The Hindu Business Line : Coking coal flow halts; steel majors in a fix

STATE-OWNED steel producers, Steel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL), are facing an acute shortage of coking coal with two Australian companies backing out from supplying the feedstock.

"At a time when the steel producers are working at full capacity to cater to the ballooning demand, two out of three Australian vendors - MIM Holdings Ltd and Anglo American - have enforced a `force majeure' clause to cut off supplies of coking coal," an industry source told Business Line.

MIM and Anglo American, along with BHP Billiton, are the three primary suppliers to SAIL and RINL, accounting for nearly 70 per cent of their consumption of coking coal. However, labour unrest, coupled with government restrictions owing to environmental concerns, has caused disruption in production and forced them to suspend supplies for at least two months, the source said.

Currently, SAIL is working with coking coal stocks for just 10 days of production.

When contacted, a SAIL spokesperson, while confirming the shortage of the feedstock, noted that the company was confident of locating alternative suppliers and continuing normal level of production. "We normally maintain a buffer of 10 days of coking coal. The situation is tight, but we are confident we will be able to arrange alternative supplies. Our team is working over-time and there is no panic on account of fuel supply," he said. SAIL is scouting for coking coal in the spot market and a company team has been in touch with Polish suppliers of the fuel, the source said.

Coking coal prices have gone up nearly four-fold in the last one year from $ 75-$80 to $ 250 per tonne freight on board.

With rising internal consumption and the mining industry plagued by accidents, China is no longer viewed as a credible supplier, creating a crisis for the industry, he said.

India imports about 15 million tonnes of high grade coking coal, which is primarily used by the State-owned producers.

Private sector steel giant, Tata Steel, which produces 4.5 million tonnes of steel annually, says that it does not import any coking coal and is not facing fuel shortage.

"We only import low ash content coal to blend with coal produced from our captive mines. The import accounts for 30 per cent of the coal used and for that we have long-term suppliers who are quite dependable. We are not facing any shortage of coking coal," said the Tata Steel Managing Director, Mr B. Muthuraman.

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