A coal shortage in India has led to soaring costs for steel producers as they participate with other industrial consumers for supply.
Mills are paying more than four times the normal costs for procuring coal from e-auctions and from mines, as per V.R. Sharma, managing director at Jindal Steel & Power Ltd. Still, there has been no impact on production at most primary steel producers yet as they have adequate supplies
and are unlikely to curtail output, he said.
India, which depends on coal for about 70% of electricity generation, is grappling with a shortage after a jump in demand, a squeeze on indigenous mine output and surging prices of seaborne supply. The country has been prioritizing the power segment, spurring concerns that other industries may face a shortfall.
“Integrated secondary steel mills or stand alone sponge iron producers may have to face production cuts as they rely on non-coking coal to run operations,” stated Jayanta Roy, senior vice president at ICRA.
“Aluminum producers too are going to face a problem of availability and price of coal for their captive power plants and, depending on their supply tie-ups or contracts for international purchases, may have to face shortages as the government’s priority remains to the power sector,” he stated. Nevertheless, with the end of the monsoon season and efforts of Coal India to boost production, supplies should enhance going forward, Jindal Steel’s Sharma said.
