Coking Coal Import Contracts Postponed But Not Cancelled: SAIL Chairman

As the Coronavirus (Covid-19) pandemic continues disrupting India's domestic steel demand, SteelMint Events spoke to the Maharatna PSU Steel Authority of India Limited (SAIL) chairman Anil Kumar Chaudhary, to understand the company's contingency plans to combat the worsening impact of the viral outbreak.

In an interactive webinar session conducted live today, Mr. Chaudhary talked about the forthcoming demand outlook for steel and its potential consequences on the steelmaking raw materials sector, which primarily comprises of iron ore, coking coal and ferro alloys.

He admitted that coal prices have definitely come down in the current quarter -- the price index for premium low-volatile (PLV) hard coking coal (HCC) has decreased by nearly 30 percent from around US$ 150/tonne (t) on 31st March to a level of US$ 107/t at present.

However, given the fact that coal prices are always fluctuating in the market, how long the current prevailing prices will sustain remains to be seen.

As market demand picks up for steel, there will be additional demand for coking coal and hence prices may go up post-July, according to him.

Coking Coal Prices Sink As Import Demand Shrinks Amid Steel Output Curbs

Seaborne coking coal prices have continued on a declining trajectory throughout the past two months, with prices across all categories hitting multi-month lows, as subdued demand conditions persisted globally amid production cuts by a vast majority of steelmakers outside of China.

Following the rapid outbreak of the novel corona virus disease (COVID-19) since end-January, there has been an inevitable decline in demand for steelmaking raw materials, as global steel industry giants became amenable to declare force majeure on raw material procurement.

In India, a nationwide lockdown enforced effectively from 22nd March has since been causing labour shortages and logistical constraints for both inland cargo transportation as well as incoming shipments at various coal-handling ports, and as a consequence the country's domestic demand for steel has plummeted.

CoalMint had already reported earlier that most of India's leading steel producing companies including SAIL, JSW Steel, Tata Steel and ArcelorMittal NipponSteel have either scaled down their manufacturing operations at all sites or suspended operations in certain locations in response to decline in industrial activity.

Accordingly, the country's biggest coking coal importing companies have refrained from signing new import contracts, influenced by expectations of production disruptions during the lockdown period.

Several companies are also heard to have been requesting their overseas coal suppliers for delays to their contracted second-quarter cargoes, as sentiment in steel markets weakened further with the Indian government extending the lockdown period in multiple phases until May 17.

In this context, Mr. Anil Kumar Chaudhary concurred by saying that "SAIL is contemplating postponement of incoming coking coal shipments under existing long term agreements", but he also clearly mentioned that the company has not taken any decision on cancellation of order shipments at this point of time.

He added by saying that the company is planning to increase its coal inventories from 35 days to 40 days.