NEW DELHI: Steel Authority of India Ltd (SAIL) along with its other partners in International Coal Ventures Ltd (ICVL) is eyeing an investment of $150–200 million as a capacity ramp-up is planned across coal mines in Mozambique, Africa. The move is also aimed at de-risking coking coal supplies from global price and supply volatilities.
Expansion plans include doubling of capacity at Benga mines to 4 million tonnes per annum (mtpa), prospecting across other mines, and creation of evacuation facilities including ramping railway network. The detailed project report is currently under preparation.
Apart from SAIL, other CPSEs in ICVL include RINL and NMDC. The three concessions with the JV are Benga, Zambeze and Tete East in Mozambique.
According to Amarendu Prakash, Chairman and Managing Director, SAIL, doubling of capacity at Benga is likely while techno-feasibility studies for Zambeze are on.
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Benga is the only operational mine and initial reports with the Steel Ministry mention the throughput capacity of the washery there at 5.3 mtpa with 35 per cent yield of 13.5 per cent ash coking coal, 10 per cent yield of 28 per cent ash thermal coal.
Total saleable coal is around 2 mtpa, from the Mozambique mine, of which coking coal mined is for captive consumption of the three CPSEs, while thermal coal is sold in the open market.
Coking coal is a key raw material for steel making, and India, the second largest producer of crude steel globally, is also the largest importer of coking coal in the world shipments coming in being pegged at 70–75 mt. Prices have moved up by $100 per tonne over the last six months and coking coal is currently trading at $350 per tonne.
“Right now, we are looking at de-risking the geographical distribution of coking coal sourcing. As part of that, ramping up capacities at the Mozambique mines are being considered,” Prakash told businessline on the sidelines of a coking coal summit organised by the Indian Steel Association (ISA).
“The capex, which we are anticipating to the tune of $150–200 million and once the DPR is done time frames will be clear,” he added.
SAIL is also on course to increase sourcing of Russian coking coal. At present there are four shipments, each containing 75,000 tonnes of coking coal that come in every quarter.
“So, for this quarter (Oct – Dec), it should be on similar lines (75,000 tonnes *4). We are trying to up sourcing from there too,” he said adding, the company is also looking at upping the buying of coking coal from the US.
Long-term contracts would be looked into as they generally protect the company from raw material price volatility.
In April–June quarter, SAIL paid around ₹25,500 per tonne for coal purchase and was anticipating prices to move up at over ₹28,000 per tonne for the coming quarters, sources said.
Rising coal prices and a failure to pass on the increased cost of raw material to steel buyers because of depressed market conditions (and oversupply because of Chinese offerings coming in) could drag steel-makers’ margins.
Source: the Hindu Business Line