Steel Authority of India Ltd (SAIL), the country’s largest steel manufacturer, is planning to invest ₹5,500 crore during the current fiscal year to expand its steel production capacity. This investment is part of SAIL’s ambitious ₹1 trillion investment plan aimed at boosting its annual steel production capacity from the current 20.6 million tonnes (mt) to 35 mt by 2030-31.
According to Amarendu Prakash, Chairman of SAIL, the company’s investments for the fiscal year will focus on sustaining existing projects and de-bottlenecking efforts. Last year, SAIL invested ₹8,000 crore for similar expansion efforts, and this year’s investment is expected to be at a similar level.
SAIL’s long-term goal is to reach an annual capacity of around 35 mt of crude steel by 2030-31, requiring substantial investments in expanding and modernizing its facilities. The company aims to invest approximately ₹1,10,000 crore to achieve this ambitious target, as outlined in a government statement in August 2022.
Part of the ₹5,500 crore investment will also go toward augmenting existing facilities. Additionally, SAIL is exploring options to double its capacity at the Benga coal mine in Mozambique, increasing it from 2 mt to 4 mt, primarily through debt financing.
SAIL’s plans for capital exploration and raising debt for the Benga coal mine expansion are strategic decisions. The International Coal Ventures Pvt. Ltd (ICVL), a joint venture involving SAIL, is responsible for acquiring overseas coal mines and assets. ICVL, along with partners such as Rashtriya Ispat Nigam Ltd, NMDC Ltd, Coal India Ltd, and NTPC Ltd, is involved in sourcing capital and managing the coal mine project.
The steel industry is currently grappling with rising coking coal prices, driven by mine closures in Australia. Indian companies are stockpiling coal to meet increased demand after the monsoon season. In response to these challenges, SAIL is actively seeking to secure 300,000 tonnes of coal through Russian imports, marking its second coal import from Russia this year.
As of September 30, 2023, Australian premium hard coking coal prices stood at $333 per tonne FOB (free on board) and $349 per tonne CNF (cost, no insurance, and freight), showing a 3% increase over the previous week. These price hikes are due to growing buyer interest and limited supplies.
SAIL’s efforts to import more affordable coal from Russia are aimed at cushioning the impact of surging coal prices on its operations. As the steel industry continues to experience demand growth, securing a stable supply of key raw materials like coal becomes crucial for the company’s production and expansion plans.
SAIL’s substantial investments in capacity expansion and coal procurement reflect its commitment to meeting the rising demand for steel in India while addressing the challenges posed by global commodity price fluctuations.
