India’s AMNS signs 10-year LNG supply deal with Shell

Indian steel manufacturer ArcelorMittal Nippon Steel (AMNS) has signed a 10-year deal to buy LNG from Shell, with deliveries to start from 2027, people with direct knowledge of the matter have said.

Under the terms of the deal, the steelmaker's direct reduced iron (DRI) plant in the western Gujarat state of Hazira will receive 500,000 t/yr of LNG, Argus understands.

The Hazira plant has crude steel production capacity of 8.8mn t/yr, according to ArcelorMittal's 2023 annual report. As much as 65pc of the capacity is based on DRI.

AMNS also has a deal with TotalEnergies for 500,000 t/yr that is scheduled to expire in 2026.

This deal comes at a time when AMNS plans to expand its steel capacity to 20mn t/yr in the long run. This supply pact also underscores a trend in the global steel industry to use cleaner energy sources to produce the so-called 'green steel'.

The firm imports up to 75pc of its 1.72mn t in natural gas requirements on an annualised basis, a source said.

The deal was signed at a 11.5pc percentage of Brent crude prices, trading firms said, adding that this is so far the lowest-heard slope for an Indian term LNG supply contract.

AMNS sought LNG supply for a period of 5-10 years starting in 2027 under a tender that closed in mid-March. The firm last sought long-term LNG in 2022 through a tender for 400,000 t/yr of LNG to be delivered across 2025-30.

Indian importers will continue to seek term supply despite softening spot prices, mostly to hedge their risks in a market that can still be volatile, trading companies said.

The Argus front-month price for LNG deliveries to India was assessed at $11.50/mn Btu today, up from $10.16/mn Btu a week earlier. The price reached as high as $48.30/mn Btu in August 2022.

The firm has lowered its carbon emissions by 32pc in calendar year 2022 from 2015 levels, it said.

By Rituparna Ghosh