India: RINL 3rd BF still idle amid coking coal supply challenges

As most steel mills grapple with coking coal supply challenges, Rashtriya Ispat Nigam Limited (RINL) too is facing sourcing issues. This scenario is keeping its third blast furnace from resuming operations, it seems.

Understandably, its hot metal production is being affected. For instance, it may see a production drop of around 150,000 tonnes (t) and 100,000-200,000 t in March. However, its two currently running BFs are producing around 15,000 tonnes of hot metal per day with one BF touching 8,000 tonnes per day against the peak rated capacity of 7,150 tpd.

Tender deferred

The coking coal supply crunch is making RINL explore spot purchases, although it mainly sources through long-term contracts. However, the bid submission date for its recent global tender for supply of 300,000 tonnes of coking coal and 50,000 tonnes of PCI coal has been deferred from 23 Feb'22 to 2 Mar'22. SteelMint learnt from market sources that "a couple of prospective bidders requested an extension of the bid date".

RINL sources mainly from Australia because the technical specification it requires matches the material from Down Under. However, RINL does not have any geographical restrictions where sourcing is concerned.

At present, RINL is looking to source four categories of coking coal and one of PCI.

"It is a double whammy for steel mills. There is very tight supply and nobody is selling in the spot market, not just from Australia but from other sourcing countries too. Prices are at record highs, some mines have gone into maintenance and there is rainy weather in Australia. These factors are forcing a supply shortage," said an industry source.

The Australian premium HCC FOB price was at $447/t, up $7/t d-o-d and $4 w-o-w.

RINL typically requires around 500,000 tonnes of coking coal and 70,000-80,000 tonnes of PCI per month. Almost 100% of this requirement was being met through long-term purchases. However, with the emergence of supply bottlenecks, RINL too started facing sourcing issues from Nov'21 onwards, goading it to explore the spot market. It is seeking one Panamax shipment for each of the four specifications and a Handymax for PCI.

This is the first time since the Covid outbreak that RINL is exploring the spot market, the previous being in 2020. However, at that juncture, the technical specifications were not available.

Long-term contracts

If the material received through the present tender is of good quality then the steel major is keen to buy in enhanced quantities and convert these into quarterly contracts.

It seems long-term suppliers have cut down production due to Covid and rains. This is resulting in loading delays by 25-30 days. These are on FOB basis and, post-loading, delivery takes 20-22 days. However, due to the loading delays, delivery is getting deferred by almost the same number of days.

Outlook

The supply scenario is expected to improve from March-April, a source said. RINL expects its third BF to resume operations within the next two months too, once coking coal supply normalizes, SteelMint learnt.