Steel prices are expected to increase in the coming months as companies are buying coal at three times the rates a month ago, said a top industry executive on Wednesday. A tonne of coal, which was in the range of Rs 4,000-6,000 a tonne, is now costing Rs 8,000-Rs 12,000 a tonne, Jindal Steel and Power Ltd (JSPL) Managing Director V R Sharma told PTI in a telephonic interaction.
He made the remarks while responding to a question related to the supply of coal in India.
"Steel in India at present is in the range of Rs 50,000-Rs 55,000 a tonne. Shortage of coal has led to an increase in its prices that will have an impact on steel which may also go up due to this unprecedented rise," he said.
Sharma did not elaborate as to what extent the steel prices may go up in the future. Sharma, who has over 35 years of industry experience, said India consumes 1,200 million tonnes of thermal coal or steam coal per year. However, state-owned Coal India Ltd (CIL) produces 800 million tonnes annually, a shortfall of 400 million tonnes.
The domestic steel industry alone consumes 150 million tonnes of coal per year, he said adding that for 120 million tonnes or 80 percent of the requirement, the players remain dependent on Coal India Ltd. Steel players use coal as fuel to produce power to run plants and produce steel through the direct reduced iron (DRI) route.
"Coal India Ltd is asking the players to come through e-auction to buy the coal. One month earlier, per mega/cal of coal was between 0.70 paise to Re 1. Yesterday (on Tuesday), it was at Rs 2.8 per mega/cal. nearly three times higher," Sharma said.
It means a tonne of coal, which was earlier in the range of Rs 4,000-6,000 per tonne, is now at Rs 8,000-Rs 12,000 per tonne, he added.
Sharma further said the crisis can be managed if Coal India Ltd increased its production. The company must produce 100 million tonnes of coal per month to meet the annual demand of 1,200 million tonnes, which comes from various industries like power, aluminium, and copper.
India has coal reserves of 350 billion tonnes and Coal India Ltd does not produce even one billion tonnes, he said.
"This is the best time for Coal India Ltd to exceed the expectations of the country in this need of the hour. The increasing output will not only stabilize the prices but also reduce dependence on imports and make India Atmanirbhar in coal," Sharma said.