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The Indian government is focusing on the steel sector. Bolstering infrastructure and industries will augur well for the sector. However, the steel industry is being impeded by scarcity of good quality coking coal- a key ingredient in steel making. 

Indian coking coal demand to rise for steel industry

In the 2017-18 FY, India became the second largest steel producer in the world. India produced 102.22 million tonnes (MT) of crude steel during this time. According to data released by the Joint Plant Committee, Indian steel production in 2018 increased by 6% on a year-on-year basis to reach 52.25 MT. It is estimated that India’s crude steel production will trend to 125 MT by 2020.

The demand for coking coal can also be expected to increase in future. The monthly coking coal demand is expected to be higher, at around 6 MT, by the end of 2020-21 fiscal. This would mark around 20%-23% increase in the demand for coking coal. According to industry insiders, around 82% of the required coking coal in India comes from imports. The primary exporting states include Australia, Canada, and South Africa.

According to industry estimates, for the domestic steel production of around 102.33 MT in 2017-18, India imported around 47.22 MT of coking coal. The Comptroller and Auditor General of India (CAG) has observed in its report that in the total annual coking coal requirement of about 15 MT, Steel Authority India Ltd. (SAIL) imports around 12-13 MT.

High prices of coking coal in the international market are posing serious challenges to the Indian steel sector. According to research by CRISIL, prices of coking coal fell to the range of $190-$200 per tonne in the last fiscal year. This range is expected to come down marginally to $175-$185 per tonne in 2019, which is still quite steep and will pose difficulties for India’s steel sector.

Domestic availability

India does not have quality reserve of coking coal. Efforts are on to increase production of coking coal but results are yet to be achieved. In the FY 2017-18, Coal India Limited (CIL) produced 567.37 MT of raw coal. But coking coal was less than 10% of the total produced coal. The share of coking coal in CIL’s total production was also down at 5.9% in FY 2017-18 from 9.9% in FY 2016-17. The decline occurred for various issues like depletion of reserves in open cast projects, closure of unviable mines and re-gradation of coal blocks in the country. CIL plans to boost its coking coal production by FY 2019-20. In the targeted production of 908 MT coal to achieve by FY 2019-20, share of coking coal will be approximately 71.12 MT.

Status of coal washeries

The 34.5 billion tonnes (BT) of coking coal reserves in the country is not suitable to produce good quality coke, because of its high impurity and very poor washability characteristics. Total installed capacity of coal washeries which operates at 20-30% capacity utilisation in India is about 31 metric tonnes per annum (MTPA). The current washing capacity of Coal India for coking coals is 23.3 MTPA. But most of these washeries were set up decades ago and require modernisation.

National Steel Policy to encourage domestic production

The Indian government is focusing on enhancing the steel sector. N. C. Jha, Advisor, SAIL informed the media in a recent conference organised by mjunction that, “The National Steel Policy gave a planning to grow the demand of crude steel to 255 MT and the capacity of crude steel to grow to 300 MT per annum by 2030-31.” The target for per capita steel consumption in India is also 160kg by 2030. To achieve this target, the estimated coking coal requirement will be around 161 MT. This demands healthy natural resources, good finances, enormous manpower and well equipped domestic infrastructure. The new steel policy envisions India reducing its import dependency of coking coal by 50% by 2030-31.

Future

CIL will be setting up 18 new domestic coking coal washeries with a total capacity of 48.2 MTPA. Three washeries at Bharat Coking Coal Ltd. (BCCL) with a combined capacity 11.6 MTPA are also in the assigning stage. Another three washeries with a total capacity of 7 MTPA are in different stages of construction and are expected to be assigned by 2020. Another new coking coal washery with a capacity of 3.5 MTPA is planned at the Tasra project of SAIL. Indian steelmakers also need to pursue cheaper import alternatives of coking coal.