Jindal Steel to operationalise  four new coal mines in next 8-12 months

Naveen Jindal-promoted Jindal Steel and Power Ltd (JSPL) plans to operationalise four of its just acquired thermal coal mines over the next eight to twelve months.

Supplies from the new mines – one in Chattisgarh and three in Odisha with a combined capacity of 15.1 million tonnes per annum – are expected to save on an average of ₹4,000-5,000 per tonne on thermal coal procurement, as the current e-auction and import price per tonne has been as high as ₹7,000 to ₹9,000, company officials said.

Substantial thermal coal needs to be imported to run DRI plants which will no longer be the case.

JSPL won the coal blocks at Utkal C, Utkal B1 and Utkal B2 in Odisha; and the Gare Palma IV/6 mine in Chattisgarh.

The company’s current thermal coal requirement is 10.8 mtpa on 9.6 mtpa of crude steel production.

Post capacity expansion ( apprx ₹20,000 crore capex program), the company would require 18.7 mtpa thermal coal on 15.9 mtpa crude steel production.

“The new blocks are expected to positively impact both export turnover – which are likely to rise to 40 per cent of ourtotal production, if we go by the April – July order book; and our bottom-line. The Angul plant will become a major foreign exchange earner for the country,” a senior official told BusinessLine.

In the near term, JSPL has secured a few contracts in Europe, filling the gap caused by the Ukraine War. It hopes the capacity expansions will result in higher export volumes in the longer term, adding to higher profitability.

Equirus Capital, in a report, said JSPL was likely to incur a capex of ₹1,500 crore to ₹2,000 crore for the development of these new mines.

“And the estimated cost savings of ₹1,480 crore in FY24E and incremental savings of ₹590 crore in FY26E on current mining capacity. The company could see incremental cost savings of Rs 510 crore if it is able to expand mining capacity to 19-20mtpa from 15.1mtpa currently,” the analyst firm added.

Hot strip mill to be operational soon

JSPL will also be operationalising  its hot strip mill at Angul by March 2023. To be used for manufacturing hot rolled coils (HRCs), the mill will have a capacity of 5 million tonne per annum and is part of the multi-crore expansion plan that the company has taken up.

HRCs are one of the most in-demand export items.

“The pellet plant is expected by Aug – Sept of this year and the hot strip mill by March next year. There are no delays and both projects are on track,” the company official said.

Interestingly, JSPL sources a significant portion of coking coal – one of the key raw materials in steelmaking - from its mines.

“In the current scenario of elevated coking coal prices, JSPL has been able to start shipments from its Wollongong mines that can result in savings of up to $200m in FY23E (assuming the coal prices remain at current market price),” said analysts at Motilal Oswal Financial Services in a March report.

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