Firm domestic coking coal price upsets steel sector

The steel sector has asked through various representations the permission to set up their own washeries for cleaning the coal, but claim that it has been denied

The domestic steel sector, which has been facing supply glut globally, isn’t able to seek much relief back home either due to increase in input cost of coking coal. The coking coal prices, which were increased as much as 200 per cent in January this year to be linked with global prices, have not seen any revision since then.

This comes at a time when the global coal prices have softened, promoting the case for imported coal for the steel sector. The current price of Indonesian coal is $49 per tonne, a seven per cent fall in the past six months. Due to low availability and supply of domestic coal, steel companies mostly import coking coal for their use.

In order to benchmark the coking coal prices with the international market, Bharat Coking Coal (BCCL) and Central Coalfields Limited (CCL), the sole suppliers of coking coal in India, revised the prices in January this year. The revision was done across the board with higher washed/quality coal garnering higher royalty. The prices were to be revised on the first day of every quarter as per changes in the international market, said a notification by BCCL on January 13, 2017.

The move was in line to reduce import dependence of the steel sector and promote indigenous coking coal. Unlike thermal coal used by the power sector which is highly dependent on domestic produce, more than 80 per cent of the steel sector’s demand of coking coal is met through imports as the quality is better.

Steel sector has expressed its concerns over the obtuse price regime. “There hasn’t been any revision in prices in the past 11 month. At the same time, higher quality coal is costlier, thereby failing the idea of replacing imported coal,” said a senior executive with a leading steel company.

Coal India (CIL) spokesperson, however, said in an emailed reply that the prices were revised by CCL in April 2017 and by BCCL in November 2017. The reply, however, did not mention the quantum.

“On a per tonne basis, the price of indigenous washed coal is cheaper than that of imported coal. However, it is accepted that the quality is not comparable. However, in the pricing mechanism an inbuilt provision is there for discounting higher ash contents,” said the spokesperson of CIL.

     Still no sign of relief

• The first linking to the international price was at $ 260 per tonne at an exchange rate of  Rs 67.5 to a $
• This translated into Rs 13,187 per tonne at 19% ash content for BCCL coal
• The minimum selling price was Rs 11,500 per tonne
• The ceiling price was Rs 15,500 per tonne 

The first linking to the international price was done at US$ 260 per tonne and at an exchange rate of Rs 67.5 US$. This translated into Rs 13,187 per tonne at 19 per cent ash content for BCCL coal. The minimum selling price was Rs 11,500 per tonne and the ceiling price was Rs 15,500 per tonne.

“Domestic coking coal is inherently inferior in quality and requires its usage in steel sector in blend with imported coking coal of higher grades. Therefore, substitution of imported coking with indigenous coal cannot be avoided. The import of coking coal is expected to stay,” said the spokesperson.

The steel sector has also asked through various representations the permission to set up their own washeries for cleaning the coal, but claim that it has been denied. CIL spokesperson, however, said that there is no restriction on anyone to set up coal washeries at their units.