SAIL to pay high for coking coal

Kolkata: Steel Authority of India Lt may have to cough up higher prices for its domestic coking coal procurement. Bharat Coking Coal Ltd (BCCL), which caters to approximately 12 per cent of SAIL’s total requirement, is now pushing the steel major for 40 per cent increase in prices from Rs 4,500 to Rs 6,300 a tonne for beneficiated or washed coal in 2008-09.

BCCL is the lead company from Coal India Ltd family to negotiate the coking coal prices. The company has standing offers from other PSUs like Vizag Steel (Rashtriya Ispat Nigam Ltd) and Durgapur Projects Ltd (DPL) for supplying up to seven lakh tonnes of washed coking coal at Rs 6,300 a tonne. Supplies are also initiated to both the companies at smaller quantities than requisitioned by them at the offered price.

Though on paper three other CIL subsidiaries like Central Coalfields, Eastern Coalfields and Western Coalfields also produce coking coal, the quality of their produce is far inferior and is largely not used for steel making.

According to BCCL chairman, Mr Ashoke Kumar Paul, SAIL had previously offered a mere Rs 100 extra per tonne for supplies in 2008-09, which was not accepted by the company. “We are practically the only coking coal producer in the country. Considering that last year we had to reduce our prices to align with international trends, we are expecting a higher price this year,” he said.

Coking coal spot prices are currently ruling at $210 per tonne (FOB) or (approximately Rs 8,400 a tonne) in Australia.

SAIL consumes approximately 13.5 million tonnes (mt) of coking coal for producing 13 mt of saleable steel. Of the total requirement, 1.6-1.7 mt is supplied by BCCL. This apart, negligible quantities of steel grade coking coal are procured from other domestic sources including SAIL’s own mines.

Overall, 75-80 per cent of the total requirement is met through imports. Since the company’s plants are not port based, import is a comparatively costlier proposition for SAIL. In 2006-07, the company procured coking coal at an average cost of Rs 6,259 per tonne, which was considerably higher than the price paid to BCCL.

According to a SAIL official, coking coal constituted roughly 60 per cent of its total cost of raw materials other than iron ore in 2006-07.

On the other hand, the ailing BCCL incurs huge losses for supplying coking coal. According to Mr Paul, the average cost of producing coking coal is approximately Rs 6,500-6,600 a tonne.