Steel Authority of India Ltd (SAIL) is eyeing long-term coking coal contracts across Australia and Russia, while it plans to ramp up production and supply from its own mines in Mozambique, Africa.
SAIL is also in discussions with other coking coal sourcing nations such as the US and Canada for upping supplies.
Long-term contracts generally protect the company from raw material price volatility - primarily upswings – by fixing up the price for the period. It also provides volume protection.
The PSU steel-major will also look to make operational one of its own coking coal mines at Tasra in Jharkhand, with a capacity of 1.6–1.7 million tonnes (mt), over the few years, the company’s Director Finance, Anil Tulsiani said.
According to him, all clearances for Tasra mines have been obtained and the company would look at finalising tenders for appointing mine development operators soon.
Coking coal is a key steel-making raw material and India, despite being the second largest producer of crude steel globally, is also the largest importer of the mineral.
At the moment, SAIL sources nearly 84–85 per cent of its coking coal requirements from Mozambique, Australia and the USAwhile the annual production capacity of the Mozambique mines – which it owns through the International Coal Ventures Ltd (ICVL) – is around 1 mtpa.
Indigenous coal usage is around 15 per cent, sourced mostly from Bharat Coking Coal Ltd and its own mines.
“Some additional capacities beyond this 1 mt we will be sourcing from our own resources in Mozambique. (And the) balance, we will be requiring some more additional coal from Australia, US, and Canada where we will be going in for long term agreements for that. We are also trying to get our coal from Russia now. We have started that (sourcing) also,” he told analysts recently.
SAIL has been importing coking coal at around ₹25,500 per tonne for both the third and fourth quarters (October–March); and the cost is expected to be “bit higher” for the next few months, at around ₹28,000 per tonne.
According to Tulsiani, benefits of lower priced coking coal – following softening in raw material prices - are expected in the “last week of June or early July onwards”.
“The time taken to reach our ports is around about 40-45 days and when it is from Australia it is round about 20-25 days. So, 40-45 days plus the movement inside within India and at the ports. So, the average is around 75-80 days,” he explained.
The steel major saw a substantial jump in expenses, including working capital requirements in FY23 because of provisioning for foreign currency losses caused by an increase in the dollar rate and due to rise in imports of coking coal. “Trade payables are fluctuating a lot depending on the coal prices and we have got these deferred payment terms,” he said.
Mozambique ramp up
Sources in the Steel Ministry said ramp up of operations in Mozambique has been on the cards. SAIL, through ICVL, owns three mines – Benga, Zambeze and Tete East. Of these, only Benga is operational. Saleable coal production in FY22 was 1.74 mt.
However, coking coal produced at Benga is not available as an open market product because of high ash and sulphur. Therefore, back-to-back arrangement with promoter companies for offtake is a pre-requisite before any expansion activity is taken up there.
“Detailed project reports are being prepared for expansion or doubling of operations at Benga, and also for starting operations at Tete East and Zambeze or understanding the viability or technical feasibility of these mines,” a Ministry official said.