Companies

Steel firms may unite to bargain coking coal prices

Vishwanath Kulkarni New Delhi | Updated on August 19, 2011

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Large Indian steel makers, such as SAIL and Tata Steel, may try to emulate their Japanese counterparts and resort to ‘collective bargaining' with global coking coal producers. This is even as the price of coking coal, a key raw material, continues to rule high.

Though such plans are still at an initial stage, SAIL has already created a consortium of large players, including Tata Steel, JSW Steel, Jindal Steel and Power Ltd, RINL and NMDC to bid for the Hajigak iron ore mines in Afghanistan.

“We are discussing with large steel makers on the need to have a collaborative approach to negotiate coal prices. Like the Japanese Steel Mills (JSM), we should also collectively bargain,” said Mr C.S Verma, Chairman, SAIL.

Mr Verma said that the players were waiting to see how the consortium approach works out in the case of Afghan mines so that it could extend it to other areas.

Coking coal prices hit the roof in the early part of the year following disruption in supplies due to flooding in Australia. The drastic rise in prices had hit the bottomlines of Indian steel makers, who rely mainly on imports to meet their requirements. Coking coal prices, which were ruling at around $320 a tonne for the past couple of quarters, have not come down despite normalcy being restored in the Australian mines.

But, the cohesive strategy of JSM cannot be easily replicated by Indian firms because there are a large number of small players, said Mr Manish Pande, Regional Director, CRU Strategies, a consulting firm. “It will be of great value if Indian players come together to bargain on prices,” he said.

CRU expects India to surpass Japan in terms of coking coal imports as new capacity gets added. India, which produces around 70 million tonnes of steel, imports about 30 million tonnes of coking coal.

“I don't think we can influence the prices of coking coal collectively like the Chinese or Japanese because we are small,” said Mr Sushil Maroo, Group CFO, Jindal Steel and Power Ltd. However, Mr Maroo said the Indian firms could collectively acquire overseas mineral assets in the near future.

Published on August 19, 2011

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