JSW in $2 bn deal with Japan’s Kawasaki Kisen Kaisha Ltd.

JSW Group has signed a $2 billion (Rs 8,160 crore), 10-year deal with Japan’s third biggest shipping firm by sales, Kawasaki Kisen Kaisha Ltd (or K Line), for transporting coal that will be used to fire the company’s steel and power plants, an arrangement that will ensure that the company is not affected by an increase in freight rates. As per the deal, K Line will deploy 10 dry bulk carriers to ship coking and thermal coal from mines owned by the OP Jindal group in Indonesia and Mozambique, as well as coal from mines in Australia and China.

The contract with K Line will start later in 2008 with two panamax ships. Five capesize ships and three more post-panamax ships will be deployed from 2011-12. By 2015, when all the ships enter service, JSW will be importing about 12 million tonnes of coal. JSW had earlier concluded ship charter contracts with K Line for three vesselsa panamax starting 2008 and two post-panamaxes starting 2009. Thus, the total volume of coal K Line will transport for JSW by 2015 is expected to be around 15 million tonnes per annum, which will be more than 40% of the total volume of coal to be imported by the two companies JSW Steel and JSW Energy. JSW Energy is the power generation outfit which plans to expand to 15,000MW by 2015 (including coal thermal and hydropower plants).

For JSW, the deal is beneficial as it will insulate the company from any escalation in freight rates. Dry bulk shipping rates have been rising mainly due to demands for shipping raw materials into China and India.