Steel companies, which import the fuel, will have to shell out Rs 12,000 per tonne. | |
| Coking coal, which accounts for 50 per cent of the raw material cost for steel, will soon cost 200 per cent, or Rs 8,000 a tonne, more. The price of the contract previously stood at $98 a tonne, or about Rs 4,000 a tonne. |
| |
| According to industry sources, Posco, the world's fourth largest steel maker, recently settled contracts at prices 205-210 per cent higher than the previous ones. |
| |
| Posco's contract with Australian miners, effective April 1, holds ominous prospects for Indian steel producers which import coking coal primarily from Australia. With this, the effective price of coal will be about Rs 12,000 a tonne. |
| |
| Proven reserves of coking coal in India are around 4.6 billion tonnes while around 7.5 million tonnes are produced each year. A majority of the demand is met via imports. |
| |
| C G Patel, director (commercial), Rashtriya Ispat Nigam (RINL), said,"The last contract price was $94-$98 a tonne, which implies that the increase in prices is to the tune of Rs 8,000 a tonne for domestic producers. |
| |
| "Add to it an increase in ocean freight rates of $25-$35 a tonne and the increase in cost would be close to Rs 9,000 a tonne," he said. RINL has no captive mines and imports its entire coking coal requirements from Australia. |
| |
| Industry sources pointed out that the increase in costs being calculated for steel makers had not factored in iron ore contracts. |
| |
| "The cost push on account of coking coal is over and above the Rs 6,000 a tonne cost, which has not been recovered by the industry," said sources. |
| |
| Iron ore accounts for 35-40 per cent of the cost of production. Among the public sector steel producers, Steel Authority of India (SAIL) meets 35 per cent of coking coal and 100 per cent of its iron ore requirements internally. RINL, on the other hand, has no captive mines. |
| |
| Among private producers, Tata Steel has 20 per cent iron ore security and 15 per cent for coal, JSW Steel has 30 per cent iron ore security and imports 100 per cent of its coking coal needs. |
| |
| Essar Steel's only captive raw material source - a mine with reserves of 1.4 billion tonnes - came with the acquisition of Minnesota Steel. The mine, however, is yet to be commercially developed. |
| |
| Ispat Industries is another company which lacks mines. "If costs continue to increase and the industry is not allowed to hike prices to the necessary level, companies will have to consider a production cut," an industry source said. |
| |
| However, Patel pointed out that the last price cut was "as on date" and there was no surety that the industry would cut prices in the future or hold the priceline. |
| |
