JSW Steel eyes US-based United Coal

Seshagiri Rao, director (finance), JSW Steel, declined to comment if the firm had submitted a bid for the US company, saying: "There are many assets on sale, this is one of the assets available for sale now."

However, with or without United Coal, JSW Steel would achieve 50 per cent raw material security by 2011-12.

Rao said with the Mozambican licence, the company would get two million tonne (mt) of coking coal next year and then step it up to 4.5 mt in three years. Also, the company has been allotted 69 per cent in a Jharkhand coal block.

By 2011-12, group company Siscol would achieve a capacity of 11 mt and have a coking coal security of 50 per cent. At present, JSW imports 100 per cent of its coking coal needs.

If JSW decides to bid for United Coal, it would be in tandem with the strategy being pursued by most steel-makers to secure raw material sources.

Coking coal contracts for the new year have been sealed by most players at $305 a tonne, an increase of more than 200 per cent over the previous year.

Moreover, coking coal accounts for 50 per cent of the cost of steel production.

Also, the quality of coking coal in India is not suitable for steelmaking and, therefore, companies have to depend on imports.

JSW is stepping up iron ore security as well. The company will invest around Rs 550 crore in its Chilean mining concessions, which would ensure a 50 per cent security by June 2009. The company plans to hedge the iron ore.

However, JSW would have to strengthen its raw material linkages in line with its capacity expansion. The company plans to enhance capacity to 31 mt by 2020. In FY08, JSW had a crude steel production of 3.6 mt.