JSPL makes trade settlement for pulverised coal from Russia in yuan

Jindal Steel and Power Ltd (JSPL) is bringing in Russian pulverised coal, and is making payments and settlements in yuan for shipments that came April onwards, through a private bank, sources privy to the matter told BusinessLine.

“The steelmaker placed order with Russian suppliers directly, got LCs (Letters of Credit) from the banks and settlements were made in alternative currencies,” said a trade source. However, JSPL has refused to comment on the developments.

Apart from the company, some of the other steel mills are already exploring yuan payments, while a cement-major has already initiated yuan settlement for bringing in Russian coking coal. Settlements through other alternative currencies to the dollar are also being explored.

Russian coal suppliers started preferring the euro and yuan over dollar, the choice of currency for global trade in raw materials, ever since the imposition of Western sanctions.

Shipments so far

“Though rare, yuan settlements are perfectly legal,” said a trade observer. So far, JSPL has brought in around 350,000 tonnes of pulverised coal from Russia, beginning April. The latest consignment of 72,000–75,000 tonne is expected to reach India next week.

The previous shipment that came in, was also of 72,000–75,000 tonne, those aware of the matter said. From January, around 700,000 tonnes of pulverised coal have been shipped to the steelmaker while the industry average is expected to be in the range of 7 million tonnes.

Prices may drop further

The company is paying around $250 for a tonne of coal (which trade sources say is slightly higher on account on payment of conversion fees and vessel insurance charges). Prices could further come down by $ 20–30 per tonne in the next 10-odd days, said sources, owing to the weakening steel demand and global recessionary pressures.

Vessels have used either the eastern (via Singapore) or western Russian (through the Suez Canal) routes before reaching Indian ports.

Pulverised coal is used in the pulverised coal injection (PCI) system, where the former is injected to the mid-bottom inlet of a blast furnace, then mixed with secondary hot air or blast and then piped to a furnace to create a raceway, which then propagates coal and coke combustion, melts the solid iron ore, releasing molten iron. The PCI allows cheaper coal to be consumed in the system, replace expensive coke and cuts down costs.

COMMENT NOW