(Bloomberg) -- India’s top metal producers are searching for ways to trim their consumption of coal after sky-rocketing prices of the fuel ate into their profits.
Benchmark thermal coal prices have more than doubled in the past year and could surpass October’s record high as deliveries from Indonesia are delayed and a global energy squeeze continues. Coking coal, a key raw material in the steelmaking process, has risen by nearly a third in Dalian in the same period.
India’s biggest steelmaker by value, JSW Steel Ltd., missed profit estimates for the previous quarter after expenses surged 77% from a year earlier mainly due to higher power and coal prices. Total spending at billionaire Anil Agarwal’s Hindustan Zinc Ltd. also jumped 25% from a year earlier during the quarter. Still, the companies expect the higher raw material costs to push up metal prices, softening the blow.
“We are of course badly hit by the increased cost of coal but at the same time we also gained by the increased price of the metal,” Arun Misra, chief executive officer at Hindustan Zinc, said in an interview.
Reducing Coal Use
The country’s biggest zinc producer is aiming to cut costs by as much $20 a ton from an average production cost of $1,116 in the nine months through December. “This depends on how much you can squeeze the lemon. Everyday we sit down to find out more and more areas of improvement.”
Hindustan Zinc is looking to minimize the cost of coal through measures including by improving operating efficiencies and reducing consumption of the fuel by modifying its turbines, Misra said.
Coal Soars to $300 a Ton as Asia Scrambles for Power Plant Fuel
Meanwhile, JSW is bracing for a minimum addition of $25 a ton to coal costs as prices surge again this month, according to Seshagiri Rao, joint managing director at the steel producer. At the same time, the higher costs of coal and iron ore will mean steel prices will remain elevated at least in the current quarter, he said.
The Mumbai-based mill expects to commission some power plants at its Maharashtra complex this quarter to reduce power expenses and is exploring blending changes in coal to reduce consumption in the coke oven, he said.
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