Adverse Australian Weather Impacts India's Steel Industry

By Joel ScanlonFeb 7 2011

Last week's cyclone Yasi has compounded the floods from December for Australia’s Queensland coal mines. The economic impact of the natural disaster is now being felt on foreign shores, specifically India.

The raw material costs of steel plants in India have been escalating for the last couple of months as domestic companies rely on imported coal.

Steel price rises will pass on to the automobile and construction industries soon enough. Since the floods in Australia the disruption of coking coal supply has driven up the spot prices of coking coal by almost $50 a tonnes to approximately $290 a tonne. The increased spot prices will hit the non integrated steel producers in India in terms of higher contract rates as well.

Prices of thermal coal used by power plants has also gone up thanks to the Australian supply of coal being delayed. Since international negotiations for annual supply contracts will be settled for 2011-12 next month most companies will end up paying much higher rates for thermal coal than last year.

It was $98 per tonne for thermal coal this financial year but may be as high as $130 to 145 a tonne for the coming year. The sky rocketing price rise will affect related industries and inflation may set in thanks to the partial shutdown of coal mines in Australia.