Sajjan Jindal-led JSW Steel is planning to invest ₹2,000 crore to develop a virgin coking coal mine in Jharkhand. The company has been declared the highest bidder for the coking coal mine put on auction recently and it is waiting for an official communication from the government.

JSW Steel expects the new mine to become operational in 2-3 years. The mine has reserves of about one billion tonne, similar to the company’s Moitra coking coal mine located in the same State.

Seshagiri Rao, Joint Managing Director, JSW Steel told businessline that the company will blend 20-30 per cent of domestic coal with high quality coal to bring down the overall cost.

“We will get about one million tonne of clean coal after both the mines come into operation in 2-3 years and this accounts for 6-7 per cent of our annual requirement,” he added.

On difficulties in developing a virgin mine, he said the company has considerable experience in mining and it currently operates four mines in Odisha, nine in Karnataka, a lignite mine in Rajasthan and one mine each in Dubai and the US.

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The company intends to achieve 25-50 per cent backward integration in coking coal. It also targets to enhance captive sourcing of iron ore to 100 per cent from the current level of 50 per cent. Given the company’s steel production target of 25-30 million tonne (mt) per annum, it requires 55 mt of iron ore. 

JSW Steel is not completely relying on coking coal integration considering sustainability of supply and price issues due to the ESG factor.

However, it is very difficult for steel companies to substitute coal as the alternative fuel (hydrogen) is very expensive and the fuel is not viable with the current technology, he said  

It is not easy even to achieve the current integration in coking coal target because there are no large mines available in India. At the current capacity, the company requires 18 mt of coking coal per annum. To achieve 25 per cent of integration, the company requires about 4.5 mt of captive coking coal supply but that kind of asset is not available in India, he said.

The company is exploring coking coal assets globally, with a focus on getting them at a right price, he added.

The long-term sustainable coking coal price is about $150-170 a tonne. Given the current volatility in commodity prices, a global company Glencore plc has made $34 billion in net profit with more than half of windfall profit came from sale of coal.