Bharat Coking Coal to boost output as steel firms battle volatile prices

With volatile coking coal prices hurting the margins of domestic steel producers, Bharat Coking Coal Ltd (BCCL), a subsidiary of Coal India Ltd (CIL), is looking at ways to enhance its production by adding five washeries at its facility.
 
“BCCL has put up two washeries and will soon place three more, which will help improve the production of coking coal,” a source close to the development told Business Standard.
 
Washed coal is more expensive because it burns longer, thus providing more energy.
 
BCCL operates coking coal mines in Jharia and Raniganj, in Jharkhand and West Bengal, respectively.

 
Under the National Steel Policy 2017, the Ministry of Steel will coordinate with the Ministry of Coal to increase the availability of coking coal through overseas asset acquisition and will ensure that a sufficient number of modern coking coal washeries are established.
 
“BCCL is aware of the issue and is taking steps to lower dependency on imported coking coal. The company is also looking at mining more coal from the Jharkhand region and elevate utilisation. Discussions are on to increase coking coal sourcing,” said the person quoted above.
 
Coking coal and iron ore are the two key raw materials used in making steel. The two input materials account for 45-50 per cent of the cost of production of steel for domestic players.
 
Currently, state-owned Steel Authority of India Ltd (SAIL) and Tata Steel are the only two domestic primary steel producers that have access to a domestic supply of coking coal, which meets some of their demand. More than 70 per cent of the steel industry’s coking coal requirement is met through import from Australia. “Of our annual requirement of 16-17 million tonnes of coking coal, 10-12 per cent is met via captive sources,” said Anil Kumar Chaudhary, chairman and managing director, SAIL.

Tata Steel, on the other hand, has captive mines and sources some coal through auctions, and imports the rest.
“We forecast India’s coking coal consumption to grow at an annual average rate of 5.4 per cent from 2019 to 2028, driven by an equally robust expansion in steel production in the country,” said Fitch Solutions in its report on coking coal.
 
Sajjan Jindal-led JSW Steel, Rashtriya Ispat Nigam and Naveen Jindal-led Jindal Steel & Power are dependent on imported coal. “On the back of increased prices of raw materials, particularly those of coking coal and iron ore, international prices of steel products firmed during February and March this year. Domestic steel producers, therefore, had to raise prices in February and March,” Chaudhary said.


 


The domestic steel price hike, however, is not significant compared to the drop in prices by Rs 6,000 a tonne during November-January, he added.
 
Prompted by strong demand growth in the domestic market, steel producers hiked prices by Rs 1,000 a tonne on March 1. This was the third rise in prices since February 1. They had raised product prices by Rs 750 a tonne on February 1 and followed it up with another Rs 1,000 hike in the third week of February. 
 
Currently, Australian coking coal prices are $200-210 per tonne, up from $170 per tonne in August 2017 but down from $285 per tonne in January 2017.
 
"We are increasing our coking coal price forecast for 2019 from $180 per tonne to $195 per tonne as a tight seaborne market keeps near term prices high and additional Chinese government support to domestic industries on the back of a slowing economy and trade concerns supports demand from the steel sector over the rest of the year," said Fitch.