Public sector steel companies saved around 25 per cent in FY12 on coking coal import. Despite weaker rupee, steel mills expects to strike a lower price deals as global prices of coking coal grades dipped further in Q1FY13.

Steel industry insiders said that coking coal grade II, largely used here, had cost (f.o.b price) $320 a tonne in April 2011 came down to $230 a tonne in the fourth quarter. “This after adjusting currency loss on account of rupee slide against dollar fetched a benefit of about 25 per cent over the year”, the finance director of a steel PSU told Business Line.

According to sources in the steel ministry as well as the steelmakers, the price negotiations with the overseas miners are expected to take place early next month. Indian steel makers may clinch further price benefit at the negotiations.

The eight-member empowered joint committee (EJC) of the PSU steel firms in March decided that the import volume would be up by around 10 per cent with the coking coal suppliers.

EJC is likely to meet later this month to take stock of the price situation and settle for a price deal for the grade I and II.

A current provisional price of $ 210 a tonne for grade II, accepted by both suppliers and buyers, represents a discount of $ 20 over the price of the grade in the January-April quarter this year.

This will, however, get realigned after the benchmark price deals are struck.

“The difference between the provisional price and the negotiated price could be at the most between $2 and $5, depending on the Australian suppliers' negotiated price with the Japanese mills and the ruling spot prices”, said a top official of a PSU steelmaker.

Lower demand of China has already depressed the coking coal prices globally.

Australian miners last year saw a 40 per cent slide in coking coal prices. Top exporters of Australia, such as BHP Billiton and Anglo Coal, are likely to face stiff competition on pricing as sellers from the United States, commodity analysts said.

Spot prices for premium coking coal (grade I) from Australia were currently hovering at around $220 a tonne, compared to a headline contract price of $235 a tonne in the January-March quarter.

India is the third-largest importer of coking coal and has become the second most important destination for Australian coking coal behind Japan.

China is the world's largest coking coal producer and imports only around 10 percent of annual consumption. Analysts forecast this year's imports at around 50 million tonnes.