SAIL, BHP to buy Australian coking coal mine

Steel Authority of India Ltd (SAIL) and BHP Billiton are close to acquiring a coking coal mine in Australia. "Our alliance partner BHP Billiton has indicated two-three coal fields in Australia, and we are in the final phases of negotiations," said V S Jain, chairman, SAIL. He, however, declined to give more details of the coal linkages.

Late last year, SAIL had signed a memorandum of understanding with BHP Billiton to form an alliance for jointly developing coking coal mines.

"Currently, we source a large portion of our coking coal requirements from BHP, and this development will ensure that our coal requirements are met in the long term," Jain said.

SAIL has chalked out plans to increase its production capacity of steel to 20 million tonne by 2011-12 from the present 13 million tonne.

"This would progressively require an assured supply of superior quality coking coal, which is not abundant in our country," said SAIL chairman.

At present, SAIL needs about 20 million tonne coking coal, of which it imports nearly 9.5 million tonne. By 2011-12, the company would require 36 million tonne coking coal.

Indian coking coal, apart from being high in ash content, is considered to be of inferior quality.

"It needs blending with a better grade of imported coking coal to meet the technological requirement for producing steel economically," said a SAIL executive.

Assured supply on a long-term basis becomes even more pertinent as the company is able to achieve an overall price reduction of 18-20 per cent.

"Also, it helps in difficult times like last year, when on account of price volatility in coking coal the prices jumped sharply to $125 a tonne from $60 a tonne, and supply, too, became irregular," said the executive.