State-run miner Coal India has cancelled the coal linkage auctions to the steel sector. This was the sixth tranche of linkage auctions for coking coal, a key feedstock for steel making, which was scheduled between June 23 and June 27.
Sources told businessline, the miner has planned tweaks in the auction process and norms which led to the cancellation. Tweaks are likely to make the auction “more friendly”. Officials said, the auctions have been “postponed” and will “take place” at a later date with the new norms being announced.
For Tranche VI, Coal India commenced sales with the sponge iron sector in February. This was then followed by auctions for the cement sector in May. The auctions which were held for the captive power plant sector — earlier in May and June — also stand cancelled as per a notice by Coal India.
In a notice dated June 27, Coal India said, “It is hereby announced that due to unavoidable circumstances the steel (coking coal) auction under Tranche VI linkage auction scheduled between June 23 and June 27 stands cancelled. The revised schedule for the auction shall be notified in the due course.”
Long-term supply agreement
A linkage auction scheme is a long-term supply agreement, mostly for five years, allotted against competitive bidding. Under this, a separate one-time auction is conducted for various non-power sectors that include cement, sponge iron, captive power plants, steel, and others.
The now-canceled Tranche VI linkage auction had proposed an offering of 1.77 million tonnes (mt) of coking coal from the mines of Coal India’s subsidiaries, primarily Bharat Coking Coal Ltd and Central Coalfields Ltd.
For instance, it was said, the floor price for washed coking coal (pulverised coking coal) from Moonidih Washery was ₹14,000 per tonne, the highest in the lot, while the floor price for washed medium coking coal from Paterdih Washery was around ₹11,400 per tonne, the second highest floor price in the lot.
Some of the steel mills who had bid in Tranche V said that around 5 mt of coal was put on offer; and around 1.3 mt was booked, mostly at a base price; and in some cases at a premium ₹50-100 per tonne. The bookings were mostly for washery grade coking coal, they claimed.
Incidentally, India, the world’s second-largest crude steel maker, is amongst the highest importer of coking coal. Nearly 60-70 per cent of India’s annual coking coal requirements are met through imports, which includes Australia, the US, Russia, Canada, and Mozambique. Imports in FY23 were around 53 mt.
Imported Australian premium coking coal is currently priced at $240 per tonne. Imports are also high since coking coal available in India is said to have a high ash content and that lowers its usability in steel-making. Domestic material picked up is usually consumed as a blend.