Ennore Coke clinches coking coal deals with Rio, BHP Jayajit Dash / Bhubaneswar June 18, 2009

Ennore Coke Ltd, a domestic maker of coking coal, has finalised the annual coking coal contracts starting April 1 this year with its international suppliers Rio Tinto and BHP Billiton Mitsubishi Alliance (BMA), a joint venture of BHP Billiton and Mitsubishi Development Pty Limited.The company clinched the coking coal contract for 2009-10 at $128 per tonne for hard coking coal and $100-118 a tonne for soft and semi-soft varieties of coking coal.

“We have finalised coking coal contracts with Rio Tinto and BMA and expect to sign formal agreements with these firms soon. Ennore Coke will import about 400,000 tonnes of coking coal, of which around 300,000 tonnes will be from BMA and the remaining will be provided by Rio Tinto,” Ganesan Natarajan, president and chief executive officer, Ennore Coke Ltd told Business Standard.

Out of the 400,000 tonnes of coking coal to be imported by the firm, 50 per cent would be hard coking coal while the remaining would be a mix of soft and semi-soft varieties.

Ennore Coke was aiming to secure raw material supplies to meet its capacity expansion plans. The firm has reserves of about 0.4 million tonnes of low ash coking coal imported from the USA and it needed around 30,000 tonnes of coking coal per month to meet its requirements through 2009-10.

Ennore Coke’s move to finalise coking coal contracts has come close on the heels of the BMA announcing a 58 per cent cut in contract prices of coking coal compared to last fiscal for the Japanese steel makers like Nippon Steel and JFE Holdings.

Following the price cut, Nippon Steel and JFE Holdings would pay $128 per tonne of coking coal for 2009-10. BHP announced a cut in coking coal prices following the slackening of demand for the raw material in the wake of the economic downturn.

The average price of coking coal in the international market jumped from $96 a tonne in 2007 to an all-time high of $300 in 2008. Australia-based Macquarie Group Limited, a global provider of banking, financial and advisory services has forecast a benchmark price of coking coal at $110 per tonne for 2009.

However, there is no possibility of a cut in the coking coal prices in the domestic market despite the softening of prices of the raw material in the international market.

Coal India Limited (CIL) has ruled out any cut in coking coal prices as the navratna felt that the domestic prices of coking coal were reasonably lower than the prevailing international prices.

“Steel Authority of India Limited (SAIL) had indicated a slash in coking coal prices during their negotiations with CIL but we have ruled out any price cuts. Any downward revision in coking coal prices by CIL is out of question at a time when the coal PSU is thinking of a price hike across all grades of coal,” said a senior official of CIL.