In a move to reduce dependence on highly priced Australian coking coal, India will acquire a mine in Mongolia and also set up the first steel plant in the quality coal rich country.
The Indian delegation comprising of Chairman of Steel Authority of India (SAIL) C.S. Verma and U.P. Singh, Joint Secretary in the Ministry of Steel will go to Ulaanbaatar on Friday to sign a pact in this regard.
“We are signing an MoU with the Mongolian government for allocation of some coking coal mine. We have been talking about this for about a year,” Mr. Verma who held talks with top Chinese steel officials and producers in the past two days told PTI.
The plan is to acquire the mine, utilise the coal for the steel plant India proposes to set up in Mongolia and export the rest to India through Chinese ports as Mongolia is a land locked country.
Asked whether India is expecting substantial volumes from Mongolian mines, Mr. Verma said, “I think it should happen. We will be too keen to get good volumes, good mine with lot of reserves, so that we feed the steel plant which we will be setting up there and the surplus will be brought to India.”
“Mongolia has very good quality of coking coal mines. We do not have such quality coal mines ourselves. Let Mongolian government allocate some good coking coal mine and we will have reciprocal arrangement to set up a steel plant there,” he said.
Despite being a growing economy with abundant coking coal mines, Mongolia does not have any steel plant of its own.
The mine India plans to acquire will first meet the requirement of setting up a steel plant there. Then the surplus coking coal will be taken to from there, Mr. Verma said.
The mine and volumes of the coal expected of it will be identified after the pact is in place, Mr. Verma said.
This will be the first attempt by India to break away from the excessive dependence of Australian coking coal, which has become too costly in recent years pushing up the cost of steel production to very high level in India.
“India is importing 35 MT of coking coal every year about 60 to 70 per cent from Australia which is close to India and the rest from US and New Zealand,” Mr. Verma said.
Considering India plans to expand steel production from the current 80 MT to 200 MT by 2020, it is looking to get coking coal securitisation, as there were no quality coking coal mines at home.
It has become very important as to produce one tonne of steel requires 0.9 tonne of coking coal.
The consumption of coking coal in India is roughly about 35—40 MT of which about 12—15 MT available in India.
But it is not very good quality but medium grade soft coking coal, Verma said.
About 30—35 MT is imported in India every year. Of which SAIL is imports about 14 MT.
“We have to acquire mines outside India as we do not have coking coal mines in India. The expansion and capacity addition is going to happen in India mostly on the blast furnace route only for which coking coal is required more,” he said.
Though the newer technologies are coming up, they would take a long time to emerge he said referring to talks with POSCO to set up furnace based steel plants.
“But mostly expansion will happen in blast furnace route which requires coking coal,” he said.
Mr. Verma said, “We want to get on government—to—government basis. We want to reciprocate by setting up a steel plant.
Talks are on for about an year. Now reached a stage of signing an MoU.”
First a coking coal bloc will be allotted for India for which prospecting will be done. Volumes can be known only after the prospecting is done, he said.
Securitisation is important as Australian coking coal price has gone up from USD 125 in 2010 to USD 350 in 2011.
Currently it is moving between USD 200 and USD 210 per tonne.
“Securitatisaiton means to work out coking coal security for our steel plants which will otherwise go dry without it.
We can have security only if we have coking coal assets, which we do not have in India. So we have acquire the mines abroad,” Mr. Verma said.
Mongolia has prime quality coking coal. China which also has a lot of coking coal reserves is importing from Mongolia, cutting down its imports from Australia.
Last year, for the first time, China had imported more coal from Mongolia than from Australia, he said.
