Indian steel producers consider plan to import coking coal

21 November 2016

Tentative moves are afoot to get Indian steel producers to combine their buying of imported coking coal to secure better bargaining muscle and to beat the trend of rising international prices of coking coal.

With international coking coal prices surging around 300% over the past year and Indian steel companies’ increased dependency on imports, a consortium approach is widely debated among local stakeholders.

Although it is early days for such a plan to be put into effect, leading domestic metallurgical grade coke producers, which have mooted the combined purchase proposal, have said that India is “ideally placed to come together and dictate a price fixation mechanism for imports from sources like Australia”.

At a meeting last week between local coking coal producers and private sector steel companies to deliberate on the rising demand of coking coal, the shortage from domestic mines and rising import prices, the idea was mooted that steel producers team up, make projections of their combined requirement and enter into import transactions as a consortium.

Local coal and steel producers believe that a combined approach will allow steel producers to enter into long-term supply contracts with major coking coal suppliers in Australia and South Africa, as is common practice among Japanese steel producers.

The shift from index-based pricing to long-term contracts will empower Indian coking coal importers to better influence, if not dictate, import prices.

Attempts to find a way of beating rising international coking coal prices stem from two sticking points. Firstly, a few months, ago the Coal Ministry, in response to a petition from domestic steel industry, pointed out that the country would not be able to ramp up coking coal production in the short term and as such, production would only reach 71-million tons a year by 2020.

Secondly, to maintain current levels of steel production growth, the Indian steel sector would have to import at least 54-million tons of coking coal during 2016/17, up from 45-million ton estimated during the current financial year.

The import dependency is only expected to reach 180-million tons a year if the Steel Ministry’s target of domestic steel production of 300-million tons a year is to be achieved by 2025.

Source – Hellenic Shipping