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Australian Cyclone May Lead To Rise In Steel Prices In India

The recent cyclone in Australia has disrupted major mines and ports in the country, producer of more than 50 per cent of the world’s seaborne coking coal

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Steel prices in India are expected to rise on the account of rising coking coal price. 
The recent cyclone in Australia has disrupted major mines and ports in the country, producer of more than 50 per cent of the world’s seaborne coking coal, pushing up the price to $150-180 per tonne, a surge of 86-124 per cent compared to the average coal price of $80.6 per tonne in Australia.

India imports 70 per cent of its coking coal for manufacturing of steel (around 70 per cent) and an increase in the input cost will very likely result in rise in steel prices in India, according to a report by rating agency CARE Ltd.

The major raw materials used for steel manufacturing are coking coal and iron ore. While the demand for iron ore is mostly met domestically, coking coal is largely imported, mainly from Australia. Thus, the sharp rise in prices will increase the cost pressure for producers, in turn, leading to a rise in steel prices. 
Steel companies are likely to pass on the rising coking coal prices to consumers as demand has begun improving.

Coal prices in Australia remained subdued during the year 2015, but have picked up since May 2016. The prices increased sharply in July 2016 and further in October 2016. 
However, prices started moderating from December 2016 and stood at $80.6 per tonne in March 2017. The rates started increasing on an year-on-year (y-o-y) basis since July 2016. It was last in November 2011 that the coal prices had increased on a y-o-y basis.

Prices of coking coal from other countries such as the US, Canada and Mozambique have also begun to rise, in sync with rising coking coal prices in Australia.