In India, consumption of Coking Coal is going to increase further as steel production in the country is on a rising mode. To cater to the incremental demand, imports of the coal will rise further in the country due to the domestic supply inadequacy.
The Steel Ministry of the Government of India has crafted out ambitious targets for the steel industry in the country to be attained by FY31. The targets include: raising the crude steel production capacity to 300 MnTPA, increasing the crude steel production to 255 MnTPA, and augmenting the production of finished steel to 230 MnTPA, among others. To sustain the incremental steel production in accordance to the target, the Coking Coal demand will go up to around 161 MnTPA. Apparently, the higher demand for the coal will result in imports of the coal escalating in the country in the future.
The import dependency of the coal for the country’s steel makers puts them at the risk of the supply disruptions as well as price volatility in respect to the coal in foreign markets. Coking Coal is predominantly imported in India from Australia, mainly due to the availability and quality issues. In fact, Australia is the largest exporter of Coking Coal in the world. But, supplies of the coal from Australia are not always uniform. The supplies are frequently hindered by production constraints, resulting in abrupt upswings in the prices.
Taking the year 2017 as a typical example, prices of the Premium HCC had risen to significant levels in Apr’17, when the supply got disrupted as the railway transport infrastructure was badly damaged due to the occurrence of a cyclone; in Aug’17, the temporary suspension of a Coking Coal mine in Australia and that too at a time when the demand was substantially strong had led the supply getting tighter, pushing the coal prices upwards; and from the onset of Nov’17 onwards, the prices have been rising constantly as the supply became tighter on account of the demand becaming stronger due to the aggressive imports by steel makers in India, Japan and China to stock the coal ahead of the winter holidays, which started on 20Dec’17 and will extend upto 8Jan’18, in Australia. At the same time, concerns of any possible supply disruption to occur during the rainy season, to being from the late Dec’17 in Australia, also have added fuel to the fire to the importing spree among the steel makers.
Driven by robust demand, prices of the Premium HCC have reach around USD 262.25/MT FoB Australia in the last week of Dec’17. The prices, incidentally, are the highest during the entire 2017. In the previous week, the prices were lower by around USD 16.25/MT, at around USD 246/MT FoB Australia.
Source: CoalMint Research
Exhibiting a similar trend, the spot prices for the 64 Mid Vol HCC also have gone up to around USD 185.20/MT FoB Australia, up by around USD 6.10/MT over the week-ago offers, at around USD 179.10/MT FoB Australia.
The imports of the coal will go up in the coming days as new steel production capacities are coming up.
Tata Steel will expand its steel production capacity at its existing Kalinganagar plant in Odisha by 5 MnTPA. The company currently has a production capacity of 3 MnT, and post expansion, its capacity will reach 8 MnT.
Nalwa Steel and Power Limited, based at the Raigarh district of Chhattisgarh, is also in the initial stages of increasing the capacity of its existing steel plant from 0.16 MnTPA to 1.0335 MnTPA. The capacity expansion will also include setting up a Blast Furnace of 0.31 MnTPA capacity.
Nevertheless, the Coal Ministry of the Indian government is exploring ways to help in increasing supply of the coal to the steel makers of the country. The Ministry had asked Coal India Limited last year to explore opportunities for acquiring Coking Coal mines in foreign countries, but the idea did not materialize as prospective mines were not found.
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