India’s demand for coking coal will boost global prices for the the next seven to eight years, driving acquisitions from the U.S. to Australia, India’s biggest non-government producer said.
“Everybody in India right from government-owned steel mills to private players is looking to acquire coking coal mines abroad,” Arun Kumar Jagatramka, chairman of Gujarat NRE Coke Ltd. and its Australia-listed unit Gujarat NRE Coking Coal Ltd., said in an interview. “They are taking whatever they can get their hands on, whether it’s in the U.S. or Canada. Australia is on all their radars.”
Growing steel production in India will increase demand for coking coal and imports of the raw material into India will more than double to 56.5 million metric tons by 2015, according to Morgan Stanley. India increased annual steel output by 34 million tons since 2005 to about 72 million tons and aims to more than triple capacity to 232 million tons.
The key steelmaking ingredient may climb to a range of $200 to $220 a ton, Jagatramka said by phone yesterday. Contract prices for coking coal have settled at $209 a ton for the December quarter, according to Macquarie Group Ltd. Prices are expected to average $191 a metric ton this year, up 48 percent from last year, Morgan Stanley analyst Peter Richardson said in an Oct. 6 report.
Gujarat NRE Coking gained as much as 1.6 percent to 62.5 Australian cents as of 2:47 p.m. on the Australian stock exchange. Parent Gujarat NRE Coke rose as much as 2.4 percent to 67.20 rupees and traded at 66.75 rupees as of 9:24 a.m. in Mumbai trading.
Gujarat NRE Coking, with two mines in New South Wales state, will increase production to 6 million tons from 1 million tons by 2015, Jagatramka said. Gujarat NRE Coke’s capacity in India is expected to expand to 4 million tons from 1.25 million tons in the next four years, according to the company’s website.
China last year imported a record quantity of coking coal, and India almost doubled purchases of energy coal for its power stations to 60 million tons. Adani Enterprises Ltd., India’s biggest coal importer, in August agreed to buy an Australian coal project for A$3 billion ($2.9 billion).
“Given the readiness, you could see at least 10 or 20 companies from India following Adani,” Jagatramka said. “Indian steel and mining companies are well capitalized, with one or two consortiums there which have more than $2 billion or $3 billion in their kitty,” he said, naming Coal India Ltd. as a potential acquirer.
Gujarat NRE Coking aims to expand its mines in Australia, while seeking acquisitions, Jagatramka said.
“We are open to acquisitions, but would not like to fritter away our resources or energy,” he said. “We’re not averse to thermal coal mines, we can see value there but we’re not actively pursuing that option.”
The company may sell shares in Australia or tap lenders in India for funding future acquisitions, Jagatramka said.
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