India Steel Giant to Lift Prices as Global Coal Costs Surge
(Bloomberg) -- Tycoon Sajjan Jindal’s JSW Group is feeling the sting of surging global coal prices and expects to hike steel rates as a result.
The steelmaking-to-energy giant, which relies mostly on imported thermal and coking coal, sees seaborne prices as likely to remain elevated for one or two more quarters, Jayant Acharya, director for marketing at JSW Steel Ltd., India’s most valuable steel maker, said in an interview.
“Coal is having an impact on the costs and that will have a bearing on the price of steel,” with JSW passing on higher costs -- which also include freight rates and iron ore -- for the next few quarters, according to Acharya. Benchmark thermal coal prices have more than doubled since the start of the year to more than $200 a ton with sharp increases in the last few weeks due to a global squeeze on supply, he said.
Indian steel mills that use domestic coal are also facing higher rates, and paying more than four times the normal cost, according to Jindal Steel & Power Ltd.
Rising global coal prices are a “big concern,” for JSW’s energy unit, Prashant Jain, chief executive officer of JSW Energy Ltd., said Thursday in a Bloomberg Television interview. “There are power plants like ours which are working on imported coal -- we are able to buy coal from the international market, but paying a lot of money for that,” he said.
Some coastal plants that rely on imported coal have idled capacity as a result of higher costs, exacerbating power issues in India as generators that use domestic fuel navigate a supply crunch. Inventories of coal -- which generates 70% of the country’s electricity -- plummeted to an average of four days at power stations this week, down from 13 days at the start of August
India’s government has warned the country could be facing a supply squeeze for as long as six months. The crisis threatens to stall the world’s fastest-expanding major economy, which has been recovering from an unprecedented 7.3% contraction in the year ended in March.
The local coal crisis could last “some more months and quarters,” in part because investments in the fossil fuel have dwindled as India -- like much of the world -- seeks to prioritize renewable energy to help meet targets for climate action, according to JSW Energy’s Jain.
“The pace of investment, which is required in renewables, has not been as strong as the withdrawal has been from the fossil fuel, and that’s why we are seeing this kind of a shortage,” he said.
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