India's top metals and cement makers are weaken by a fall in the availability of coal from state-owned Coal India Ltd (CIL NSE 0.63 %) and its subsidiaries, which are sending more of the dry fuel to the power segment while cutting down the supplies to other users.
"We heard from CIL that there is no sufficient coal available and that is why they have stopped the supplies. Our stock as of today is available for the next two days," stated an executive at a top steelmaker, requesting anonymity.
Steelmakers that process DRI (direct reduced iron) use thermal coal and maintain stock for 12-15 days, which has now come down to 3-4 days for most. For them, the daily consumption is around 10,000-12,000 tonnes of coal.
Industry insiders said top players like Jindal Steel & Power, Vedanta NSE 1.49%, Hindalco NSE 1.18 % and JSW Steel will be impacted because of this development.
"The situation is grave. We are mulling reducing the production if this continues," stated another executive of a manufacturer of primary steel.
Coal India arm Mahanadi Coalfields on Tuesday informed the railways that it has decided to limit the loading of non-power category rakes to boost dispatches to the power sector.
"Therefore, it is requested to restrict supply to non-power category customers to a maximum of 2 rakes from the sidings of IB coalfield to maximise dispatch to powerhouses having less than l0 days' stock," the company stated in a letter to the chief freight traffic manager at the South East Central Railway in Bilaspur.
Mahanadi Coalfields said this has been discussed and a joint decision made by the coal players and the ministries of coal, power and railways.
A CIL spokesperson could not be contacted over the phone.
"Coal India usually loads around 210-230 rakes per day for both power and non-power categories. Around 50-60 rakes per day go for non-power categories like steel, aluminium and cement. In the last 10 days, the supply is around 29-25 rakes," stated an industry executive close to the development.
Cement firms say that they had stocked enough during the first quarter and expected the situation to ease, but it did not happen.
"We were not prepared for this ad hoc announcement by Coal India," stated an insider at one of the largest cement makers based in eastern India.
Some cement manufacturers said they may curtail production.
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