CIL’s coking coal linkage auctions for steel sector to gain traction

Kolkata: Coking coal linkage auctions by BCCL are expected to gain traction among steel producers after Coal India Limited (CIL) made the auction terms more industry-friendly to help India reduce imports, officials said on Monday. Steel majors have expressed satisfaction with the modifications made in the terms, stating they will participate in future rounds of auctions. Coking coal is a key raw material for steel making and most of its demand is met through imports.

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Steel makers, however, emphasised that quality, quantity, and timely delivery will be key factors in successfully replacing imported coking coal with domestic raw material, officials said.

Bharat Coking Coal Limited (BCCL) achieved record-breaking success in the recently concluded long-term linkage e-auction in tranche VII for the steel sub-sector. Of the 3.36 million tonnes of coking coal offered, 2.40 million tonnes were successfully booked, setting a new benchmark in coal bookings, the miner said.

In contrast, till tranche VI, auctions for coking coal had received a tepid response, with none of the offered coal being booked.

AVP (Coal) at JSW Steel, Goutam Senapati, told PTI that the terms and conditions were simplified and made more user-friendly by Coal India and the Coal Ministry after industry concerns were raised.

"With the necessary relaxations and changes, it made it conducive for us to bid," Senapati said.

JSW Steel booked 2.06 million tonnes in tranche VII and expressed interest in participating in future auctions.

Senapati, however, added that further relaxations are required and expects Coal India to address the remaining issues to increase participation in the bidding process aimed at replacing imported coal.

Tata Steel, another successful bidder in the last tranche, noted that the auction norms were attractive but stressed the need for the miner to ensure coal quality and timely supply.

"Coal India and the government have listened to us and made the auctions more attractive. If more coal from new mines is brought in, it will generate further interest from steel companies. However, they must ensure quality and supply assurances to support our bidding," Tata Steel DGM (Coal Coordination) Rajeev Datta said.

BCCL produced approximately 1.5 million tonnes of washed coal in FY24 and plans to raise this to 2.5 million tonnes in the coming financial year. This increase in production is expected to save USD 562 million in foreign exchange through import substitution, BCCL Chairman and Managing Director Samiran Dutta said.

To accelerate its asset monetisation efforts, BCCL will seek bids for the development of four coal washeries with a combined capacity of around 8 million tonnes, he added.

A top Coal India official said that key relaxations were offered concerning the end-use of coal middlings, which are a byproduct of the coal washing process, consisting of a mixture of clean coal and coal gangue.

The new auction documents also allowed relaxation of the timeframe for incremental linkage and inter-company coal transfers within the same group.

Coal India stated that the key objective of these auctions for the steel sector is to generate premium revenues and meet the government’s target of reducing coking coal imports by replacing them with domestic output.

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