Coal news and updates

Coking coal prices dip; Good news for steel cos

A record 20% dip in global coking coal prices to a six-year low bodes well for steel companies in India which rely heavily on imports. The price impact will lower companies' coal import bill and reduce working capital needs. However, its impact on earnings is likely to be muted at a time when demand from auto and infrastructure remains sluggish.
Spot prices of coking coal have come down almost 20% to $107 per tonne, while long term contract prices are hovering at $125 per tonne in April-June'14 quarter compared to $140 per tonne in January-March'14 period.

India's steel producers import nearly 40 million tonne of coking coal , out of which top steel producers like SAIL, Tata Steel and JSW Steel account for a significant share. Steel majors have been negotiating contracts with foreign suppliers for the April quarter, at prices that are nearly 10-11% lower.

A slower-than-expected offtake by China, the largest steel producer in the world, leading to a supply glut in Australia, the world's biggest supplier of coal. "Along with rupee appreciation, a dip in coking coal prices, a key steelmaking input will rein in production costs," director-marketing of JSW Steel Jayant Acharya said.

Analysts tracking the sector felt this could translate into gains for steel companies particularly at a time, when demand has remained sluggish on the back of a slowdown in the economy.

Analysts tracking the sector said the impact of a lower coking coal prices will mainly translate into reduction in working capital needs. "Lower prices will mean a lower imports bill and hence lower working capital requirements. As such, the price impact may not be felt in terms of improved margins for steel companies.

Source: The Economic Times