Coal news and updates

Steel majors may clinch coking coal deals at 6-yr low prices: Report

March 26: Three steel majors, Tata Steel, Steel Authority of India Limited and JSW Steel Limited, are reportedly in separate talks with suppliers to sign coking coal contracts at prices that are said to be the lowest in six years, a media report said.

According to Bloomberg, India's top three steel-makers are negotiating for deliveries at $125 a metric ton for the month and quarter starting April, said three officials, who asked not to be identified pending the settlement of the contracts.

The price at which these companies are looking to settle the contracts is 13% lower than the $143 for the three months ending March 31 and the lowest since 2008, when annual contracts were the norm.

Increasing supplies from Australia and North America and a decline in output from pig-iron mills in China, Japan and South Korea have pulled down spot prices of coking coal and are set to impair benchmark contracts rates.

Paying less for coal, a key raw material, would help the Indian steel-makers reduce their input costs and boost earnings at a time when demand from auto-makers to builders has been slumping.

The three companies consume almost half of India's 40 million tons of metallurgical coal imports. Tata Steel's India business and SAIL are set to report their smallest profit margins in more than a decade for the year ending March 31, while JSW's earnings have lagged estimates for five consecutive quarters, the Bloomberg report said.

Tata Steel buys about half of its coking coal requirements from external suppliers while SAIL imports more than 70%. JSW buys almost all of its needs.

"We're both a seller and buyer of coking coal and are looking at a range of $125-$135 a ton for the quarter," said K. Rajagopal, Group Chief Financial Officer at Jindal Steel & Power Ltd.

The company bought a controlling stake in Corrimal, New South Wales-based Wollongong Coal Ltd, which operates two coking coal mines in Australia and produces about 1.5 million tons a year.

Spot coking coal prices in China have declined 20% to $107 a ton since December 31, according to data from the Freight Investor Services index. A supply glut is estimated by Morgan Stanley to be about the equivalent of 3% of the annual seaborne trade. A reduction of at least 15 million tons is needed to restore tightness, Sanford C. Bernstein & Co said in a report last month.