JINDALS PLAN
TO ACQUIRE EQUITY COAL IN AUSTRALIA
The Sajjan Jindal controlled JVSL is planning to pick up equity
coal in an Australian coal mine, to tide over the raw material
shortage that threatens to cripple the steel industry.
"The group is currently evaluating
the mine and will spend roughly $20 million for the acquisition,"
Jisco managing director Sajjan Jindal said.
About 2 million tonnes per annum of JVSL's expected demand
of 4 million tonnes will be sourced from the mine, relieving
pressures on the supply side. The deal is expected to be concluded
in about six months, he said.
JVSL will pick up equity as part of an
international consortium that currently operates the mine
for a 30 to 50 year term, Mr Jindal said. Prices of raw materials
like coking coal, metcoke, scrap or sponge iron and iron ore
have sky-rocketed over the last two months crossing 20-year
highs.
Acquiring coal mines was one way of taking
care of volatility problems, Mr Jindal said.
Another strategic move is to enter into
long term contracts with shippers. The company is planning
to sign a 20 year shipping contract with shippers to ensure
that freight rates were not beyond control. Spot freight rates
have spiralled from $10 a tonne to $35 levels in the past
six months, he said "The plan is to form an SPV (special
purpose vehicle) for about six vessels and take a 15-20% stake
in the venture, Mr Jindal said..
Commenting on the government move to regulate steel prices,
Mr Jindal said the industry has agreed to freeze prices till
June. There is little that the government can do to help ease
the raw material sourcing problem, but it can canalise iron
ore exports.
"Iron ore of over 60% iron content
should not be allowed to be exported," he said.
The higher grades should be reserved for
India .
Mr Jindal also said the financial institutions
should review their decision to limit exposure to the steel
industry.
Companies which are pre-paying their debt
should be allowed to expand, he said.
New steel makers like Jindals, as well
as older companies like SAIL and RINL are facing severe pressure
from rising input costs, industry analysts say. While SAIL
is self sufficient in iron ore, RINL may have to shell out
about Rs 750 crore per annum on increased coal and ore prices.
