* Low-grade iron ore tends to consume more coal in
* Domestic mining bans lead to paucity of superior iron ore
* Coal suppliers Australia, South Africa, U.S. to gain from
the extra imports
By Krishna N Das
NEW DELHI, Nov 25 India's coking coal imports
could see a double-digit percentage increase this fiscal year as
a scarcity of high-quality iron ore after a mining ban is
forcing steelmakers to use inferior grades that need more coal
to process into steel.
The world's third-largest importer of coking coal shipped in
32.2 million tonnes last year. The use of low-grade iron ore
would mean more coal purchases from traditional suppliers such
as Australia, South Africa and the United States - helping
support prices even if demand from China tapers.
But it would not help in the country's efforts to reduce its
trade deficit and shore up a weak rupee currency.
"Some of the lower-quality iron ores mined in India have a
higher than normal alumina content, which leads to higher
slagging (residue from smelting of ore) in the blast furnace,"
said Jim Truman, principal coal analyst at energy consultancy
"As a result, when using more of this product, blast
furnaces require higher levels of heat."
Domestic steel companies have traditionally preferred
high-grade ores as every percentage point increase in iron
content improves productivity by 2 percentage points and reduces
coking coal consumption by 1 percentage point, according to the
Indian Bureau of Mines. Ore with more than 64 per cent iron is
regarded as high grade.
But mining bans in key producing states have forced Indian
steel companies to adopt methods to be able to use even
low-quality ores - containing as low as 48 per cent iron
-accumulated over the years.
Many of the so-called beneficiation plants - which extract
waste material from ore and increase its iron concentration -
built by companies such as JSW Steel Ltd, Essar Steel
and Monnet Ispat & Energy are struggling
with the high percentage of alumina as well as silica.
"The problem that is coming up today is that low-grade ores
contain very high alumina and silica which cannot be taken out
during the beneficiation process," said Seshagiri Rao, joint
managing director of JSW Steel, India's third-biggest steel firm
by market value. "That's when fuel consumption goes up."
Rao said the company's coking coal consumption could rise
about 15 per cent this fiscal year mainly due to the use of
low-grade iron ores. JSW Steel imports all of its coal needs -
about 14 million tonnes last fiscal year - due to a shortage at
Kalyani Steels Ltd's imports of coke - derived by
heating coking coal - would rise 50 per cent to 150,000 tonnes
this fiscal year as it uses low-grade iron ore and adds
capacity, Managing Director RK Goyal told Reuters.
OUTPUT TRAILS DEMAND
About 770 kg of coking coal and 1,400 kg of high-grade ore
are required to produce 1 tonne of steel, according to industry
estimates. Though coking coal is slightly costlier than iron
ore, steelmakers prefer importing coal due to the lower volume.
India produced 49.4 million tonnes of coking coal last
fiscal year, with state-run monopoly Coal India Ltd
accounting for most of that.
The miner's inability to raise output of thermal and coking
coal in line with demand has meant India has become the
third-largest importer of the fuel despite sitting on the
world's fifth-largest reserves, as per a BP Plc estimate.
Despite the higher fuel requirement, India's consumption of
low-grade iron ore is expected to rise to about 120 million
tonnes by 2020 from about 80 million tonnes in the past fiscal
year, said N.K. Nanda, technical director at NMDC Ltd,
India's top iron ore producer.
In a measure of things to come, Kalyani Steels' Goyal said
the company would bid for some of the 11.5 million tonnes of
low-quality iron ore that Goa would auction. The state used to
export all of its ore mainly to China before a ban last year.
"It's a developmental process," said Goyal. "Earlier nobody
had a sinter plant, nobody had pellet plants (which could
utilize low grade ores) because sufficient iron ore was
available and good quality iron ore was available cheap."
(Editing by Muralikumar Anantharaman)