India’s JSW Steel mulls surcharge on met coal cost rise

Indian private-sector producer JSW Steel is considering implementing an energy surcharge amid a record rise in metallurgical coal costs, although a final decision has not yet been taken as the steelmaker is in discussions with customers.

"[A] shortage of energy across the world has brought a lot of volatility. Coking coal prices have shot up to unsustainable levels of $400/t," said Seshagiri Rao, JSW's joint managing director and group chief financial officer, last week.

The Argus premium low-volatile hard coking coal index was at $431/t cfr India on 22 October, having hit a record high of $437.75/t on 23 September. Prices are 253pc higher on the year. Steel prices in India are expected to remain elevated in the coming weeks, as mills look to pass on high coking coal costs to customers and with the demand outlook positive, market sources told Argus last week. JSW is not the first mill to consider implementing an energy surcharge. Steelmaker Tata Steel told mills in the UK that it will implement an energy surcharge linked to power and gas prices.

JSW Steel will take a call after discussing with customers, Rao said.

The company has increased prices of flat and long steel products in October and is planning to raise prices again in November, which could make domestic prices for hot-rolled coil (HRC) slightly higher than export prices, it said. The company increased its exports during the July-September quarter to counter subdued domestic demand. Exports accounted for 38pc of company's total sales during the quarter.

The Argus domestic India HRC index stood at 70,000 rupees/t on 22 October, up by 67pc from a year earlier, while primary rebar prices rose by over 40pc on the year to Rs59,500/t as of last week.

"We expect that the coking coal price impact for [the] third quarter will be higher by about $95/t to $100/t. The impact of the cost increase is getting reflected gradually in the market; the prices of steel products in India, which were lagging the international price cycle, are now going up," said JSW's commercial and marketing director Jayant Acharya.

"In October, we have seen some price increases and going forward in November and December, we see price adjustments going upwards to balance cost increase," he added.

JSW Steel also highlighted that Indian iron ore prices had not receded to the same extent as international prices and a further decline in iron ore prices will help offset the coking coal costs.

India's state-controlled NMDC cut its iron ore prices for a fourth consecutive month in October but prices were still higher on the year by 72pc for lumps with 65.5pc Fe content. The daily Argus ICX 62pc iron ore index has dropped by 50pc since hitting a record peak of $235.55/t cfr Qingdao in mid-May and is at the same level as October last year. JSW's captive iron ore capacity has gone up from 42pc to 50pc this quarter.

By Sumita Layek