India
Survey finds Orissa ‘poorest’ in India - Opp. demands farmers’ loan waiver, study points to slow growth | ||
| SUBRAT DAS | ||
Bhubaneswar, Feb. 15: Tall claims of “rapid industrial growth” made by the NDA government have fallen flat with the pre-budget economic survey for 2007-08 describing Orissa to be the poorest state in India. “Orissa’s economy is still characterised by incidences of poverty,” states the survey. Quoting the recent estimate stated by the Planning Commission, the survey report states that the percentage of BPL population in Orissa stood at 39.9 per cent, compared to 21.8 per cent at the all-India level. The percentage of BPL population in rural Orissa (39.80) is lower than that in the urban belt (40.30), which is reverse at an all-India level (rural 21.80 and urban-21.70). The state could reduce poverty by 1.5 per cent during 2000-05 despite implementation of poverty alleviation schemes. However, the situation did improve in 2000-05 with a reduction percentage of 7.3. The slow rate of improvement has been attributed to several inherent problems such as vulnerability to repeated natural calamities, a disproportionately large proportion of ST/SC population, a large number of rural communities, want of adequate irrigation facilities and lack of high quality infrastructure. “Realising” that poverty is one of the factors for the backwardness, the Vision-2020 document, prepared by the government, has targeted an ambitious economic growth rate of 9 to 10 per cent by 2020. Attempts have been made in the document to target poverty reduction by promoting broad-based industrial growth. Orissa’s economy achieved an average annual rate of 7.26 per cent in the first four years of the 10th Plan primarily due to a high growth rate of 11.34 per cent in the industrial and mineral sectors. More than 45 steel companies, including Posco and ArcelorMittal, three aluminium giants and 13 power entities have signed MoUs with the state so far to set up plants in here. Despite the industrialisation drive and implementation of a number of employment generation programmes by the Centre and the state, the number of unemployed youths has been on the rise. During 2006, about 2.41 lakh job seekers registered themselves in employment exchanges. Only 586 placements were made against the 2,103 vacancies notified, read the survey report. |
Tehelka:: Free. Fair. Fearless - Riots in Kandhamal
Tehelka:: Free. Fair. Fearless
Fear still grips Orissa nearly two months after Hindu groups attacked Christians, reports BIBHUTI PATI
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| Jaganu and his wife at their home Photo: Bibhuti Pati |
The turmeric leaves have yellowed and in days shall turn brown. Mustard fields are ready to yield. Ginger is being reaped. In the next seven days Jaganu Digul will reap his turmeric and pay back the moneylender’s loan and celebrate Christmas with his family.
On December 24, Jaganu Digul took his ginger yield to the Daringbadi ‘haat’ (village weekly market), and from there to Bamunigaon haat to sell the remaining ginger. It was around 11am when a group of aggressive youth stormed in, brandishing weapons. They went about closing the haat. They belonged to the Kui community, and were backed by party workers of the Bajrang Dal, RSS and the Vishwa Hindu Parishad.
Local Christians gathered and supported the shopkeepers who were unwilling to close the haat. Heated exchanges soon took the shape of skirmishes. Soon arson and looting of shops followed. “Loot the Hindus,” someone screamed. Jagnu’s ginger got crushed in the stampede. Another group of men, shouting “Jay Bajrangbali”, set fire to a garage named “Jaga Balia”. Jaganu heard that the chapel at Bamunigan was being vandalised. He hid himself under a culvert near the police out post. Soon, the authorities clamped down, and a curfew was declared.
“I am a Christian and was looted by a Christian mob, and the Jaga Balia garage belongs to a Hindu, and was burned down by Hindus,” says Jaganu, recollecting his Christmas eve, spent in fear and hunger under the culvert. He somehow managed to get home by taking a jungle path. On seeing him, his wife broke down and said that a mob had forcibly cut the mustard crop from their field and set fire to their turmeric crop. Jaganu fainted, and on regaining consciousness, all he could do was to think of how he would repay the moneylender.
Jagnu is just one among the hundreds in places like Mansaguda, Butukia, Sindiro Gaon, Barakhama, Musukuli, Kadingia, Godapur, Khadadar and Prayati panka who suffered during the communal riots in Orissa’s Kandhamal district last December. Many are still waiting to return to their work and livelihood, and the peace that seems to them lost forever. They don’t understand the complexities of religion and caste, let alone politics.
More than a 100 churches have been destroyed in the violence and several temples vandalised. Around 600 homes and shops were set fire, including 300 houses of the Christian street of Barkhama and some Hindu areas like Aadua Sahi of Bamunigaon that were completely destroyed. More than two thousand people were affected directly, and another five thousand or more indirectly. Some relief has reached the affected, and the administration has provided tents for shelter. Yet, despite all the support given by the district administration, many are yet to recover from the trauma of the event that destroyed their life savings and took away their loved ones. More than a hundred criminal cases have been registered in Kandhamal district, and so far the police have arrested172 people. Some 600 people are still missing, and are believed to be hiding in neighboring districts.
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| Nearly two months after the attacks, some of those who fled return to their villages Photo: Bibhuti Pati |
Manish Burma, the District Collector says, “ It will take some time to normalise the situation”. According to a local social activist, “The terror is yet to recede. In Bamunigan, Daringibadi and Godapur areas the hardcore Hindus as well as Christians are holding secret meetings. The Christians of Barakhama and the Hindus of Aadua Sahi is their target this time. The government and the local administration have done their lot. Some people are politicising the matter. This is delaying in the restoration of peace and confidence among the people. Now Christian tribals are separated from their original Kui community. Thousands of school children are without books and lanteens. Their education is completely hampered.”
According to District Christian Welfare Society Secy. Manas, in Kutikia, Basakhama, Sudra, Budukia, Ribingia and Sinkiguda, Christians are being forced to convert to Hinduism by the RSS, VHP and the Bajrang Dal. But a local police officer dismissed this as baseless, “I have personally been to Dalki, Sudra, Katangi villages on receiving complaints. On asking them, they denied such things. We have not received any reports. These are rumours.”
In the Bamunigaon firing incident Tileswar Digul of Katamaha and Kundan Mantri of Alanjari village lost their lives. But their families are refusing to identify and receive their bodies in apprehension of police harassment. Day by day, Tileswar’s wife Sunita is crumbling into misery. When asked why they didn’t identify the bodies, a family member said, “ This is a Naxal area. If we identify them, then the police will take action against us as per Naxal laws.”
Interestingly, the victims of the riots across Bamunigan to Barakhama say, “We haven’t seen any Hindu of our village burning our churches or attacking us, nor did any of the Christians here attack any Hindus.” One of them, Tajuri, asked, “What was the religion of the rioters? Who were they and where from did they come? We have been celebrating Dussehra, Christmas and Diwali for years together. I go to temple because my forefathers have been going there, in the same way Elia here is going to church. What is wrong in it? So far, no radical Hindu or Christian has come with an answer to this innocent question of the people of Kandhamal.
| Tajuri’s Story Barakhama’s Tajuri, 72, is a Hindu. Alio, 51, is a Christian. Though not related by blood they are no less closer to each other than a mother and son. It was Tajuri who brought up Alio since he was orphaned in childhood. They live in one house, with a common gate and kitchen stove.Even after he got married, Alio looked after Tajuri since she is a widow. He also helped Tajuri’s daughter Minakhi to be married away, in complete Hindu rites. On December 25, as Alio was getting Tajuri her medicines before setting out for the church, he heard loud slogans outside. Shouting “Jai Sri Ram, Bom Bom Bhole, Jai Hanuman”, a mob entered Alio’s house and set it ablaze. They beat up Alio and his Ukia severely. Half-blind Tajuri rushed out, asking them why they were beating her son. The mob turned on her, and showering her with abuse, said, ‘You are a Hindu but you call a Christian your son?’ And then they beat her up. One of them said, “Set fire to her house!” the house was burnt down within minutes. Tajuri and Alio still break down when they recall the terror that visited them that day. |
Posted on February 15, 2008
Asia's top 3 steelmakers agree 65 pct rise in iron ore prces with Vale UPDATE - Metals News - Metals Place
Asia's top 3 steelmakers agree 65 pct rise in iron ore prces with Vale UPDATE - Metals News - Metals Place
18 February 2008
18 February 2008
Asia's top 3 steelmakers agree 65 pct rise in iron ore prces with Vale UPDATE
Asia's three-biggest steelmakers have agreed to a 65 pct increase in iron ore prices following negotiations with Brazil's Vale, the world's biggest iron ore producer, in a move likely to set the global benchmark for the raw material.
JFE Holdings, Nippon Steel and Posco have agreed to pay 78.88 usd a ton for iron ore starting from April 1, also heralding an increase in steel prices.
BHP Billiton and Rio Tinto, the world's second- and third-largest producers, are expected to follow suit. A spokesman for BHP declined to comment on the negotiations, while Rio Tinto could not immediately be reached for comment.
Steelmakers agreed last year to a 9.5 pct increase in iron ore prices but since then spot prices have jumped about 150 pct as demand has soared, leading the market to expect an increase of about 60 pct in the contract price this year. A 65 pct jump is the second biggest rise after 2005's 71 pct spike.
Demand for iron ore, a key material in steel, has soared due to growing demand led by a construction boom in China and India.
Steelmakers also face increasing costs for coal and coke.
Ko Min-Jin, a spokeswoman for Posco, said the group will consider raising prices of its products after completing negotiations with other miners.
Katsuaki Watanabe, president of Toyota Motor Corp, said Japan's top-ranked automaker had no immediate plans to raise car prices.
At 9.25 am, shares in Rio Tinto were up 74 pence, or 1.4 pct, at 5,567 pence, while BHP was up 24p, or 1.6 pct, at 1,575p. – Thomson Financial
Sunday, February 17, 2008
WSJ - Feb 12: Coal prices Surge $20 in 2003 to $120 in 2008
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China is doing for coal what it once did for oil: pushing prices to new highs, adding more pressure to the creaking global economy.
China has long been a huge supplier of coal to itself and the rest of the world. But in the first half of last year, it imported more than it exported for the first time, setting off a near-doubling of most coal prices around the world. The capper came in late January when a winter of punishing snowstorms and power shortages led Beijing to suspend coal exports for at least two months.
Just since then, Asian prices have shot up an additional 34%. Last week, coal benchmarks hit all-time highs in the U.S., Europe and Asia. That's adding to worries over global inflation already stoked by rising prices for everything from crude oil to cattle feed. "The velocity of the change has been remarkable," says Thomas Hoffman, senior vice president for external affairs for U.S.-based coal supplier Consol Energy Inc., which he says is considering holding off on some commitments to supply coal to see if prices rise even further.
For the world, which uses coal for about 40% of its electricity, the result is similar to what happened after China became a net importer of oil in 1993. But the Chinese factor is unfolding much faster with coal. It wasn't until China's industrial development shifted into overdrive this decade that the nation began to shake global petroleum markets. Oil's big price surge came after widespread brownouts in China in 2004 forced factories there to buy diesel fuel for backup generators, increasing the country's foreign oil demand.
China's need for coal is rising as other factors around the world are putting severe strain on supply for the fossil fuel. Flooding at major mines in Australia since mid-January has dramatically stunted that major coal producer's exports to Asian markets. For more than a year, meanwhile, Australia's overloaded ports have been choked with cargo vessels, forcing ships to wait in long lines to dock and get their coal. Power shortages and blackouts in South Africa amid rising demand there have curtailed exports to Europe. In Russia, another major coal producer, rail-car shortages have frustrated attempts to meet growing world demand.
Demand is rising quickly elsewhere. Japan, one of the world's biggest importers, is burning even more coal since an earthquake damaged a nuclear reactor last year, doubling one utility's coal intake. Longer-term pressure comes from India, which has mounted a major expansion of coal-fired electricity plants that is driving up the country's coal imports despite its large domestic reserves. Indonesia has been moving over the past year or so to divert more of its coal stores to domestic use, as the coal industry there has been depleting its higher-quality coal reserves.
Even U.S. coal producers are ramping up exports to Europe, as buyers who for years were uninterested in American coal now are scrounging for supply. "There's a butterfly effect," with issues inside China pushing up demand and prices for the fuel from other coal-producing nations, says Vic Svec, a senior executive at Peabody Energy Corp., the world's largest private-sector coal producer, based in St. Louis. "Demand from Beijing can ripple back to Queensland, Australia, or Gillette, Wyoming."
The China-driven coal boom has pushed up wages and created more jobs for U.S. miners as well as port and rail workers -- a twist on recent trends moving industrial jobs from the U.S. to China. "We've as an industry never seen such a dramatic . . . upturn in the market that seems to have such extended strength," Bennett Hatfield, chief executive of International Coal Group Inc., another U.S. coal producer, said Thursday in a call with analysts. Consol Energy said exports from its Baltimore terminal rose 20% last year and it expects a 25% jump this year.
Thermal coal prices at Australia's Newcastle port, an Asian price benchmark, finished at $125 a metric ton Monday, according to the globalCOAL international trading platform. That was up 34% since Jan. 25 and up 143% from January 2007.
On Monday, Central Appalachian coal futures on the New York Mercantile Exchange for delivery in March stood at $78.25 per U.S. ton. That's double its price at the start of 2007 despite weak domestic demand and above-average stockpiles due to a mild U.S. winter.
Some experts say coal prices could remain high or even keep climbing through 2009 or beyond, weighing on the already-slowing world economy. Even though coal is a leading source of atmosphere-warming greenhouse gases, its share of the world's energy diet is increasing -- which could help keep its price up in a recession. Although the use of cleaner-burning alternative fuels is on the rise, fast-growing energy consumption is expected to underpin coal demand. Still a relatively cheap -- and abundant -- alternative to oil, coal is sought in rapidly industrializing nations such as Brazil, India and Vietnam as well as China.
The demand for steel in developing countries has put coking coal used for steel at historic highs, as well as the thermal coal used for power. New coal-fired electric plants under construction in the U.S. also should add 50 million tons of new coal demand a year, about a 5% increase above current demand, say natural-resources portfolio managers at U.S. Global Investors.
To be sure, some of the factors boosting coal's price are temporary. China's worst snowstorms in 50 years have both increased demand and hampered delivery from coal mines in northern China to power plants across its southern and western regions. China has been methodically closing down thousands of unsafe and inefficient coal mines, restricting supply until enough new or refurbished mines can be opened. And Chinese regulations have contributed to shortages. China has freed domestic coal prices to rise with demand, but has capped electricity tariffs. That led power plants to order less coal -- leaving them short of coal when the storms hit.
But it's unclear how long Beijing could take to reopen more mines or correct its market imbalances. And other factors driving up prices aren't likely to change soon.
Chinese coal demand grew nearly 9% last year, raising its share to a quarter of the world's consumption. Its coal industry roughly doubled output from 2001 to 2006, but that growth slowed to about 6% last year, not enough to keep pace with demand. Five years ago, China exported 83 million more metric tons of coal than it took in. Last year, that surplus had fallen to two million. The rapid loss of more than 80 million tons in exports amounts to about 12% of the internationally traded market.
This year will be worse, predicts Gerard Burg, minerals and energy economist at National Australia Bank, who calculates China will become a net importer of 15 million tons. The International Energy Agency forecasts the gap will continue to widen: Unless China changes its energy mix, the agency predicts, it will be a net importer of 66 million tons of so-called coal equivalent, an energy measurement that equates to 95 million metric tons.
Coal was assumed by many in the energy industry to be immune to worries about the stability of supply that have helped push oil to record highs. Coal reserves are more evenly distributed around the world, and most of the world's coal is consumed where it's mined. Coal prices enjoyed a bull run in 2004 and 2005, but today's prices are higher and are causing more concern, as the possibility of a global recession looms and oil trades at around $90 per barrel.
Coal reserves still are relatively plentiful world-wide. But expanding the infrastructure to mine and transport them in developing countries is slow and expensive -- and those countries' consumption is rising at least as fast their output. India ramped up production by a third from the late 1990s to 2005, according to the BP Statistical Review of World Energy, while its consumption increased by roughly 40%. Russia plans to double its coal consumption, says U.S. Global, in part to free up natural gas for lucrative export to Europe.
As recently as 2003, China was a critical coal supplier to many Asian neighbors such as Japan, which relies on China for 10% of its coal. But around that time, China's economic expansion began to accelerate sharply, especially in heavy industries that guzzle electricity, including auto making, steel and chemicals. Coal exports began to dwindle and imports rose.
Beijing began closing coal mines in 2005 to address a horrific safety record. Energy-security experts still expected its exports to increase. But China also was adding hundreds of new coal-fired power stations -- enough to power all of Australia in 2006 and again in 2007 -- even while closing older, inefficient ones. According to the China Electricity Council, China's power-generating capacity rose by 18% just from last July to December, most of it fueled by coal.
In northern China's coal belt, there were massive expansions on key rail lines to keep the supply flowing. But by mid-December last year, cracks in the coal-supply chain started to appear as the country entered the winter heating season. On Dec. 11, the huge city of Chongqing announced it would ration electricity for the first time during winter. Government officials said overworked generators were breaking down, and there was a shortage of coal.
By early January, the government said it had closed 10,412 coal mines and still planned to close 1,100 more. Meanwhile, coal miners and buyers were preparing for contract negotiations. Coal prices, freed from government control two years earlier, were steadily rising. But the government was keeping caps on electricity rates to hold down inflation, at an 11-year-high. Power producers started lobbying for higher tariffs. They began shutting down some plants because they were unprofitable to run -- and let their coal stockpiles run down to just 10 days' supply, according to the Ministry of Railways.
On Jan. 10, the worst blizzards in decades started to pummel a huge swath of central and southern China, leading to heating shortages. The vice governor of one of China's most economically important provinces, Guangdong, publicly chastised power operators for chasing excessive profits.
A day later, Xiao Peng, the vice general manager of China Southern Power Grid, said the region had shut down 6% of its power-generating capacity because of a shortage in coal -- the worst electricity shortage in five years. Other provinces reported power plants had stopped providing electricity because they couldn't afford coal supplies, until ordered back online. Later in the month came the ban on coal exports.
The coal shortage has rippled through other commodity markets, hurting China's output of steel, copper, zinc and aluminum as electricity is being diverted for domestic industry and household heat and electricity. China's largest copper producer, Jiangxi Copper Co., shut down some plants, contributing to higher U.S. copper futures. Jim Thompson, editor of Coal & Energy, a daily market newsletter on the coal industry, said if global coal prices remain high, it's possible that utilities in the U.S. and Europe could run low on fuel too.
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Ellen Zhu in Shanghai contributed to this article.
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Tuesday, February 12, 2008
Document View - Nine cities, Nine Ideas - Energy saving WSJ
Document View
Energy (A Special Report); Nine Cities, Nine Ideas
Abstract (Summary)
"If city government does not show leadership by its use of renewable energy and energy-efficiency solutions, it is hard to have credibility with its constituents in being a good steward of the environment," says John Berger, chief executive officer of Standard Renewable Energy, a Houston-based provider of solar, wind and other alternative energies. The City Hall garden, completed in 2001, covers about 20,000 square feet of the roof, using more than 100 hardy species that can withstand Chicago's fierce winds and temperature extremes.
Full Text (4030 words)
(c) 2008 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.
[Local governments around the globe are coming up with some of the most innovative ways to cut energy use. There are lessons here for places of all sizes.]
Ann Arbor, Mich., and Beijing, China, have precious little in common. But the modest college town and sprawling national capital do share one trait: They're part of a world-wide movement by cities to rein in their runaway energy use.
Ann Arbor is replacing the bulbs in its street lamps with light- emitting diodes that use much less power. Beijing is closing or relocating cement kilns, coal mines and chemical plants dating back to the era of Chairman Mao.
Elsewhere around the world, cities are embarking on all sorts of innovative programs to try to corral the amount of energy they consume. Chicago is planting rooftop gardens to cool down its municipal buildings. New York is working with a private company to harness the power of tidal currents in the city's East River. Amsterdam is using cold lake water to help air-condition homes.
"We have the beginnings of a mass movement among municipal leaders," says Ralph Cavanagh, energy-program co-director for the Natural Resources Defense Council, an environmental group based in New York.
For cities, the motivation is twofold. All the hand-wringing over climate change has prompted more cities to do their part to contain greenhouse-gas emissions that most scientists believe are causing global warming. In the U.S., more than 700 mayors have signed an agreement to try to follow the Kyoto Protocol's goal of reducing greenhouse-gas emissions -- even though the Senate has rejected the treaty.
The other major motivation for cities: energy costs, which have more than doubled since 2000. Strapped for cash, municipalities are scrambling to save as much money on energy use as they can.
Although city governments themselves use a fraction of energy consumed in a municipality, industry experts say they play a crucial leadership role in getting others to conserve.
"If city government does not show leadership by its use of renewable energy and energy-efficiency solutions, it is hard to have credibility with its constituents in being a good steward of the environment," says John Berger, chief executive officer of Standard Renewable Energy, a Houston-based provider of solar, wind and other alternative energies.
Here's a look at the innovative programs nine cities around the world are using to keep their energy consumption -- and their skyrocketing bills -- under control.
CHICAGO
LET YOUR GARDEN GROW
About eight years ago, the Windy City began overhauling 15 million square feet of its municipal buildings to make them use less power. On many of the buildings, city officials decided to put in a novel feature: rooftop gardens.
The first was planted atop the 11-story Chicago City Hall, a nearly century-old landmark where the temperature on the roof -- as on many other downtown buildings -- would soar to as high as 160 degrees on hot days. Gardens can keep a roof as much as 70 degrees cooler, city officials say, because all the greenery reflects heat while providing shade. Consequently, less energy is needed to keep a building cool.
The City Hall garden, completed in 2001, covers about 20,000 square feet of the roof, using more than 100 hardy species that can withstand Chicago's fierce winds and temperature extremes. The savings were felt immediately, with the annual power bill for the building falling by 11%, or almost $10,000, city officials estimate.
Since then, the city has expanded the green-roof program dramatically. Now 4 million square feet of municipal and private rooftops either have a roof garden or are in the process of getting one, says Suzanne Malec-McKenna, Chicago's commissioner of the environment. In so doing, Ms. Malec-McKenna says, the city has made sure to use lightweight, permeable soils to keep the rooftops from becoming too overloaded. Waterproof membranes are also fitted below the garden to keep rain runoff and other water from leaking into the building.
A different kind of problem cropped up on the City Hall roof soon after it was finished. "We had a grasshopper invasion," Ms. Malec- McKenna says. "But thankfully the birds got them."
-- Jim Carlton
ANN ARBOR, MICH.
LIGHTING THE WAY
Officials in this town of 115,000 near Detroit took a close look at their $5 million-a-year municipal electrical bill two years ago and realized they were shelling out $1.5 million -- or roughly a third of the total -- just for street lights. Then they realized they could save substantially by simply swapping standard bulbs for a newer technology: light-emitting diodes, or LEDs.
Unlike standard lights that use heated, incandescent bulbs, LED light is cooler and is produced by a semiconductor. The bulbs last as long as 10 years, or five times longer than traditional lights, while using about half as much energy, Ann Arbor officials say.
The LED technology has been around for decades, and the lights have become common in computer indicators and traffic lights. But until about two years ago, LEDs weren't practical for street-lighting purposes because it was difficult for them to produce white light, says Govi Rao, charman of Lighting Science Group Corp., a New York- based LED provider.
In 2005, Ann Arbor tried out one technique for making white light: blending red, green and blue beams. City officials installed some of the makeshift lights in the City Hall parking lot. "They looked like they were cobbled in somebody's garage," recalls David Konkle, energy coordinator for the city.
Then manufacturers came to the rescue, developing aesthetically pleasing white bulbs by coating blue LEDs with phosphor. City officials spent $15,000 to install the new lights on a few streets downtown and in a residential neighborhood.
One of the few complaints was from a resident who said the new lighting no longer illuminated his home on the street; LEDs shine light directionally and are typically pointed down at the ground, unlike incandescent bulbs, which cast a glow all around. "We told him we're not in the business of lighting his home," Mr. Konkle says.
Most other people liked the new LEDs, and the city recently obtained a $630,000 grant from the Ann Arbor Downtown Development Authority to replace all 1,046 of the street lights downtown. The city estimates that replacing the downtown street lights alone will save more than $100,000 in reduced power costs annually as well as 294 tons of carbon-dioxide emissions -- equivalent to the carbon dioxide that about 35 homes generate annually from electricity use.
After that, Mr. Konkle says, the rest of the city's lights will be replaced as the technology develops and prices drop. City officials say they could cut their light bill by as much as $700,000 a year by replacing all of the 7,000 or so streetlights in town.
-- Jim Carlton
PALM DESERT, CALIF.
A COMMUNITY EFFORT
In 2005, Jim Ferguson, then the mayor of this desert city, was traveling across Northern Europe to investigate the region's energy- saving programs. A host of California leaders and utility executives were along on the fact-finding trip, but for Mr. Ferguson the energy problem hit home particularly hard: Power bills in Palm Desert had skyrocketed to as much as $1,000 for residents in hot summer months.
As the cruise ship made its way across the Baltic Sea, Mr. Ferguson recalls turning to some California utility executives and saying: "If you can save us money, then do it."
With the gauntlet laid down, two local utilities, Edison International's Southern California Edison Co. and Sempra Energy's Southern California Gas Co., formed a partnership with the city and a nonprofit for help. The Energy Coalition, of Irvine, Calif., helps cities and utilities work together to reduce energy consumption. Together, the partners devised a plan that would help slash Palm Desert's energy consumption by 30% by 2011 -- and achieve as much as $40 million in annual energy savings.
The plan is one of the most audacious arrangements devised for a U.S. city, since the cuts weren't just coming from municipal operations but from the city of 50,000 as a whole. Adding to the challenge: Palm Desert is a fast-growing resort community with 30,000 homes, 22 golf courses and more than a dozen hotels -- and it's situated in one of the hottest climates in the U.S., with summertime temperatures approaching 120 degrees. That means a lot of power for a lot of air conditioners.
Under the partnership, the utilities obtained $14 million in grants from the California Public Utilities Commission earmarked for use in Palm Desert to finance one of the nation's most aggressive incentive programs for homes and businesses to replace outmoded, energy-guzzling gizmos with energy-saving ones.
Unsurprisingly, air conditioners are one of the biggest parts of the plan. It can cost as much as $1,200 a month for the four or so hottest months of the year to keep older models humming in a three-bedroom home. Palm Desert now gives residents rebates of up to $1,400 per system when they buy new, energy-efficient air-conditioning setups, which can run between $5,000 and $9,000. Since the new air conditioners can save as much as half the power of the older ones, city officials say, they pay for themselves in four to six years. Last year, 493 new systems were installed under the program.
After one full year of the program, which began in January 2007, the city has saved 27 million kilowatt-hours of power, or 12% towards its goal, says Patrick Conlon, director of energy management for Palm Desert. The effort has removed about 3,475 tons of carbon from the air -- equivalent to the carbon dioxide that 1,531 homes generate annually from electricity use. "What we are trying to do is open up [residents'] wallets and invest in energy efficiency, and that's hard to do," Mr. Conlon says. "But everybody understands dollars, and when they get a $1,200 electric bill they understand that."
-- Jim Carlton
AMSTERDAM
LOOKING TO THE LAKE
In 2001, the Zuidas section of Amsterdam, south of the central city, was seeing lots of new development. As Zuidas grew, local leaders wanted to keep emissions down and help the city -- and the Netherlands as a whole -- meet Kyoto Protocol objectives. So the Dutch capital set an ambitious target: Zuidas would have to use 40% less energy than other parts of the city.
It would be a challenge. The high-density development would have big energy demands -- particularly since about 45% of the buildings would be used for businesses.
"There were lots of companies investing, making plans," says Ronald Roelen, business manager at Nuon Warmte, the subsidiary of Amsterdam- based utility Nuon that's responsible for Zuidas. "Amsterdam wanted to be the center of the IT world and needs a lot of electricity; the question was, how can we avoid making huge investments into electricity?"
Nuon zeroed in on air conditioning. About 37% of the total power load in Zuidas was expected to be used for cooling computer rooms and other high-tech necessities. Using a pilot project in Stockholm as a model, Nuon decided to cut down on all that power use -- by harnessing a local man-made lake, Nieuwe Meer.
The system, which came on line in August 2006, starts by removing water from about 100 feet below the surface of the lake. At that level, the temperature is usually a chilly 41 to 45 degrees. This water is pumped away and used to cool another supply of water that is then pumped into customers' buildings. There, it radiates cool air through the pipes -- much like hot-water pipes give off heat to warm a building. The lake water, meanwhile, is returned to Nieuwe Meer.
The project, which provides air conditioning for about 700,000 people in the southern part of Zuidas, saves 200,000 euros ($292,000) a year in electricity costs and uses just one-tenth the power of conventional cooling systems, Nuon says. The utility provided most of the investment for the roughly 25 million euro effort, with a subsidy of 900,000 euros from the Dutch government.
Now there are plans to expand the project to the northern part of the Zuidas area. Officials also are considering a similar project for the district Amsterdam Zuidoost Lob, in the southeastern part of the city, using water from another lake.
-- Erica Herrero-Martinez
BEIJING
OUT WITH THE OLD
As part of its action plan for hosting the Olympics, Beijing targeted deep cuts in energy consumption. And it had a string of industrial relics from the city's former planned economy squarely in its sights.
Cement kilns, coal mines and chemical plants dating back to the era of Chairman Mao were earmarked for relocation or closure so that Beijing could lower its energy consumption per unit of gross domestic product by more than 6% annually by 2008. (That measure represents the ratio of China's total energy use, in tons of coal equivalent to its GDP, in yuan.) Part of the motivation was simple conservation of resources. China has been gobbling up coal at an enormous rate, as the nation's recent shortages -- and resulting power outages -- show.
Pollution worries were also driving Beijing's campaign; conditions were so bad that the International Olympic Committee talked of a need for contingency plans to protect athletes' health, possibly by postponing events on smoggy days.
To achieve Beijing's goals, some big employers are getting the boot. The Beijing Coking and Chemistry Plant, built in 1959, shuttered in July 2006. Last year, Beijing Huaer Co.'s chemical plant and the Beijing Organic Chemical Plant were targeted to be moved out of town within a year of the games' beginning. Scores of coal mines will be shut, and a ban was imposed on cement kilns inside the city's fifth ring road -- about 7 miles from the city proper.
The biggest challenge lay about 11 miles west of Tiananmen Square: Shougang Group's vast steelworks. A major employer in the city, the steelworks has been a source of civic pride for decades despite its inefficiency and the smoke emitted from its chimneys. Production at the plant is being wound down for the Olympics, with annual output due to halve to 4.2 million metric tons of steel during 2008. Operations will cease in 2010 and move to a new, more-efficient facility some 137 miles away at Caofeidian in Hebei province. Part of the new plant will be ready for production in October, to make up for the shrinking capacity in Beijing.
But relocating Shougang's steelworks involves complex technical and political challenges -- not least the impact on more than 60,000 Beijing-based workers who may need to be relocated or change their jobs. How to split taxes from steel production between Beijing and Hebei is another issue.
Beijing hopes to absorb some of the displaced workers from the environmental drive into the city's booming service sector. Municipal officials also plan to salve civic pride by making Shougang's steelworks a memorial to the capital's industrial development -- including progress in energy efficiency -- by turning it into a tourist attraction once production ends.
The city's efforts are paying off. For years, Beijing had the highest energy consumption in China. But its efficiency drive -- equivalent to taking two 500-megawatt power plants offline each year -- has dropped Beijing behind Shanghai in terms of consumption.
-- David Winning and Sue Feng
LONDON
POWER CLOSER TO HOME
By 2025, London Mayor Ken Livingstone wants to cut London's carbon emissions 60% from their 1990 levels. His plan: move a quarter of the city's power supply to small, local energy sources and away from the national electric grid.
Producing electricity nearer the point of use means you don't have to use as much energy to deliver the power to customers, and less of the electricity bleeds away in transit. It also means that heat created as a byproduct of energy production can be used to warm customers' buildings. If plants are located far from customers, that heat cools down in transit.
The city has a number of projects in the works to achieve that goal. To develop them, the city's climate-change agency has teamed up with the U.K. unit of the French utility EDF to create London Energy Services Co., or London ESCO.
EDF Energy says the driving force behind the local-power venture will be combined heat-and-power plants, along with conventional gas- fired plants. As part of the effort, London ESCO says it is also considering investing in a large-scale wind farm, as well as a plant that combines power generation with both heating and cooling. The plant creates heat as a byproduct, as heat-and-power plants do, but also cool air -- which can be used in local air-conditioning systems.
The company estimates that projects already in the pipeline will be able to meet about 2% of London's energy needs. The first plant is expected to come on line as early as 2009.
Meanwhile, London ESCO is one of the three short-listed bidders for a project in the Elephant and Castle area of London. The proposed new plant will have up to 9 megawatts of capacity and will supply heat, cooling and electricity to about 6,500 local homes.
-- Erica Herrero-Martinez
ASPEN, COLO.
Few cities have more at stake in global warming than this skiing mecca, whose main livelihood -- winter sports -- is directly threatened by forecasts of shrinking snow packs in the Rocky Mountain West.
So, in 2005, officials in the upscale town of 6,000 decided to adopt a plan called the Canary Initiative -- so named because the town sees itself as a canary in the environmental coal mine. The plan called for the city to dramatically ramp up its use of alternative energy and take other steps to reduce its greenhouse-gas emissions 80% by 2050.
A major part of the plan involves the Aspen Recreation Center, a three-story structure that houses swimming pools, an ice rink and other athletic facilities. Last August, Aspen launched a $1.1 million retrofit of the center to cut its hefty power use. The two pools and a hot tub, for instance, got new covers so they don't lose heat at night and have to be reheated in the morning. The facility also was outfitted with energy-efficient climate-control units and timed electrical controls. For instance, vending machines now have sensors, so the lights turn on only if someone is in the room, says Tim Anderson, the city's recreation director.
Mr. Anderson says the city will benefit economically from the project, with the annual energy bill for the center dropping by nearly 40%, or $130,000, from its usual $350,000. The overhaul will also save 713,207 kilowatt-hours of power annually, or enough to supply 85 average Colorado homes for a year. As for carbon dioxide, the new designs will keep about 640 tons of the gas out of the air every year, about the same as 77 homes generate annually from electricity use.
-- Jim Carlton
NEW YORK
TAPPING THE WAVES
In December 2006, Mayor Michael Bloomberg announced an ambitious plan for New York: By 2030, the nation's largest city would cut its greenhouse-gas emissions by 30%. As part of the plan, Mr. Bloomberg called for 800 megawatts of new clean-energy generation, or enough to power about 640,000 homes. One company is working with the city to help reach that goal. Its unorthodox idea: harness the power of waves in New York's East River to generate electricity.
On June 11 of last year, Mr. Bloomberg helped flip the switch on an experimental tidal plant in the waterway. Since then, the five turbines submerged in 30 feet of water have been producing enough power to meet nearly a third of the electricity needs of a supermarket and parking garage on Roosevelt Island, between the New York boroughs of Manhattan and Queens. The turbines are equipped with three 16-foot diameter rotors, which spin like the blades of a windmill when the tidal currents rush through the East River at regular intervals every day.
The pilot project by Verdant Power Inc. has worked so well that officials of the New York-based start-up say they plan to seek a federal operating license later this year to install more underwater turbines. A total of 30 are on the drawing board; they would be capable of generating up to 1.5 megawatts of electricity, or enough to power about 800 homes.
City officials, who helped underwrite environmental studies for the project and have streamlined the permitting process, say as many as 300 turbines could eventually be installed in the East River, providing 10 megawatts of renewable power, or enough to power about 8,000 homes. That power, city officials say, could replace the equivalent of 68,000 barrels of oil a year.
But wave power isn't without its challenges. Regulatory barriers are so large, for example, that it can take years to get a permit to build one. Verdant Power wasn't able to get its turbines actually up and running until last year after spending five years seeking state and federal permits. The costs are also high: Verdant Power officials say the East River project has cost a total of about $9 million, with the state of New York footing the bill for about a third of that.
So far, one fear of environmentalists isn't materializing: that blades of the turbines would hurt fish. In the East River project, Mr. Taylor says, the blades spin so slowly that fish just swim out of the way.
-- Jim Carlton
THANE, INDIA
FOLLOW THE SUN
A little-known suburb of India's financial center, Mumbai, is aspiring to become the face of the nation's renewable-energy efforts. Thane, like other Indian cities, depends on the power generated from the country's vast coal resources. And, like other cities, it's struggling to meet the growing demand of its population -- which usually means one to four hours of blackouts every day.
To cope with the problem, many Indian cities offer incentives such as property-tax rebates to get residents to install solar-water heaters. But Thane, an industrial city of about 1.5 million people, has been much more aggressive than other municipalities. Not only is it encouraging residents to take up solar power -- it is using the renewable energy extensively in its own buildings.
"We saw a big potential in energy conservation and the use of solar power in tackling the power shortage in the city and decided to make the most of it," says deputy city engineer (electrical) Sunil Pote.
The local administration started its solar drive in 2003 with a project at its main hospital. Facing a huge electricity bill, the administration decided to install solar water heaters at the facility, with a capacity of about 4,760 gallons a day. The $40,500 or so investment made five years ago saves the hospital about $23,500 a year in electricity costs and meets all of its hot-water needs. The energy saved is enough to power about 45 homes.
The success of the project and the savings it generated prompted the administration to move on to its other buildings. During the refitting drive, local officials installed a total of about 8,850 gallons a day of solar water-heater units.
Then the city decided to get residents in on the effort, as well. Beginning in May 2005, the administration made it mandatory for builders to fit all new buildings with solar water heaters. "We wanted people to see the cost benefits of using solar energy, so we took a different approach," Mr. Pote says. "Before we made it mandatory, people were reluctant to use solar water heaters, as there was a misconception that they are expensive to install."
Meanwhile, to encourage existing buildings owners to install solar water heaters, the city began offering a 10% discount on property tax every year for adding the hardware.
Since the program began, 16,300 families in the city have connected to solar water heaters, Mr. Pote says. With those efforts, the city today saves enough electricity to power more than 5,000 homes. "This is still a small fraction," Mr. Pote adds. "If we can get at least 25% of the families to start using solar water heaters, we can reduce the city's total electricity consumption by almost 15%."
-- Gurdeep Singh
Document View - OPEC of Iron Ore
Document View
Mining Firms Bulk Up, Echoing Big Oil Mergers; BHP Bid for Rio Heralds A New Era for Resources; The OPEC of Iron Ore?
Patrick Barta and Robert Guy Matthews. Wall Street Journal. (Eastern edition). New York, N.Y.: Dec 18, 2007. pg. A.1
Abstract (Summary)
The resulting megaminers would have great influence over the cost of raw materials like iron ore, copper and uranium -- and, by extension, the price of consumer electronics, cars and new apartment blocks. Freeport- McMoRan Copper & Gold Inc. of New Orleans acquired Phelps Dodge Corp. of Phoenix; Vale bought Canada's Inco Ltd.; Xstrata took over Canadian nickel giant Falconbridge Ltd.; and Rio Tinto snatched up aluminum powerhouse Alcan Inc. As recently as early this decade, the mining sector was filled with relatively small companies with minimal pull on the world economy.
Full Text (2198 words)
(c) 2007 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.MELBOURNE, Australia -- First there was Big Oil. Now comes Big Mining.
For years now, mining companies have gotten rich supplying the raw materials that have fueled consumer booms from China and India to Brazil. As commodities prices soared, these companies socked away cash and snapped up rivals. Now they are embarking on another round of deals that promises a new class of juggernauts. The resulting megaminers would have great influence over the cost of raw materials like iron ore, copper and uranium -- and, by extension, the price of consumer electronics, cars and new apartment blocks.
Last month, Anglo-Australian miner BHP Billiton announced a $125 billion proposal to merge with Anglo-Australian rival Rio Tinto. The deal would combine the world's No. 1 and No. 3 miners into a company worth as much as $320 billion at current market values -- bigger than every global oil company except Exxon Mobil Corp. and Russia's OAO Gazprom. It would be the world's largest producer of copper and aluminum, its No. 2 iron-ore provider and potentially the largest source of uranium.
BHP's proposal set off talk of more deals. Last week, the world's No. 5 mining company, Switzerland-based Xstrata PLC, suggested it was open to being taken over -- with likely suitors including the two other top five names, London-based Anglo American PLC and Brazil's Companhia Vale do Rio Doce, or Vale. This comes on top of more than $100 billion worth of mining deals in the past two years: Freeport- McMoRan Copper & Gold Inc. of New Orleans acquired Phelps Dodge Corp. of Phoenix; Vale bought Canada's Inco Ltd.; Xstrata took over Canadian nickel giant Falconbridge Ltd.; and Rio Tinto snatched up aluminum powerhouse Alcan Inc.
As recently as early this decade, the mining sector was filled with relatively small companies with minimal pull on the world economy. But the acquisitions of recent years echo the oil-industry consolidation that began in the late 1990s and produced today's "super majors" -- Exxon joining with Mobil, Chevron with Texaco, and British Petroleum with both Amoco and Atlantic Richfield.
"If you look at the industry and the history of oil, really the same game is playing out," says Alex Gorbansky, a managing director at Frontier Strategy Group, a Washington, D.C.-based emerging-markets advisory firm.
Not all of the forces that united oil companies were like those driving Big Mining today. Commodity prices were depressed in the late 1990s, and oil companies thought merging would help them cut costs to survive hard times. Today's miners face the opposite challenge: Prices are so high that natural-resources companies have more cash than they know what to do with.
But the similarities are striking, say investors, bankers and analysts who study the sector. On the back of explosive growth in China and other developing countries, some mined commodities are taking on a strategic importance that's starting to rival that of crude. As with oil, most of the world's easy, high-grade mineral deposits have been tapped, leaving resources that are lower-grade, harder to reach or in politically challenging locations. By merging, miners hope to tackle the complex projects that remain.
Many Western miners hope their size and technical prowess will make them choice partners in countries such as Mongolia that need foreign expertise to develop their assets. Big Western miners are also bulking up to compete with new miners in countries including Russia and China.
Size will also matter in an era of increasing resource nationalism. Much as Russia and Venezuela cracked down on oil companies' access to local reserves, the likes of India, Indonesia and Bolivia are increasingly protective of their mineral resources. Megaminers with broad experience and well-known names could have more leverage to persuade such countries to open for development. On the flip side, should host governments decline to cooperate, big miners would have a portfolio of reserves to fall back on.
The Big Mining era could result in higher profits for leading companies, much as consolidation boosted earnings for Big Oil. But the trend could make life more difficult for consumers. A few big companies could have the power to wait out market weaknesses and keep prices high, by putting projects on hold or moving slowly to start new ones.
"The more concentration you get, the more monopoly power you get," says Amy Jaffe, an energy-studies fellow at Rice University's Baker Institute for Public Policy. In a November study, Ms. Jaffe found that oil-sector consolidation resulted in less oil, not more, from big companies. She suggests that's because big oil companies have spent money on dividends and share buybacks at the expense of new exploration. "People with monopoly power don't use it to decrease prices and develop more supply," she says.
Though a BHP-Rio deal is far from certain, the overture is the product of broad forces that analysts say are driving consolidation across the industry. A look at the proposed tie-up provides one scenario of how the world of Big Mining would look.
BHP Billiton and Rio Tinto both date to the 1800s, when their predecessors developed mines in Australia and Spain. Over the years, the companies grew through mergers and new mines to become two of the business's largest players. In the industry, BHP was known as the more aggressive, with risk-taking geologists who favored large, complex projects. Rio was seen as stuffy but financially savvy, with a tendency to talk down the value of its assets to manage investor expectations.
As recently as 2001, there were a dozen or more midsize players with market capitalizations of around $3 billion to $5 billion, and many smaller players. No single company achieved a dominant role.
Melbourne was an industry center. Two decades ago, the city of trams and Victorian-era buildings had scores of midsize mining houses, including several that became known collectively as the Collins House Group because they were located on a stretch of Collins Street downtown. Rival executives sometimes drank together at the posh Melbourne Club, housed in a 19th-century landmark building.
Business changed as the recent commodities boom gathered momentum starting in 2002. New mines were in great demand, but they were few and far between. In presentations to investors last year, former BHP Chief Executive Charles "Chip" Goodyear noted that mining companies were finding only a handful of major new deposits in the Western world each year, compared with 30 or more in the late 1960s and early 1970s. Most newer mines were based on deposits discovered years or decades before. Many had never been developed because they were in places that posed significant risk, like the Congo, or held relatively low-grade minerals.
Meanwhile, resource-rich countries have been tightening the screws on foreign investors. Earlier this year in Bolivia, authorities seized a tin smelter owned by Glencore International AG of Switzerland. Glencore protested but hasn't been compensated. Similarly, officials in mineral-rich Indonesia have stalled legislation that would clear the way for new foreign mining investments. Rio has been in talks with the Indonesian government since 2005 to develop a large nickel mine there but hasn't sealed a deal.
On another front, new competitors from developing countries were taking form. Russia's United Co. Rusal, the product of a three-way merger, elbowed Alcoa aside recently to become the world's biggest aluminum company. China Shenhua Energy Co., a coal producer, raised nearly $9 billion in the year's second-largest public stock offering. It aims to grow by acquiring assets overseas, it has said.
As BHP and Rio grappled with this new reality, cash from sales in emerging markets were piling up. Both companies' operations in iron ore -- a key component in steel -- were booming as highways, factories and apartment towers sprouted up across China. Chinese iron-ore demand has more than doubled since 2003, and the country now accounts for roughly half of the world's iron-ore imports, compared with 29% in 2003. Iron-ore prices have more than doubled in the past three years.
Mining companies boosted dividends and repurchased shares to appease investors, much as oil companies have done. But that didn't boost future growth prospects. So as Big Oil did in the 1990s, BHP and its cohorts began buying each other.
In 2005, BHP launched a $7 billion takeover of WMC Resources, an Australian copper, nickel and uranium miner and a mainstay of the Melbourne mining scene. Rio bought big stakes in other companies' undeveloped mines.
By 2007, the old midsize miners had practically disappeared from Melbourne. BHP and Rio, with high-rise offices downtown, were the undisputed heavyweights. Globally, the mining landscape was dominated by a handful of giant players, including BHP, Rio, Vale, Xstrata and Anglo American. BHP's market value is now on par with Chevron Corp. Brazil's Vale has a market capitalization bigger than ConocoPhillips.
BHP and Rio both positioned themselves for bigger deals. When Mr. Goodyear retired from BHP's top job earlier this year, the company chose South Africa-born Marius Kloppers, who held an M.B.A. and a Ph.D. in materials science. Mr. Kloppers had led the internal team that executed BHP's acquisition of WMC Resources.
Facing its own CEO vacancy, Rio tapped American Tom Albanese. At age 17, Mr. Albanese had set out from New Jersey to Alaska, persuading the University of Alaska to create a major for him called "mineral economics." He got a job staking claims in remote parts of the state, living out of a tent. Mr. Albanese joined Rio Tinto in 1993 and helped lead the company's effort to invest in a $3 billion project in Mongolia, Oyu Tolgoi, that analysts believe is one of the world's largest undeveloped copper and gold deposits.
As Rio's CEO, Mr. Albanese bought Alcan out from under rival Alcoa. When it was announced, the $40 billion deal was the mining sector's largest. Many analysts assumed it was driven in part by a desire to prevent other suitors -- including BHP -- from launching an attack on Rio.
In November, BHP said it was going after Rio anyway.
In a presentation laying out the proposal, BHP's Mr. Kloppers said he wanted to create a "super major" of mining. The company would focus on high-reward projects, including capital-intensive jobs smaller companies can't handle. "I would take my cue from some of the very effective work in the oil and gas sector when some of the super majors were put together," Mr. Kloppers said.
After a BHP-Rio merger, just two companies -- BHP-Rio and Brazil's Vale -- would control more than 70% of the world's iron-ore trade. (By contrast, the Organization of Petroleum Exporting Countries controls only about 40% of global oil.) Likewise with uranium: About 70% of the world's supply now comes from 12 mines, including three controlled by BHP and Rio. One of BHP's Australian mines, Olympic Dam, has the largest known uranium reserves in the world. The speed with which megamining companies choose to develop such assets would have a large impact on world prices.
BHP and other large miners say they have no intention of slowing new developments to squeeze customers. BHP argues that a merger with Rio would help boost near-term supply because of the combined company's new efficiencies.
Rio's Mr. Albanese has downplayed the similarities with Big Oil, though he concurs it is getting harder to find good new projects. Rio officials have also argued that BHP's offer significantly undervalues its assets, and investors are waiting to see whether BHP comes back with a bigger one. But some kind of combination is likely, many analysts say. Many shareholders they've talked to approve of a merger in concept, they say.
The proposal has set other talks in motion. A few days after BHP's proposal was announced, Russia's Rusal said it was trying to acquire roughly 25% of OAO Norilsk Nickel, a major Russian nickel producer. People familiar with the situation say the Russian aluminum producer hopes a Norilsk stake would provide additional diversity to compete with a bulked-up BHP.
Rumors have also been swirling that Chinese steelmakers could launch a competing bid for Rio Tinto priced at about $200 billion. Most analysts believe such a deal would be hard to pull off, in part because of likely opposition from foreign governments.
"We're only talking about a couple of years before [China-based companies] are ready" for a deal the size of BHP-Rio, says Mark Pervan, an analyst at ANZ Bank in Melbourne.
"We're in a game of musical chairs," adds Wayne Atwell, a former Morgan Stanley mining analyst who's starting a resources fund, Pontis Global, in Stamford, Conn. "There are fewer and fewer chairs, and if you want to make another acquisition, you'd better make it now or it will be gone."
The outlook for mining could change dramatically in the event that China suffers a severe economic slowdown. In that case, commodity prices could fall significantly, leaving big miners with assets purchased at the top of the market.
But most industry observers expect Chinese demand to remain strong, and say the currents of consolidation are moving too quickly to keep the sector's remaining companies from joining in. When they do, they'll have to invent new ways to grow. One new idea now circulating in the industry: the possibility that Big Mining will start buying Big Oil companies.
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