Coking coal contract for FY'10 by April-end: Sajjan Jindal

Domestic steel giant JSW Steel is likely to finalise the long-term contract for supply of coking coal in 2009-10 fiscal with global miners like BHP Billiton and Rio Tinto by April-end, a top company official has said.

"We are in talks with the suppliers and may sign the contract by end of this month," JSW Steel Vice-Chairman and Managing Director Sajjan Jindal said.The company expects to finalise the deal at $ 100 a tonne, which is almost 66% lower than previous fiscal, following a steep correction in prices of coal amid the global industrial downturn.

Japanese steel makers, including Nippon and JFE, are understood to have signed the coking coal pact with global suppliers like Rio Tinto and BHP Billiton at$129 a tonne, which is about 60 % less over the year-ago period.

 

"Even as the Japanese steel mills have clinched coking coal contract at $ 129 a tonne, we are targeting $ 100 level," Jindal said.The annual long-term raw material pact between Japanese steel mills and Australian coking coal suppliers sets the benchmark rate for the global industry.

JSW Steel's coking coal contract for 2008-09 lapsed in March, but it is buying coking coal from the suppliers as per a provisional pricing mechanism."Our contract cycle is April-March... We are already into the new cycle and right now buying coking coal at provisional pricing set by our long term suppliers," Jindal said.

JSW Steel had already negotiated a 43% cheaper rate for coking coal, a vital raw material for steel making, with Rio Tinto for the last quarter of 2008-09 at $ 175 a tonne, against the contracted price of $ 305 a tonne.

Jindal said the long-term coking coal contracts for the next fiscal would ease out the company's input cost pressure, which partially ate into its margins as it reported a net loss of Rs 127.50 crore for the third quarter of 2008-09.He, however, ruled out any cut in steel prices as a fallout of the decline in input costs, saying a sizeable quantity of coking coal contracted at a higher rate last year is still piled up with the firm.

Selling at $ 96 a tonne last year, coking coal prices had touched $ 300 (free on board) a tonne under long-term contracts in the international market.After touching the peak during the first-half of 2008, commodity prices, including that of coking coal, fell by over 60% in the spot market due to the global economic crisis.