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Rabu, 09 Februari 2011

Steel prices to go up on coking coal costs - Mail Today

Steel companies are likely to raise prices further as the cost of coking coal has shot up following the floods in Australia.

Even company's like Steel Authority of India (SAIL), which have captive mines, have to import coking coal which is a key input in manufacturing steel.
The price of coking coal has shot up $40-50 per tonne due to floods in major producing region Queensland, Australia, according to a study by research and rating firm Crisil. Queensland, which is badly hit by recent floods, accounts for 40-45 per cent of the world's exports of coking coal.

The study states that the operating margins of steel makers will decline in the April-June period as the floods will affect the import of coking coal.
"Coking coal accounts for about 45 per cent of the raw material costs of non-integrated steel producers in India. The run in coking coal prices will affect the margins of these producers, who are already vulnerable to an expected increase in iron ore prices over the next quarter," Crisil's head (research), Manoj Mohta, said.

The disruptions in supply due to floods have driven coking coal spot prices up by $40-50 per tonne to $280-290 per tonne, the study states.

These higher prices will flow through into the operating margins of India's major steel companies such as SAIL and JSW have already reported a decline in profit even as their turnover has risen during the third quarter.
While they have already increased steel prices last month another round of price increases due to higher raw material appears to be likely. Steel producers, who import their entire requirement of coking coal.

Integrated steelmakers, that constitute 25-30 per cent of India's steelmaking capacity, will be shielded from these increases as they source all of their iron ore, and a large part of their coking coal, from captive mines, the study said. The effect of rising coking coal prices will make it felt starting April, when steel players enter into new contracts with mining firms.
Reflecting the sharp increase in spot prices, coking-coal contract prices for the April-June quarter will rise by 15-20 per cent quarter-on-quarter to $260-270 per tonne.

Steel prices, which are likely to increase by $20-30 per tonne during the quarter, will not offset the pronounced increase in cokingcoal cost, the report added.
Major steel companies such as SAIL and JSW have already reported a decline in profit even as their turnover has risen during the third quarter.

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