Indian Sponge manufacturers that contribute over 2% share in Coal India’s consumption are facing supply issues over Coal being diverted to power plants, which have low Coal stock owing to rising power demand and delayed monsoon. Sponge manufacturers have claimed that despite having Coal linkages, they have to buy from merchant market at high prices.
CIL plans to cut E-auction Quantity; Sponge Manufacturers expect rise in Imports
A big setback for Sponge iron industry likely to hit, in case Coal India cuts its e-auction quantity by about 20%. At present, around 35-36 MnT of Coal is required in Sponge iron industry, out of which 13.8 MnT (3%) is available at subsidized rate and the rest are purchased from open market or have to import.
Officials’ close to this matter stated to SteelMint, “There are plans to reduce the Coal volume supplied through the e-auction by 25 MnT, which is about 5% of total targeted production in FY15. This step has been taken primarily to cater the needs of power producers, as there is no immediate means to raise the domestic production.”
E-auction prices and import will rise if there will be reduction in e-auction quantity. It is already evident from rising demand for South African coal.
Impact on Sponge Manufacturers
A Sponge iron manufacturer in West Bengal quoted, “We have increased our consumption of imported South African Coal because of better quality. For making 1 MT Sponge, we require 1.9 MT of domestic Coal, whereas 1.1 MT of imported Coal. Blend will make it to 1.45 MT approximately.”
In line, Sponge manufacturers in Central India have also shown their interest for importing Coal from South Africa. They are planning to use imported South African RB-2 (Richard’s Bay) Coal. Currently, Coal available in domestic market is out of reach.
Domestic Coal Prices started to pick up
Sponge iron manufacturers based across India have highlight that Coal prices have started going up on anticipation that e-auction quantity will be lowered to 25 MnT. Currently, F grade Coal is being offered at about INR 4,300-4,400/MT (delivered plant site), which was earlier at INR 3,400-3,500/MT in Chhattisgarh.
Rising Coal Import from Africa
The lower availability of Coal in domestic market increases the Coal import especially from African countries, which is supposed to be suitable for Sponge iron makers.
“We have seen rise in Coal imports from South Africa & Mozambique, which is suitable for Sponge iron making. South African Coal has much controlled moisture and volatile matter as compared to Indonesian Coal. It is also noted that manufacturers based in eastern regions have started showing interest in importing Coal from Africa, which was earlier restricted to South based manufacturers,” said Mr. Agrawal from a trading house based in Singapore.
Current offers for RB-2 would be around USD 80-81/MT CFR India on High Sea Sales (HSS) delivery to be made in end August.
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