Indian steel companies seek coal blocks after cancelled auctions

KOLKATA (miningweekly.com) – Close on the heels of the Indian government cancelling the auction of nine coal blocks, owing to a poor response, government-owned and -operated steel majors have pitched for preferential allocation of coal reserves to ensure raw material supply.

Taking up cudgels on behalf of Steel Authority of India Limited (SAIL), Rashtriya Ispat Nigam Limited (RINL) and NMDC Limited, the Steel Ministry has asked the Coal Ministry to allow preferential coal block allocation for government-owned steel companies outside the auction route.

The Steel Ministry contended in a communication to the Coal Ministry that the poor response from steel and aluminium producers in the recent coal block auction was owing to the highly leveraged balance sheet of most private sector steel companies.

The Steel Ministry said in the inter-government communication that the Coal Ministry would do well to bolster raw material security of financially stronger government steel companies by preferential allocation of coal reserves, as this would also improve market competitiveness of steel producers in the face of the current downturn in prices and high import competition.

In fact, the Steel Ministry pinpointed Utkal A and/or Utkal B, in the eastern Indian province of Odisha, with 300-million-tonnes of thermal coal reserves each, for SAIL and two blocks for NMDC Limited and one for RINL.

It is not clear whether the Ministry had sought preferential allocation of coal blocks from those which had been identified for the now-cancelled auctions.

Forecasting the thermal and coking coal requirements of the steel companies, the Ministry said that SAIL would require 436-million tonnes of thermal coal and 732-million tonnes of coking coal over the next 30 years, while NMDC would require 125-million tonnes of thermal coal and 319-million tonnes of coking coal, and RINL 153-million tonnes thermal coal and 105-million tonnes of coking coal over the same period.

While SAIL had some captive thermal coal mines, it was highly dependent on imports for coking coal, while neither NMDC or RINL had any captive coal linkages.

NMDC, the country’s largest iron-ore miner, was constructing a three-million-ton-a-year steel mill in the central Indian province of Chhattisgarh. The mill was slated to be operational by mid-2017, but would be dependent on merchant purchase of coal.

As for SAIL, the company would complete its expansion of capacity from 12-million to 21.40-million tonnes a year this financial and RINL from 3-million to 6.3-million tonnes a year.