India: Coal-starved sponge units stare at production cuts in April

Sponge iron units across India currently have a thermal coal stock of only 7-8 days. If supply of this major feed is not secured soon, many of these units will stare at temporary closures while others may have to reduce production by 50% in April. As a result, Indian sponge iron production may drop by 30-40% in the coming month, a reliable source informed SteelMint in the aftermath of the national conference on "Making India Atmanirbhar in Steel: Role of Secondary Steel Sector", held in New Delhi recently.

CGSIMA proposals to CoalMin

Against the backdrop of this pressing need, the Chhattisgarh Sponge Iron Manufacturers' Association (CGSIMA) has submitted two recent proposals before Vinod Tiwari, Additional Secretary, Ministry of Coal, Government of India.

n As per the first proposal, CIL has pithead stock of 100 million tonnes (mnt), but no sufficient logistics infrastructure to evacuate and supply the same to end-user plants. Therefore, CGSIMA has suggested, in the face of insufficient rakes, this coal should be evacuated and transported to end-use sponge iron plants through road mode. "The ministry has sought a few days to think on this proposal," Anil Nachrani, President, Chhattisgarh Sponge Iron Manufacturers Association (CGSIMA), informed SteelMint.

Road mode is beneficial to both South Eastern Coalfields (SECL) and the sponge iron industry, Nachrani said. Rakes have their limitations since not more than 48 can move in a day in the SECL sector, whereas volumes can be increased via road, a source explained.

Plants have both rake and road allotments. However, in the 48 rakes allotted per day, 45 are for the power sector and a paltry three to the non-regulated sector (NRS) and here too most of it goes to the aluminium plants, leaving sponge units high and dry, Nachrani said.

Moreover, there is a backlog of one year's supply via rakes. Thus, the suggestion to the ministry is that the first six months' pending supply via rakes should be transported by road. Total one year's pending volume to the sponge iron sector would amount to 0.22 mnt, of which 0.11 mnt have been sought to be transported by road.

"Around 550 rakes of supply are pending since the last one year to the steel units. Each rake has a capacity to carry around 4,000 tonnes of coal," a source revealed. However, there is a backlog of three months' supply by road too.

n Secondly, CGSIMA suggested, since only low grade coal is required in power generation, the medium and high grades of G-10 and below should be kept aside for sponge iron units while the G-11-G-17 can be allocated to power plants. CGSIMA has sought at least 15% of coal for the steel sector.

Ministry assurance pending

CGSIMA is yet to receive any assurance on both proposals from the coal ministry.

India's sponge iron sector annually requires 60-70 mnt of thermal coal, of which 50% demand is met through imports, in the form of RB2 from South Africa.

However, South African coal prices are sky-high as vessels are getting diverted to the European Union and Turkey, which are starving of supplies from Russia and Ukraine at present because of the war.

Last week, portside RB2 prices touched INR 20,000-21,000/t.