Coal Import Bill of Steel Companies set to Rise.

KOLKATA: The coal import bill of steel manufacturers is set to rise with the slump in the rupee pushing up spot prices of coking coal, an essential raw material. Big steel companies will be hurt the most as a large part of their coking coal requirement is met through imports.

Steel Authority of India Ltd (SAIL), the country's top steelmaker, imports 13-14 million tonne of coking coal every year, mainly through long term contracts. In 2010-11, domestic steelmakers imported close to 27 million tonne of the raw material.

The depreciation in the rupee is likely to offset any advantage companies may have gained due to a softening of coking coal prices in the second quarter.

On Wednesday, the rupee closed at 52.36 to a dollar. It has fallen almost 18% since August 1. The timing of the rupee tumble has put steelmakers in a bind, with dwindling demand due to economic slowdown leaving them with very little room to raise prices.

"I am worried. While prices are at around $280 a tonne (fob), the slide in the rupee is making imports costlier," said Gautam Kumar, director of Asia Minerals, which imports coke and coal from Ukraine. "We are likely to see a drop in new order bookings. This will definitely affect overall coking coal imports in the short term," Kumar added.

SAIL's requirement of coking coal is set to rise to 21 million tonne by 2013-a 50% rise over its requirement in 2010- because of capacity addition. JSW Steel's coal imports are estimated at 7 million tonne this year after the company raised capacity to 10 million tonne in March. Coking coal prices were ruling at around $330 a tonne in the last quarter of 2010-11.

However, supplies from Australia, India's largest coal provider, were seen picking up after the flood situation improved in Queensland. This led to a lowering of prices to about $280 a tonne in the July-September period.

Source : economictimes.indiatimes.com