Steel firms' race for coal hots up

Half of the mine bids are from steel majors.

The raw material scramble is not just restricted to iron ore. Coal "� the other key raw material for the steel industry "� is as much in demand.

Of the 665 applications scrutinised by the ministry of coal for allotment of 20 coal blocks for captive mining, more than 50 per cent of the applicants belong to the steel industry.

Among the steel majors to have applied are Tata Steel, Steel Authority of India Ltd (SAIL), Ispat Industries, JSW Steel, Rashtriya Ispat Nigam Ltd and Bhushan Steel.

A glimpse at the first round of scrutinised applications show that that there are six applications from Bhushan for Bahur, Chakla, Jitpur, Rohne, Sitanala and Tubed blocks. Ispat Industries had applied for Rohne and Sitanala, JSW Steel for Rohne, Sitanala, Tenughta-Jhirki. SAIL had applied for Sitanala and Tata Steel for Rohne.

The applications were in response to an advertisement put out by the ministry of coal late last year, inviting bids for allotment of 20 coal blocks and eight lignite blocks for captive mining. Companies engaged in the generation of power, production of iron and steel or cement, were eligible.

Sources said, after the first round of scrutiny the applications had been forwarded to the respective state governments for recommendations. Majority of the blocks were in Jharkhand. West Bengal and Orissa also received bids for blocks.

The steel industry's race for coal blocks is natural since India imports around three million tonne of coke and more than 16 million tonne of coking coal, mostly from China and Australia. In fact, many of the steel companies were eyeing coal blocks in Australia.

Tata Steel has an agreement for five per cent interest in the Carborough Downs Coal Project located in Queensland Australia for low ash coking coal.

Allotment of coal block would ensure insulation from rising coke or coking coal costs. Over the last two months, coking coal prices have increased from $90-$95 per tonne to $120-$122 per tonne while coke has increased from $165 to $220 per tonne.

However, the remaining applicants are a mix from the cement and power industries. Among the non-steel applicants are Essel Mining & Industries, Grasim Industries, Hindalco Industries, Essar Power, Orient Paper & Industries, Reliance Energy, CESC, ACC, Tata Power Company, Ultra Tech Cement Company.

As in the case of iron ore, the exploitation of coal reserves in India was also low. As on January 1, 2006, the geological reserves of coal had been estimated at 253.30 billion tonne while proven reserves were 95.866 billion tonne.