Financial Daily from THE HINDU group of publications
Saturday, Mar 13, 2004
Coking coal shortage hits SAIL plants
Kolkata , March 12
ALL the four integrated steel plants of Steel Authority of India Ltd (SAIL) are facing an acute shortage of imported coking coal. The crisis has assumed such great proportions that almost all the mills are forced to cut down production.
According to sources, production cuts ranging from 10-30 per cent has already affected at Bhilai Steel Plant, Durgapur Steel Plant (DSP) and Rourkela Steel Plant (RSP).
The only exception is Bokaro Steel Plant, where production of hot metal and subsequent downstream items are not yet affected. Plant level sources, however, agreed that there is a crisis of coking coal. "If the current shortage continues for long, then the plant management might be forced to think otherwise", sources told Business Line.
DSP and RSP are badly hit. Both the units were banking heavily on the ongoing bull run in the steel sector for a financial turnaround but their productions have been affected by the coking coal shortage.
"The worst part of the whole issue is that it has happened at a time when the plants are running full stream and the marketing teams are going all out to meet the sales targets", sources said.
Sources in RSP said the plant is surviving on a "hand-to-mouth" stock of coking coal. Monthly production of hot metal has been reduced by 10 per cent from 1.5 lakh tonnes to 1.35 tonnes.
On a daily basis, production has dropped by 900 tonnes to 4,100 tonnes from 5,000 tonnes
The coal blend has already been changed. "Earlier we were blending equal amounts imported coal with domestic coal. Now the ratio has been changed to 65:35. We are using more of domestic coal compared to imported coal", sources said.
Imported coking coal is preferred over domestic coal because its ash content is low. As a result while using domestic coal, furnace space is choked up with the ash. Another aspect is that domestic coal takes longer time to melt iron ore and in the process it affects productivity.
SAIL had long-term contracts with three Australian coal majors, namely BHP, MIM and Anglo Coal.
"Out of these three, supplies from two had stopped long back. It was supposed to resume from February but nothing much had happened. This has really caused this coking coal crisis", sources said.
A senior official of SAIL based in the headquarters confirmed that the plant is facing coal shortage and "adjustments" have been made in production levels. "The situation is tight but there is nothing to panic", the official told Business Line.
Similar is the situation in DSP. Sources said that the coke oven pushing rate has been cut down by 15-20 per cent. As a result, production of hot metal and crude steel is also down to the same extent. Average daily hot metal production has been cut down to 5,000 tonnes from 6,000 tonnes.
"We are running with a coal stock which is sufficient only for a few days. The situation is alarming and something has to be done fast, otherwise we will have to cut down production further", sources said.
Perhaps the worst hit is Bhilai Steel Plant because it uses the maximum amount of imported coal. It was learnt from sources the plant might just operate for a day or two only, despite cutting production by 30 per cent.
Bhilai daily coal requirement is 12,500 tonnes, out of which 80 per cent or 10,000 tonnes are imported and the rest is domestic. Its coal stocks have dropped to 20,000-22,000 tonnes from the average level of 1-1.5 lakh tonnes. The plant's over-dependence on imported coal is for two reasons.
First, it is located far away from the coal belt of India and nearer to the Vizag port. So, importing coal made sense. Second, imported coal is a better alternative for the steel plant.
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