Sponge iron manufacturers have increased their appetite for South African Coal instead of domestic grade. In the month of August, total around 0.15 MnT of Coal were purchased by Raipur based Sponge units.
Indian Sponge manufacturers, which contribute over 2% of share in CIL’s total consumption, are facing supply issues owing to reduced Coal linkage for Sponge iron manufacturers and more Coal being diverted to power plants.
In line with domestic supply crunch, Sponge iron manufacturers have preferred to import South African Coal over domestic. Trade sources have mentioned that constantly increasing domestic prices have forced people to more incline towards imported Coal.
Current cost of domestic F grade Coal (28 FC) would be around INR 4,400-4,500/MT and B grade (40-42 FC) would be around INR 5,700/MT, delivered to Raipur (Chhattisgarh) based plants. Whereas, South African Coal with 52 FC is being offered at INR 6,800/MT delivered to plant.
“With rising prices in domestic market, we are bound to go for imported Coal. On an average, imported Coal will cost us INR 130 per Fixed Carbon. Whereas, domestic Coal is costing us INR 145-150 per Fixed Carbon,” said a Sponge iron manufacturer based in Raipur, who recently placed the order.
Trade sources confirmed that Adani Enterprises recently concluded its deals with Raipur based manufacturer for 0.1 MnT of South African (RB-2) Coal at East Coast of India for September delivery.
Indian Sponge iron production stood at about 24 MnT in FY14, out of total, around5 MnT was produced from gas based plants and the rest from Coal based. On an average, 50-60% of total Coal requirement has been linked to long-term supply at a subsidized and rest they have to buy from open market.
As Coal India planning to reduce quantity in e-auction and raise prices by about 10%, Sponge manufacturers believe that domestic prices may move up further.
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