VSP may take stakes in Australia mines

Visakhapatnam Steel Plant is evaluating taking a minority stake in a couple of mines in Australia. This could help the company control the runaway increase in coking coal prices. 
 
VSP expects an additional burden of about Rs 270 crore (Rs 2.70 billion) this year because of increased input costs, mainly on account coking coal. 
 
The increase in raw material costs is, however, not expected to have any impact on its profitability, thanks to a recent hike in prices of long products, according to a senior official of the company. 
 
VSP chairman and managing director BK Panda said the steel plant was evaluating investing in a couple of mines in Australia to ensure that the plant did not face any shortage in coking coal and was not financially impacted by increasing prices. 
 
"The ministry has allowed us to take a stake and we are eager to look at this route. We are looking at two or three mines in

Australia, though nothing has been finalised. For a steel plant it makes sense to make such investments as it will help us have some say in pricing and distribution of coal," Panda said. 
 
The Indian steel industry has been hit by a crippling shortage of coking coal and leading steel manufacturers have had to cut production and have had to buy coal at very high prices in spot buys. 
 
"We need to tie up supplies for about 5 lakh tonne of coking coal with American suppliers. This is for the first time that the steel industry in India is facing a problem of coking coal and this is a learning curve," Panda said. 
 
Coking coal shortages hit the Indian steel industry early this year. VSP imports close to 90 per cent of its 3 million tonne coking requirement from two Australia companies. 
 
Coking coal prices have gone up nearly four-fold in the last one year, from $75-80 to $250 per tonne FOB (freight-on-board).