Coal news and updates

Is US steam coal affecting NEC’s coal market?

December 6: The increase in imports of US steam coal in 2012 and 2013 have prompted many an exporter to comment that it is affecting the overall market share of North Eastern Coalfields Ltd (NEC), the smallest subsidiary of Coal India Ltd (CIL).

The trend became visible from last year when brick kiln makers in Punjab started using high sulphur and high calorific value US steam coal and this appears to be severely denting the marketshare of NEC, which produces coal similar in characteristics to that of US steam coal, industry sources said.

Such is the situation that NEC, which had offered around 2.17 lakh tons of G1 and G2 grade coal in 2012-13 and allotted around 2.05 lakh tons on the coaljunction platform, has offered only around 50,000 tons and allotted 36,000 tons in 2013-14 on this platform till November.

On the MSTC platform, NEC had offered around 675,00 tons in the first seven months (April-October) of 2013-14, but allotted only around 48,000 tons.

NEC generally offers higher quantity of coal for sale through e-auction in December-January when the brick kiln season begins, but that depends on production and market assessment.

“The delivered price of NEC or Meghalaya coal (average calorific value of 6,800 Kcal/kg) which are bought by brick kiln makers in Punjab, comes to around Rs 12,500 per ton (Rs 6,000 is the price of coal and Rs 6,500 is the freight cost by truck), but the price of US steam coal comes to around Rs 11,500 per ton and that is why a section of users has shifted to the imported material,” they said.

“In fact, some brick kiln makers claimed they saved around Rs 12-13 lakh last season by using US steam coal instead of the NEC variety,” a trader said.

The basic characteristic of US steam coal is almost similar to that of NEC coal, but the calorific value of the former is much higher. The US coal typically has CV of 7,400 Kcal/kg GAR, TM of 11% (ARB), ash of 11% (ARB), VM of 40% and sulphur of 2.75 to 3.50%, which is almost same as that of NEC coal (G1 grade), except that the calorific value of the former is only around 6,800 Kcal/kg.

In terms of heat value, the landed cost of US steam coal comes to around Rs 1.55 per kcal/kg for Punjab brick kiln makers as compared to Rs 1.84 per kcal/kg for NEC coal, ie, a saving of nearly 16%.

“Besides saving in per Kcal cost, the cost itself is down by about Rs 1,000 per ton and the high sulphur of US steam coal results in generation of additional flame that adds more colour to the bricks. So it is a win-win situation for brick kiln makers,” an official with a US steam coal supplier said.

Will other states follow?

The supplier claimed that brick kiln makers in other states like Haryana, Himachal and Uttar Pradesh may also start buying US steam coal considering its advantage.

The brick kiln makers in these states generally buy coal from other coalfields of CIL, ie, non-NEC mines where not only sulphur, but calorific value too are extremely low. In addition, non-NEC coal also has high ash content, he said.

“High calorific value means low ash generation and that too augurs well for brick kilns as high ash content in coal leads to less heat generation which affect the quality of bricks,” the supplier said.