Russian coking coal import impasse continues as steel makers raise concerns over ash content

Abhishek Law | | Updated on: May 26, 2022

Price, payment mechanism pose challenges

Import of Russian coking coal into India has hit an impasse with Indian steel makers reportedly rejecting offers over issues such as quality of coal offered, its price and the payment mechanism.

Officials of the two countries had met in April to resolve the issues and but steel makers—some of the major private players and also the PSUs—continue to have concerns.

Trade sources say coking coal imports from Russia stopped around March. Bankers too have been hesitant with the letter of credits.

No sanctions

India incidentally has not imposed any sanctions on Russian imports. Pulversied coal imports – from Russia— continue. JSW Steel—the country’s largest steel maker—has seen the share of pulverised coal imported from Russia increase to around 10 -15 per cent of its total supplies, up from 2 to 3 per cent, a senior official of the company had told BusinessLine.

Imports make up for 85 per cent of India’s coking coal requirements and nearly 4.5 million tonnes (MT) came in from Russia.

India and Russia signed a Memorandum of Understanding in October last year for a strategic partnership in mining and steel, with special focus on coking coal. Russia was India’s sixth largest supplier of coking and thermal coal.

A Union Steel Ministry official said Russian coking coal has an ash content of around 17 per cent or more while Indian mills prefer coking coal with an ash content of 10–11 per cent. Russian coal, despite the higher content, was benchmarked at imported coking coal rates because of which steel mills were hesitant in opting for it.

“We could have used Russian coking coal in order to mix with Indian coking coal or imported ones, but the price difference between imported coal from countries like Indonesia and Australia compared with what we would get from Russia was not much. Its really not cost competitive. So there really is not point in going for imports. We either need a good discount or terms should be favourable via rupee-rouble trade,” a trade source said.

Opening LCs

Then there is also an issue of opening letters of credit (LC), something which Indian banks were hesitant to provide. Some of the steel makers have also sought more clarity on the insurance details for these consignments. “Moving the coking coal from Russia’s western provinces to the east and then from there to Indian ports via far east route is a long route. So obviously we will need more clarity on things like insurance,” the source said.

Published on May 26, 2022
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