Indian Steelmakers Head Northeast Under Impact of Coking Coal Prices

SEATTLE (Scrap Monster): Flat steel prices in India jumped by nearly 25 per cent in just two months following the Ukraine war. However, subsequently, thanks to a drop in raw material prices, imposition of export duty by the Government of India, and rising stock levels the prices of flat steel cooled off. These prices are set to turn the corner with input costs for Indian producers heading northward. And it does not require any rocket science to understand this.

Mind you that the Indian steel industry imports nearly 90 per cent of its coking coal requirement, majorly from Australia. While their prices were on a declining trend for most of this fiscal, short-term volatility was observed in anticipation of supply chain disruptions. Easing of China's unofficial ban on Australian-origin coal import will not only add to further volatility but also alter the supply chain, yet again. While there are reports that three power plants and one steel player in China have already been given the go-ahead to purchase Australian coal, more entities are likely to be allowed. That's what a recent study by CRISIL Research has suggested.

One also has to keep in mind that the anticipation of China-Australia coal trade resumption has already driven coking coal prices beyond $300 per tonne by late December. But with the Chinese New Year round the corner, uptick in trade volumes between Australia and China is expected only beyond March. However, major imports by China is anyways unlikely, given Chinese steel mills have already adjusted to Russian and Mongolian coal over the past two years, which comes at a healthy discount compared to Australian coal. CRISIL study predicts that with coal production in Australia is not likely to see any sharp increases due to environmental concerns, coking coal prices are set to stay elevated this year at around the $250-300 mark.

From the steel consumers' point of view, rising input costs has prompted integrated and secondary steel players to announce price hikes across segments over the last two weeks, by Rs 2,000-2,500 per tonne.

It was as if that the rise in coking coal prices was just not enough! Along with coking coal, domestic iron ore prices have also moved up significantly, since the withdrawal of export duty - put to effect last November. Since then, National Mineral Development Corporation (NMDC) has raised prices of iron ore fines by over 30 per cent. Prices are only set to move up further, with expected healthy domestic demand in a pre-election year and improving global iron ore prices, which also rose by 20 per cent over the past two months.

When it comes to long steel prices, prices for secondary players are expected to see a small decline, driven by falling thermal coal prices, which, in turn, will primary drive TMT prices lower by an expected 1-3 per cent next fiscal.

At this outset, as experts are predicting, with coal production unlikely to see any sharp increase in Australia is, coking coal prices are set to stay elevated in 2023 around the $250-300 mark.

Courtesy: www.bizzbuzz.news