Coking Coal Import Duty Waiver Likely in FY19 Budget, Coking Coal Offers Gallop Northwards

The Coking Coal consumers—the steel makers—in India now have a reason to at least be optimistic.

The Steel Ministry of the Indian government is learnt to have proposed the Finance Ministry to waive off the import duty on Coking Coal imports in the country in the next union budget(for FY19). Imports of the coal attract an import duty of 2.5%. The waiver of the duty was proposed in view of the import dependency of the country’s steel producers due to the domestic supply inadequacy. In India, 80% of the coal requirement has to be catered through imports.

The duty waiver, if implemented in the budget, will not only bring in much relief to the steel producers in the country but also will invigorate domestic manufacturing, a scheme the Modi government is emphasizing under the ‘Make-in-India’ initiative.

The international Coking Coal market is moving along the expected lines, with rising prices and robust demand ruling the market. At the same time, congestion at the Dalrymple Bay Coal Terminal (DBCT) of Australia also is weighting along the coal price rise.

With the winter holidays in Australia beginning from today, steel makers, especially in Japan and India, were in importing spree to stock the coal to cater to the production need during the holiday period, to extend to 8Jan’18. During the holidays, there will be no mining activity, and hence no supply of the coal. At the same time, the maintenance activity at the DBCT had led to congestion, leading to cargo vessel delays. These factors continuously imparted upward thrust to the coal prices.

Offers for the Premium HCC have gone up to around USD 246/MT FoB Australia, a rise of around USD 9.5/MT over the week-ago offers. Simultaneously, offers for the 64 Mid Vol HCC have moved up to around 179.10/MT FoB Australia, a marginal increment of around USD 1.3/MT against the offers in the preceding week.

Source: CoalMint Research

For Indian buyers, these offers translate into: USD 259.45/MT and USD 192.55/MT respectively on CFR India basis.

Demand for Coking Coal will increase in India on the back of the ambitious steel production target. The Steel Ministry has targeted producing 150 MnT of steel by 2020.

Imports of the coal have substantially taken place in India due to the strong demand. According to the data compiled by CoalMint Research, around 3.1 MnT of the coal was imported in the country during the 1-18Dec’17 period.