Indian Sponge iron manufacturers’ increase appetite for South African Coal instead of domestic. In August, Raipur based Sponge units purchased around 0.15 MnT Coal.
Indian Sponge manufacturers are struggling with Coal supply crunch on the backdrop of reduced Coal linkage as well as diverting material to power plants on priority.
Domestic supply crunch has forced the Sponge iron manufacturers to import South African Coal as it is most preferable grade Coal because of controlled moisture and volatile matter. Trade sources have reported that constantly rising domestic price has pushed people to incline towards imported Coal.
Currently, domestic F grade Coal (28 FC) is offered at around INR 4,400-4,500/MT and B grade (40-42 FC) at around INR 5,700/MT; delivered to Raipur (Chhattisgarh) plants. Whereas, South African Coal with 52 FC is offered at INR 6,800/MT; delivered to plant.
“With increasing prices in domestic market, we are bound to go for imported Coal. On an average, imported Coal will cost us INR 130 per Fixed Carbon. Whereas, domestic Coal to INR 145-150 per Fixed Carbon,” said a Raipur based Sponge manufacturer.
Trade sources confirmed that Adani Enterprises recently concluded its deal with Raipur based manufacturer for 0.1 MnT of South African (RB-2) Coal at East Coast of India, for September delivery.
In FY14, India had produced about 24 MnT of Sponge iron. Out of total, around 5 MnT was produced from gas based plants and the rest from Coal based. On an average, 50-60% of total Coal requirement has been linked to long-term supply at a subsidy and rest from open market.
As Coal India is planning to reduce quantity in e-auction and raise prices by about 10%, Sponge manufacturers believe that domestic prices likely to boost up further.