You are here: Home » Economy & Policy » News
Business Standard

Hike in coal prices likely to impact secondary steel makers, says Icra

The company has hiked prices of non-coking coal which will raise average coal price by about 8.5 per cent

Press Trust of India  |  New Delhi 

coal, jcb

The hike in prices of coal by state-run is likely to make producing for secondary players costly by up to Rs 500, says a report.

The increase followed an additional levy on evacuation facility charges (EFC), of Rs 50 per tonne, from December 20, credit rating agency said today.

"The recent hike in coal price and railway freight rate hikes, following the earlier levy of EFC, is expected to increase the cost of production by for a using sponge iron and induction/ electric arc furnaces for steel-making, and dependant on domestic coal," the report said.

On January 9, Coal Ltd (CIL) hiked thermal coal prices for both power and non-power consumers with immediate effect, a decision which said would jack up by up to Rs 0.50 per unit.

The company has hiked prices of non-coking coal which will raise average coal price by about 8.5 per cent, had told

The quantum of impact would however depend on the grade of coal used in the sponge iron kiln and captive power plant. This is due to the fact that the level of coal price increase implemented by for the non-regulated sector is uneven across various grades.

Senior - Corporate Ratings at Icra, Jayanta Roy said: "The cumulative effect of this recent increase in raw material and freight costs would negatively impact the operating margins for by 45-145 basis points at current price levels, unless such mills are able to pass-on this cost increase to consumers."

It also said that for the higher calorific value G7G9 grades, which are typically used in the sponge iron kiln, the price increase including duties and taxes ranges from Rs 58 per tonne for the G9 grade, to Rs 468 for the grade.

For the lower calorific value G10G12 grades, which are typically used in captive power generation, the price increase ranges from for the G10 grade, to for the G11 grade.

further said the are also expected to experience an increase in inward freight costs on account of the rate revision by the Indian Railways for movement of coal and coke, the effective rate of increase has been around 4 per cent over the prevailing rates across various distance slabs.

"...unless secondary players are able to pass-on this cost increase through steel price hikes, operating margins for such mills are expected to decline between 45-145 basis points at current price levels," it added.

First Published: Mon, January 15 2018. 18:10 IST
RECOMMENDED FOR YOU