Coal news and updates

Good times for the steel industry, led by the imposition of the minimum import price, anti-dumping and safeguard duties, might be getting over soon, as 40 million tonnes (mt) of steel production will be impacted by the coking coal price surge in the third and fourth quarters.

 

Since July, coking coal spot prices have increased from $90 a tonne to $245 a tonne and 40 per cent of India’s current steel production of 90 mt that uses the blast furnace technology, will be affected. That includes all major players, Tata Steel, SAIL, JSW Steel, Bhushan Steel and Essar Steel, to an extent.

 

Indian Steel Association Secretary General Sanak Mishra pointed out around 60-70 per cent of the industry's coking coal requirements were imported.

 

In the next two to three months, this increase will reflect in steel prices. “This is a serious concern for the industry. Coking coal prices have been moving up since July. Over the next two-three months, this increase will have to be passed on and it will have to be significant each month,” JSW Steel Director for Commercial & Marketing, Jayant Acharya, said.

 

But, prices internationally, too, will have to move up. So far, there has been an increase of $15-20 a tonne. 

India’s installed capacity is 116 million but the production during last year was 90 mt. The installed capacity has grown about 19 per cent from 97 mt in FY12 and almost the entire expansion has happened through the blast furnace route. Coking coal accounts for 35-50 per cent of the cost of producing steel with this method.

 

“The cost of steel production for domestic players would increase by around Rs 6,000 per tonne, actual hit would depend on contract vs spot purchase mix,” Jayanta Roy, senior vice-president, ICRA, said. 

 

Steel prices, since the imposition of minimum import price, has increased by Rs 6,000, led largely by a recovery in international prices, but the sharp increase in coking prices is now threatening to wipe out the gains.

 

The reason for the price surge is that China, which relies mainly on domestic supply, has started importing coking coal to curb pollution levels, curtailing its own production. Also, there is supply disruption in Australia.

 

The price surge has led debt-stressed companies like Bhushan Steel to contemplate restarting its direct reduced iron (DRI)-based plant that doesn't use coking coal.

Source:Busienss Standerd