Gujarat NRE sees Australia flood boosting demand

Gujarat NRE sees Australia flood boosting demand

Mumbai: Gujarat NRE Coke sees demand for coking coal from its Australian unit “rising substantially" after floods in some parts there hit supplies to Asian steelmakers, a senior official said on Wednesday.

More than two months of torrential rains in Australia’s Queensland state, the world’s largest exporter of coal for steel-making, have left collieries underwater, rail lines inoperable and coal ports running at a trickle -- if at all.

However, Gujarat NRE’s Australian mine - located in New South Wales - was unaffected, chief financial officer P. R. Kannan told Reuters over the telephone.

“There are no issues in New South Wales so my mine is operating normally," Kannan said. “But, I’ll benefit from higher prices. It will definetely help our fortunes in the last quarter."

Gujarat NRE’s Australian unit reported a net profit of A$29.4 million for the half-year ended September against a loss a year ago, helped by higher coking coal output and robust prices.

The mettalurgical coke producer expects coking coal prices to rise as much as $300 a tonne over the next few weeks, Kannan said.

Spot prices for coking coal have already risen to $240 a tonne on tight supplies, Kannan said, more than 10 percent over the industry benchmark of $225 a tonne free on board Australian ports negotiated between BHP Billiton and Japanese steelmakers for the first quarter of 2011.

“Steelmakers might not get adequate quantity of coal they require and also the cost will go up drastically if they go for spot purchases outside the contract. Availability will be an issue," he said.

The firm has booked two consignments of 80,000 tonnes each to be shipped to China from its Australian unit this month, Kannan said, without disclosing the price but adding “there will be more to come."

The Australian unit, which produced a little over 1 million tonnes of coal in 2009/10, aims to increase output to 6 million tonnes per annum by 2014/15.

The coal produced from the unit is sold to the Indian parent, but with increased production, Gujarat NRE Coke has started exports to China and other countries.

Gujarat NRE, which supplies coke to major secondary steel producers mainly on India’s western coast, has seen prices rising by $50 to $450 over the previous quarter.

Gujarat NRE has risen 20% in the last 30 days compared with a little over 2% rise in the 30-share BSE benchmark index. At 12.05 pm, shares of the company were trading at Rs69.3, down 3.14% in a weak Mumbai market.

“With higher coking coal prices, coke has also benefitted. Already prices have increased so much and we expect it to go up further."