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Canada says keen to work with Narendra Modi govt

LiveMint logoLiveMint 27-05-2014 Pranav Nambiar

New Delhi: Canada will work with the Narendra Modi government with an eye on boosting supplies of coking coal to India and invite Indian investments in the country’s rich coal resources, said Rosaline Kwan, senior trade commissioner at the Canadian high commission.

Steel companies in India are starved of coking coal, a key input in steel making, which is in short supply domestically. Coking coal stocks were 1 million tonnes (mt) in 2013. Overall imports stood at around 33-35mt, primarily from Australia.​

Other suppliers include the US, Mozambique, Indonesia and Canada.

“Canada definitely sees an opportunity in supplying coking coal to India. We do not supply large amounts of coal to India as of today. Half our coal base is in the thermal area (used in power generation) and the other half is in the metallurgical or coking coal area. Where our relationship has potential is in the area of coking coal that is used in steel making,” Kwan said.

Canadian high commissioner Stewart G. Beck recently invited state-owned Coal India Ltd (CIL) to invest in coking coal assets in Canada. Kwan added that companies from both countries are in dialogue on coking coal assets, but she declined to name any specific companies, citing corporate confidentiality.

Coking coal prices have been down in recent times with a supply glut due to declining demand from big consumers like China, Japan and Korea. Canada hopes that Indian steel producers will allow the country to look beyond customers in Japan and Korea.

Kwan said the interest shown by Indian companies in Canadian coal is because of the quality of the coal—low in sulphur and ash content. “It could be that the coal in Canada is not the lowest priced, but certainly I think it could be competitive given that there is already importation done by steel makers here.”

Steel companies like JSW Steel Ltd and Steel Authority of India Ltd (SAIL) import coking coal from Canada. International Coal Ventures Pvt. Ltd (ICVL), a consortium of state-owned firms led by SAIL for acquiring coal assets abroad, also views Canada as a target country.

Rashtriya Ispat Nigam Ltd. (RINL) too has signed an in-principle agreement for co-operation in coal mining with Canadian institutions.

Former minister of steel Beni Prasad Verma led a delegation to Canada last year that studied Canadian technology and signed a few preliminary agreements, Kwan said.

“They also looked at some of the coal assets and the quality, etc. From a government-to-government perspective, there was support and openness for co-operation and hope this grows growing forward,” said Kwan.

Canada is the third largest coking coal exporter behind Australia and the US. The country has 8.7 billion tonnes (bt) of proved resources of coal-in-place (known deposits that have been carefully measured). The resources are expected to last about 100 years, going by current production levels.

Seshagiri Rao, joint director and chief financial officer at JSW Steel, said the company is sourcing from Canada as part of a strategy to avoid over-reliance on Australia. JSW has also begun sourcing from countries like Mozambique and Indonesia, he said.

“The Canadian coal is, however, $10-12 per tonne more expensive than Australian coal, primarily due to freight charges. However it is good to have a blended mix of different grades of coal,” Rao said.

According to data provided by iron and steel research house Ore Team, while mid-volatility hard coking coal imports from Canada are priced at $140 per tonne, the corresponding price (cost and freight) for Australian imports stands at $122.5 per tonne.

It is in India’s interest to maintain Australia as its main source of coking coal, both from the perspective of costs as well as the quality of ore, as the Australian variety is of superior quality compared to that from other markets, said Prakash Duvvuri, head of research at Ore Team.

“Companies like Essar Steel, which have their own shipping vessels, can benefit importing from Canada. But the likes of SAIL might not find it feasible to import large quantities from Canada, as they would have to hire ships to import the coal,” Duvvuri said.

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