Bangalore: India’s JSW Group has signed a $2 billion (Rs8,160 crore), 10-year deal with Japan’s third biggest shipping firm by sales, Kawasaki Kisen Kaisha Ltd (or K Line), for transporting coal that will be used to fire the company’s steel and power plants, an arrangement that will ensure that the company is not affected by an increase in freight rates.
K Line will deploy 10 dry bulk carriers to ship coking and thermal coal from mines owned by the OP Jindal group in Indonesia and Mozambique, as well as coal from mines in Australia and China.
For JSW, the deal is beneficial as it will insulate the company from any escalation in freight rates, said a company executive who does not want to be named. Dry bulk shipping rates have been rising mainly due to demands for shipping raw materials into China and India.
The contract was signed by Hiroyuki Maekawa, president of K Line, and Sajjan Jindal, vice-chairman and managing director of JSW Steel Ltd and chairman of JSW Energy Ltd.
The group needs more coal as it has some new plants coming up. JSW is setting up a 1,200MW coal-fired power plant in Jaigad, Ratnagiri district, Maharashtra, and a similar plant at Simar in Gujarat.
It is also planning a 900MW power plant close to its steel plant at Vijayanagar, Bellary district, Karnataka. The company currently operates a 450MW plant in Bellary, which, apart from meeting its own captive needs, sells power to Power Trading Corp. Ltd.
Besides, JSW Steel is expanding its existing steel mill in Vijayanagar and plans to build two new mills in Jharkhand and West Bengal. JSW Energy, the group’s power generation unit, plans to expand to 15,000MW by 2015 (including coal thermal and hydropower plants).
The contract with K Line will start later in 2008 with two panamax ships. Five capesize ships and three more post-panamax ships will be deployed from 2011-12. By 2015, when all the ships enter service, JSW will be importing about 12 million tonnes of coal. “Freight revenue from the 10 vessels is expected to be over $200 million a year,” K Line said in a statement.
JSW had earlier concluded ship charter contracts with K Line for three vessels—a panamax starting 2008 and two post-panamaxes starting 2009. Thus, the total volume of coal K Line will transport for JSW by 2015 is expected to be around 15 million tonnes per annum, which is more than 40% of the total volume of coal to be imported by the two companies.
Panamax ships are called so because they are the biggest ships that can sail through the Panama Canal fully laden.