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Coking coal is a sarce resource to source for, says Mahesh Mehta, Abterra's executive director. Photo by Sim Kih

INDIAN DEMAND for steel will shoot up in the next 6 months, predicted Mr Mahesh Mehta, an executive director of Abterra, the coal and iron ore trader that is venturing upstream into mining.

And a high global turnover of steel is good news for Abterra, as its topline comes mainly from the trading of metallurgical coke, coal as well as iron ore, which are the key raw materials in steel production.

As the world’s fifth largest steel producing and consuming nation, India has a huge infrastructure growth potential that will boost global steel demand, Mr Mehta explained.

He was speaking to over 80 investors at the Asia Investment Conference and Exhibition organized by SIAS at the Suntec International Convention Center on Sunday.

The rising global trade in iron ore is a sharp contrast to the standstill it was at during the first quarter of this year.

Despite this, Abterra was able to grow 1Q09 revenues by 49% yoy to reach S$65.9 million, thanks to a near doubling in its trading turnover for coking coal and coke to S$64.9 million (up 194%).

Mr Mehta assured investors that demand had picked up again.  Things are also looking rosy in China, which is also the world’s largest steel producing nation.

Its iron ore output in June had leapt 27% month-on-month to reach 93 million tons, while its crude steel output rose 6% yoy to reach 49 million tons.

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All met coke produced in China is consumed domestically, said Mr Mehta. Photo by Rachel Ho.

In the same month, its coal output had jumped15.9% yoy to reach 279 million tons.

The statistics are historical records, according to China’s National Bureau of Statistics.

Analysts are also upbeat.  Hong Kong-based OSK analyst Helen Lau believes the utilization rate of China's steel sector has returned to 2007 levels, according to a Reuters report published last Friday.

Abterra currently owns 15% of Zuoquan Yongxing (its first coalmine investment), which is booked as an “available for sale investment”, and this will only boost group earnings when it pays dividends.

Its acquisition of 49% in Taixing Jiaozhong was completed on 29 May. 

As the second coalmine investment will be counted as a subsidiary, the management is excited about the unit’s impending boost to group revenue, especially when approval is obtained to raise annual production capacity by 6-fold to 900,000 metric tons.

The company plans to acquire more coal and iron ore resources.

Singapore-based analysts are currently visiting Abterra's coal mines and facilities in China. NextInsight's China correspondent, Andrew van Buren, is also on the trip. Watch this space for pictures of the trip.

Recent story:  ABTERRA: Trader-turned-miner’s new coal reserve revalued 6-fold

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