Naveen Jindal-promoted Jindal Steel & Power Ltd (JSPL) mines in Odisha, which are set to start by early next year, will make them self-reliant in thermal coal and will lead to an improvement of 5-6% in their operating margins, a top executive said.
“We consume around 12MT of thermal coal per year and sources half of our needs through both domestic and international markets but that is set to change after the mines in Odisha start. This will make the company self-reliant in meeting its thermal coal requirements and not require sourcing from outside…and will lead to an improvement of 5-6% in the company’s operating margins in the ensuing quarters,” the executive said.
Adjusted Earnings before interest, tax, depreciation, and amortization (Ebitda) of the company for the half year ended September 2023 stood at ₹4,917 crore, a fall of 3.76% YoY (Year-on-Year).
The company secured three new non-coking coal mines last fiscal (Utkal B1, B2, and C in Odisha, Gare Palma IV/6 in Chhattisgarh), which are set to commence operations early. These mines will provide the company with a significant competitive advantage. Through these mines, the company plans to meet its entire thermal coal requirement as they reach their peak capacity, in turn making the company self-reliant.
This ensures a reliable and cost-effective supply of key raw materials for JSPL’s operations.
Thermal or steam coal is a grade of coal used to create electricity from steam in power plants and India is one of the largest producers of thermal coal in the world after China.
Many industrial processes like the production of steel, etc. also require thermal coal primarily for producing sponge iron and for captive power generation used to make crude steel.
“If a company has captive coal mines, enough to meet its demand, it will help them save raw material costs, as despite being a large producer of thermal coal, India still imports huge chunk of it from South Africa, Australia, and Indonesia, which adds to the costs,” said Priyesh Ruparelia, vice president and co-group head of corporate ratings of Icra Ltd.
According to the International Monetary Fund (IMF), South African Coal Export Price was at $129.47/MT (USD per million ton) at the end of October 2023, up from $125.02/MT in September 2023, recording a change of 3.56% MoM (Month-on-Month).