Co plans to ship commodity in large vessels to cut costs

Rio Tinto Ltd, the Anglo-Australian mining firm, is eyeing a share of the rapidly growing Indian thermal coal market.

“India's coal imports are projected to touch about 200 million tonnes over next few years. We want to be part of that supply,” said Dr Nik Senapati, Managing Director, Rio Tinto India.

Rio Tinto has been selling other mineral resources such as coking coal, alumina, borates and rough diamonds to Indian companies.

“Last year, we sold some small quantity of thermal coal to India through a trader. Now we want to get into Indian thermal coal market directly,” Dr Senapati told a group of visiting Indian journalists.

The company is in talks with the Indian buyers in sectors such as cement and power to supply the thermal coal. However, Mr Senapati did not comment on how much the company expects to sell in India.

Cost Strategy

Rio Tinto produces high grade thermal coal from its deposits in Eastern Australia. In a bid to make it competitive with those from Indonesia, Rio Tinto proposes to ship the commodity in large (cape size) vessels to India to reduce costs, Dr Senapati said. India currently imports a bulk of its thermal coal from Indonesia, while it relies heavily on Australian coking coal to produce steel.

Last year, Rio Tinto supplied three million tonnes of coking coal to Indian steel companies such as JSW Steel and Tata Steel.

Rio Tinto has seen its business from India grow to more than a billion dollars in the past five years. The domestic thermal coal output in India, constrained by environmental regulations, is insufficient to meet the rising demand.

India's coal import stood at 70 million tonnes in 2010-11. In the current fiscal, the shortfall in coal demand-supply has been pegged at 142 million tonnes, which will be met through imports.

(This article was published on September 10, 2011)
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