Steel firms look forward for “Collective bargaining” of coking coal prices

Major Indian steel makers,
such as SAIL and Tata Steel, may try to emulate their Japanese counterparts and
resort to ‘collective bargaining' with global coking coal producers.

Though such plans are still at an initial
stage, SAIL has already created a consortium of large players, including Tata
Steel, JSW Steel, Jindal Steel and Power Ltd, RINL and NMDC to bid for the
Hajigak iron ore mines in Afghanistan.

“We are discussing with large steel makers on
the need to have a collaborative approach to negotiate coal prices. Like the
Japanese Steel Mills (JSM), we should also collectively bargain,” said Mr C.S
Verma, Chairman, SAIL.

Coking coal prices hit the roof in the early
part of the year following disruption in supplies due to flooding in Australia.
The drastic rise in prices had hit the bottomlines of Indian steel makers, who
rely mainly on imports to meet their requirements. Coking coal prices, which
were ruling at around $320 a tonne for the past couple of quarters, have not
come down despite normalcy being restored in the Australian mines.

But, the cohesive strategy of JSM cannot be
easily replicated by Indian firms because there are a large number of small
players, said Mr Manish Pande, Regional Director, CRU Strategies, a consulting
firm. “It will be of great value if Indian players come together to bargain on
prices,” he said.

CRU expects India to surpass Japan in terms of
coking coal imports as new capacity gets added. India, which produces around 70
million tonnes of steel, imports about 30 million tonnes of coking coal.

“I don't think we can influence the prices of
coking coal collectively like the Chinese or Japanese because we are small,”
said Mr Sushil Maroo, Group CFO, Jindal Steel and Power Ltd. However, Mr Maroo
said the Indian firms could collectively acquire overseas mineral assets in the
near future

 Source: The Business Line