Taking stock: India’s met coal, coke outlook
"Coal makes up for 29% of global primary energy and 41% of global electricity. China remains the world’s largest market for coal, accounting for nearly half of global coal consumption in 2035. India is also one of the largest growth markets, with its share of world coal demand expected to double, from 10% in 2015 to 20% in 2035, according to industry sources."
Coal is believed to be the most uniformly distributed fossil fuel in the world but it is not so with metallurgical Coal or coking coal, which has a skewed distribution around the world and is mainly concentrated in China, Australia, Canada, Mongolia, Russia and Mozambique.
Global steel production is dependent on coal either for the energy used in electric arc furnaces or as a primary raw material source for the steel making process through BF-BOF (Basic Furnace-Basic Oxygen Furnace) route. Out of the total 1,630 million tons of world crude steel production, nearly 65% of the production is through BF-BOF route.
China has always been the largest producer of coking coal in the world. From the Year 2000, the Chinese Coking Coal production surged 392% to reach 611.1 million tons in the year 2015. Its share in the world coking coal production has increased from 26% to 56.1%. Australia, the second largest producer with an annual output of 191.1 million tons is also the largest exporter of the material, accounting to around 65% of the coking coal exports.
While India, with meagre reserves and production of coking coal, does not figure in the world rankings. The expansion of our steel industry has made us emerge as a leading importer of the material next to Japan with a share of 17% globally. This is more than the imports of China and Korea which stand at 15% and 11% respectively. Over the last few years, the steel production surged by 36% while coking coal imports have gone up by nearly 65% in India.
As against the ever rising requirement, India’s Coking coal reserves have been stagnant over the years. The vulnerability of the steel sector springs from the low availability and poor quality of the material in the domestic market. India’s total coal reserves have shown an increase of about 7 billion tons during 2014-16, but there has hardly been any addition to coking coal reserves and there is no increase in the prime coking coal category. The prime coking coal reserves stand at 5.313 billion tons and proved prime coking coal reserves are 4.614 billion tons.
Total coking coal reserves including proved, indicated and inferred increased by only 333 million tons, from 34.07 billion tons to 34.403 billion tons in 2016.
Jharia Coal fields in Jharkhand, which hold the major share of quality coking coal reserves continue to witness raging fires despite the best efforts being put in over the decade.
With meagre reserves and production combined with inferior quality of coking coal that is available in the domestic market, the expansion of steel industry in India has seen increasing import of coking coal. Currently about 80% of coking coal consumption is being imported.
As per National Steel Policy (NSP) 2017 objectives, domestic availability of washed coking coal has to be increased so as to reduce import dependence on coking coal from 85% to 65% by 2030-31.
In 2015-16, of the total demand of 62.75 million tons of coking coal, 44 million tons was imported. If domestic supply remains at the present level, coking coal imports may go up to about 75 million tons by 2020-21.
The import dependency is expected to reach 160 million tons a year if the steel ministry’s target of 300 million tons of crude steel is to be achieved.
Coal India Limited (CIL) is presently producing about 50 million tons of coking coal annually, out of which only 5 million tons is being washed by the existing washeries and supplied to steel sector. The remaining quantity along with non-coking coal is being supplied to power sector under Fuel Supply Agreement (FSA) and other miscellaneous consumers.
It is estimated that CIL will enhance production to 68 million tons by 2019-20 and set up 12 new coking coal washeries with a capacity of 36 mtpa and modernize 9 existing washeries thereby increasing availability of clean coal up to 15 million tons in the next 4-5 years, industry insiders said.
The dependence on imports for crucial raw materials is always a matter of concern, but the vulnerability of the steel sector shows up at the time of price volatility. The surge in coking coal prices during the last quarter of 2016 dealt a sudden blow to the steel makers who were already reeling under soft demand conditions in the domestic market. The more import dependant entities SAIL and RINL suffered more compared to the peers. Cost of Coking Coal has increased cost of hot metal by more than Rs 3500-4000 per ton.
Import dependence on Coking Coal will continue to remain in India. The growth in coking coal imports has been driven by the growth in steel production in the Country. The growth of steel demand, in turn, is dependent on the growth in infrastructure and user industries namely construction, automobiles, capital goods and consumer durables. All these factors lead to higher imports of coking coal, the extent of which depends on the mobilisation of the resource within the country.
What hinders usage of indigenous metallurgical coal is high ash, low coking properties (MMR, CSN, Vitrinites etc.), high inerts resulting in poor M10, M40, CSR&CRI and logistics. Even though by reducing ash of Indian coking coals through several beneficiation processes, it cannot be proportioned to substitution with imported coking coal, unless other vital quality parameters such as Mean Max Reflectance (MMR), Fluidity, Petrography, Ash Chemistry etc. suit the requirement.
Under the present Scenario, the Government of India has brought out the National Steel Policy 2017 with an objective to create a Self-sufficient Steel Industry that is technologically advanced, globally competitive and promotes inclusive growth.
It’s expected that at the current rate of GDP growth, the steel demand will grow threefold in next 15 years to reach a demand of 255 million tons by 2030-31. Based on these projections, it is anticipated that a crude steel capacity of 300 million tons will be required by 2030-31.
Meanwhile, Coal India, SAIL, RINL, NTPC are on the hunt for good quality Coal assets abroad. Coal Videsh and International Coal Ventures Limited have ventured to South Africa and Mozambique. In addition Australian Coal assets have to be procured for secure resource mobilisation of the vital raw material.
The Make in India initiative is expected to witness significant investments in infrastructure, Construction, Automobile, Shipbuilding and Power sectors which will stimulate Steel demand. Make in India campaign aims to triple the capital goods production from Rs 230,000 to 750,000 crore over the next 10 years. Use of cost efficient and competitive “Indian made Steel” will pave the way for future development.
Availability of raw materials at competitive rates is imperative for the growth of the steel industry. National Steel Policy-2017 envisages a requirement of 161 million tons of Coking Coal and 31 million tons of Coal for PCI by 2030-31. As per the targets fixed by NSP, the present level of PCI which is around 50-150 Kg per ton of hot metal has to increase to 180-200 Kg and coke rate from 450-600 kg has to be reduced to 300-350 Kg per ton of hot metal. Indeed, it is a challenging task for Indian steel industry.