India's JSW Steel to buy coking coal firm in Mozambique

India's JSW Steel will buy a coking coal company in Mozambique to secure supply of the key steelmaking raw material and shield against any volatility in prices.

JSW Steel's board of directors approved the acquisition of coal mining firm Minas de Revuboe (MDR) for about $74mn. The purchase of a 92pc stake in MDR gives JSW access to more than 800mn t of premium hard coking coal reserves in Mozambique, the steel producer said on 17 May. MDR's mine is not yet operational but the company aims to start developing the mine in the 2024-25 fiscal year.

"This is not only going to provide us some cushioning with respect to the highly volatile [premium low-volatile (PLV)] index," said JSW Steel's chief executive officer Jayant Acharya. "It also is logistically closer to India, and therefore, will give us an optimised cost."

Fluctuations in prices of high-quality seaborne coking coal have been a concern for Indian steelmakers, as they work to ramp up production in anticipation of rising demand from the infrastructure and automobile sectors. The Argus-assessed Australian PLV hard coking coal price crossed $600/t in March 2022, following the start of the Russia-Ukraine conflict. It was at $237/t on 17 May, a decline of $8/t from the start of this month, owing to ample supplies and thin buying interest.

JSW Steel's fourth-quarter profit fell by 64pc to 12.99bn rupees ($156mn) because of higher coking coal costs. Crude steel production in the quarter rose by 3pc on the year to 6.79mn t, while sales totalled 6.73mn t, also registering a growth of 3pc from last year.

The company also expects capital expenditure at 200bn rupees ($2.4bln) in the 2024-25 fiscal year, as it adds to its steelmaking capacity. JSW Steel is targeting a production capacity of 50mn t/yr by the 2030-31 fiscal year.

The company expects steel demand to pick up in the coming year, citing the government's infrastructure push and robust economic growth in India.

By Amruta Khandekar