Coal news and updates

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GFG Alliance is bidding for coking coal assets to feed the Australian steel plant it has acquired amid a flurry of dealmaking by the UK-based engineering-to-energy conglomerate.

 

Sanjeev Gupta, the Liberty House metals tycoon whose family owns GFG, confirmed the group has lodged a bid for Glencore’s Tahmoor mine in Australia and is exploring other coking coal opportunities Down Under.

 

This follows GFG’s purchase of Arrium, a beleaguered Australian steel and mining outfit, in which Mr Gupta plans to invest US$1bn over two years to upgrade equipment and transform the company into a major steel exporter.

 

“Part of the motivation in pursuing various coal assets in Australia is to integrate them with Arrium and other steel plants around the world which we are investing in,” Mr Gupta said in an interview. 

 

“[Arrium’s Whyalla] steel plant needs coking coal and that is one of the things it is really exposed to, as coking coal prices are very volatile,” he added. 

 

Several coking coal mines are currently on the market in Australia, including Peabody’s Metropolitan mine in New South Wales and two Rio Tinto mines in Queensland.

 

The India-born businessman is building a global industrial empire spanning metals, engineering, renewable energy and finance. Over recent weeks Mr Gupta has bought two Tata pipe mills in north-east England, and Arrium, which slipped into administration last year following a decline in steel prices. 

 

Mr Gupta said GFG would initially invest US$1bn in new plant and equipment at Arrium’s Whyalla steelworks — a lossmaking business that has one of only two blast furnaces in Australia — to boost efficiency.

 

He said the Australian government was providing loan guarantees for part of the investment, which is the first phase of longer-term strategy that include plans for a renewable energy and pump storage facility. 

 

“We need to reduce our costs of production and how we do that is by having competitive technology and world-class plant,” he said.

 

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Whyalla, which produces about 1m tonnes of steel a year, was not viable at its current size, said Mr Gupta. The initial GFG investment would boost annual production to 1.5m tonnes per year while a second phase would target 5m tonnes, enabling the business to export to the UK and India. 

 

“India is going to be the next big driver of steel demand globally and we have a strong presence in the country,” he said.

 

Mr Gupta said it was “nuts” that Australia did not add value to the raw materials, such as iron ore and coking coal — the main ingredients for steelmaking — that it digs out of the ground and exports.

 

“We believe Australia can be a low-cost steel producer because you have the raw materials,” he said. “The concept that this is a high-cost environment is nonsense. Labour is not a big component of steel making — the real costs are raw material and infrastructure and we have both at Arrium.”

 

Arrium will be plugged into GFG’s steel businesses in the UK, under the Liberty House banner, and in India, said Mr Gupta. High-quality steel slabs produced at Arrium could be exported to Liberty House’s Scottish steel mill for rolling and then be finished at its pipe facility in Hartlepool, he added.

 

Source: Financial Times