 "Volatile coking coal prices to keep steel firms’ margins down")
The volatility in coking coal prices – which has dragged down the profits of steel majors such as Tata Steel, Steel Authority of India, JSW Steel, and Jindal Steel & Power (JSPL) – is likely to continue in the near term, according to experts.
Revenues of these companies were impacted due to the increase in coking coal prices in the international market. Coking coal is an important raw material used in steel production.
While the Steel Authority of India posted net loss in the fourth consecutive quarter in April-June 2016, JSPL’s net loss in the quarter doubled. However, the companies witnessed an overall drop in the cost of material consumed, compared with the year-ago quarter.
The cost of raw material consumed for SAIL was down to Rs 3,930 crore in the quarter ended June 30, 2016, from Rs 4,815 crore in the corresponding year-ago period.
Coking coal forms a third of the steel industry’s cost structure.
India’s coking coal imports remained flat at 43 million tonnes (mt) in 2014-15 and 2015-16. Steel companies imported 6 mt of coking coal in April and May, according to the coal ministry data.
Coking coal prices continued to soar, adding 54 per cent gain during September. Flood in China’s Shanxi province, change in coal mining policy in China, and supply disruption from Australia might have contributed to the rally, brokerage firm Emkay said.
Global coking coal spot prices have almost doubled in the past year. This is mainly due to declining coal supply from Australia due and reduction in coal production by major coal producers, the brokerage added.
