Coal Industry Criticality


India is currently the 5th largest producer of steel. She is slated to become the second largest by the year 2016 and by the year 2020, her steel making capacities are expected to grow exponentially, taking her way beyond the 200 million ton mark. 193 MOU's for Greenfield projects involving a total outlay of INR 5140 billion is already in place which is expected to be further bolstered once the global economy shrugs off the ill effects of the meltdown.

The per capita consumption of finished steel products in India has nearly doubled to 43.4 kgs in 2007 from 26.8 kgs in 2001, showing the kind of growth trajectory that the industry has chalked out in the immediate past. However, this is still woefully small in comparison to the world average of 194.2 kgs and virtually insignificant when compared to developed economies like USA (353.9 kgs) and Germany (463.4 kgs), pointing at the huge scope that remains in the segment.

Even if we take a conservative benchmark of 200 million tons of steel by the year 2020, and consider that only 50 percent of it will be made using the Blast Furnace route, then also will arise a coke demand of above 60 million tons per annum, which is a humungous jump from current consumption levels. Industry experts however, expect this demand to be upward of 150 MT basing their calculations on an realistic benchmark of 300 MT of steel production by the year 2020.

Another fact that needs clarification is that while the primary driver of demand for coke is, and will continue to remain, the steel industry, there is also a thriving demand from segments like foundries, soda ash and other chemical units, etc. something that is not considered while compiling the demand for coal and coke.

The critical point then, is that coking coal and coke will continue to be in short supply in the foreseeable future and that there will be a huge opportunity in front of key players like Chhattisgarh Industries Ltd.