JSW Gets 20% Discount on Coking Coal Imports.

NEW DELHI – JSW Steel Ltd. will buy coking coal for the January-March period at a 20% discount to last quarter's rates but a weaker rupee will offset those cost savings, its managing director said.

Seshagiri Rao said recently that the Indian steelmaker has signed pacts with overseas miners to buy coking coal at $230 a ton for the current quarter, compared with $290/ton in the October-December period.

"In normal circumstances this would have led to significant cost savings. However, the sharp fall in the rupee has neutralized the cost savings," Mr. Rao said.

The rupee has slipped about 7% against the U.S. dollar since the end of September, making imports costlier.

Shares of JSW Steel, which like its peers imports almost all of its coking coal needs, jumped on the news about the lower contracted price of the key steelmaking raw material. In afternoon trade, JSW shares were up 10.4% at 631.65 rupees ($11.98) in a Mumbai market that was up 2.1%.

The company has been hit hard by an iron-ore supply crunch since August last year, when India's top court banned mining in three districts of Karnataka state, where JSW's 10 million-ton-a-year steel plant is located.

The company is currently buying iron-ore through court-mandated auctions, which it says will keep it comfortably supplied for four months, but beyond that it will face production disruption unless the ban is at least partially lifted.

In October, the iron-ore shortage led the company to pare its output target from 8.75 million metric tons to 7.5 million tons in the fiscal year through March 2012. But Mr. Rao said that meeting even the reduced target would depend on whether the company gets adequate iron-ore.

He said that it isn't financially viable for JSW Steel to either haul in iron-ore from other Indian states or bring in imported ore for its Karnataka steel plant.

Mr. Rao also said that JSW Steel's capital expenditure next fiscal year is likely to be around 50 billion rupees, around the same level as the estimated spending this fiscal year.

He said the company has cut its estimated capital expenditure this fiscal year to between 40 billion rupees and 50 billion rupees from an earlier target of 80 billion rupees.

He added that the company expects to start work soon on its proposed 10-million-ton-a-year steel plant in Salboni, West Bengal. "We are expecting some clearances from the West Bengal state government. If we get those, work can begin this fiscal year."

Source : online.wsj.com