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Workers drill at an open cast coal field at Dhanbad district in the eastern Indian state of Jharkhand. File photo: REUTERS/AHMAD MASSOD
Workers drill at an open cast coal field at Dhanbad district in the eastern Indian state of Jharkhand. File photo: REUTERS/AHMAD MASSOD

A coal crisis in India has forced the country’s sponge iron producers to scour the planet for supplies to keep their mills running as they are deprived of the fossil fuel at home.

Jindal Steel & Power, which is running its sponge iron plants at 40% capacity as it does not have enough fuel, has contracted orders for 150,000 tonnes of thermal coal each for May and June from SA and Mozambique, according to MD VR Sharma. That is the most it has ever imported in a month, he said. 

“There is no coal available and we are at a hand-to-mouth situation now for inventories,” Sharma said in an interview. “We have to keep on importing coal till the time domestic coal is not available.”

Asia’s third-largest economy is battling an energy crisis threatening to hit industrial production as the state-run behemoth Coal India diverts most of its output to power plants to keep the lights on amid worsening blackouts. In the central state of Chhattisgarh, a hub for iron ore and steelmaking, sponge iron makers are running at about 60% of usual levels and could be forced to shut down completely if they cannot get more coal, the Chhattisgarh Sponge Iron Manufacturers Association said in April.

India’s sponge iron industry, the world’s biggest, may ship in as much as 35-million tonnes of coal this financial year, 30% more than a year earlier, according to the Sponge Iron Manufacturers Association. Sponge iron is a steelmaking raw material produced after heating iron ore at high temperatures using carbon in the form of coal or gas.  

SA and Australian traders have been flooding the industry group with queries on the quality and prices of coal that mills need, as “they know that India will have to import a lot of coal because of the energy crisis”, according to Deependra Kashiva, executive director at the sponge iron group.

“The coal situation is very bad in India,” as inventories are drying up and the availability of railway carriages to transport the material gets tougher, Kashiva said in an interview. Mills are ready to pay a higher premium for coal in e-auctions as “they are desperate to run their plants”, he said, adding that companies do not want to miss out on the booming export demand for steel.

India’s steel exports jumped 25% to 13.5-million tonnes in the financial year ended March, according to government data.

“The government or Coal India should try to cap coal prices” to rein in energy costs, Sharma said. The country should also speed up environmental clearances and set a production deadline for miners that have won leases at auctions to bring more output quickly, he said.

“Because this is not a one-day situation. This will remain forever. This will remain in December also and next March also and next June also,” Sharma said. “The faster the mines start production, the better it is for the country.”



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