The Hindu Business Line : Steel makers tie up coking coal supplies till 2005

INDIAN steel manufacturers have entered into a number of forward contracts in the international market for sourcing coking coal in the price range of $105-140 f.o.b. per tonne.

According to industry sources, Steel Authority of India Ltd (SAIL), the largest Indian buyer in the international market, has entered into forward contracts within this price range for supplies running up to 2005.

Sources said that SAIL being the largest buyer sets the benchmark for other Indian buyers in the international market. Once SAIL has entered into a series of forward contracts, other domestic steel makers are also planning to source coking coal in the same price band. As per available information, the average c.i.f price of SAIL's forward contracts work out to be $180 per tonne. Shipments are expected to begin from September this year.

Indian steel producers, it may be recalled, have been facing severe problems regarding the availability of coking coal. Some companies had to reduce production on account of the shortage of coking coal. The annual consumption of coking coal in India is about 25-26 million tonnes. Out of this, around 15-16 million tonnes are imported.

A SAIL spokesman, when contacted, said that price details of the forward contracts could not be revealed because of commercial reasons. He, however, mentioned that the steel major is still scouting for coking coal and may enter into some more forward contracts.

Coking coal prices in the international market had increased from about $80 per tonne (c.i.f) around the beginning of last year to a peak of about $280 per tonne (c.i.f.) in March this year. Now, it has settled at around $180 c.i.f. a tonne.

The increase in coking coal prices was a fall-out of the lower production in Australian mines owing to a number of roof falls. The situation aggravated further following a couple of accidents in the coal handling ports in Australia. As a result, a number of Indian companies had to procure coking coal from unconventional sources in the US, Canada and Russia.

Officials in the steel manufacturing companies said that sourcing from these unconventional sources was only because the market was overheated and the supply position was very tight. However, industry sources said that, as of now, it seems that the crisis is less acute but sudden unforeseen disruptions cannot be ruled out, which may again lead to hardening of prices.