Fuelled by steel production, coking coal imports may climb to 58 mt by 2023

Imports of coking coal in the country is seen rising to 58 million tonnes (mt) by 2023, appreciating 23 per cent over the 47-mt recorded in 2017-18.

Import of the key steel making ingredient will be fuelled by growth in production of steel. Also, tightness in domestic supplies is likely to be another factor. A report by ratings agency CRISIL forecasts the demand for metallurgical coal in the country to reach 65 mt by 2023, up from 51 mt in FY18, marking a CAGR (compound annual growth rate) of five per cent.

By contrast, the domestic supply of coking coal is expected to be tepid despite a CAGR projection of 9.5 per cent in the comparable period. In FY23, the country’s coking coal output is pegged at only 19 mt. Lacklustre production within the country is bound to drive imports, which will have a dominant share of 85-87 per cent in the total coking coal consumption over the next five years, the report by CRISIL Research states.

Steel makers are fretting over rising input costs, particularly coking coal, import of which is escalating. A higher import bill is a perceived threat to the competitiveness of domestic steel making.

“The demand for coking coal in the country is set to touch 88 mt by 2020. This has sparked concerns as there is no let up in our import dependence. Some steel plants have developed alternative technology with steep initial capital costs to curb import of coking coal. Such plants can be incentivised by way of financial benefits like supply of indigenous non-coking coal at subsidised rates at FSA (fuel supply agreements),” said a senior official with a steel company.

Recently, the Comptroller and Auditor General of India (CAG) flayed the state-run Steel Authority of India Ltd (SAIL) for its excessive dependence on coking coal imports in spite of its captive resources. Of its annual coking coal requirement of about 15 mt, SAIL imports 12-13 mt, the central auditor observed in its report.

Globally, demand for coking coal is expected to be positive over the next five years, led by revival in demand for steel. Global output is set to expand, buoyed by the resumption of coking coal mines earlier were shut by government orders in China, resolution of transport bottlenecks in Australia, and the doing away of restrictive policies in the US.

Presently, slow-moving cargo at coal handling ports in Australia and China is delaying deliveries and resultantly causing prices to soar. However, with the resumption in supplies from major exporters and moderate coking coal demand persisting, CRISIL Research sees prices falling only marginally in the range of $190-200 per tonne in 2018. Coking coal prices are poised to soften further to $175-185 per tonne in 2019.