Coal news and updates

Thermal coal imports rise 28% on strong demand

India’s imports of thermal or steam coal rose 28 per cent to 81.6 million tonnes (mt) during April to October this year. Thermal coal is used in power generation.

According to the India Coal Market Watch (ICMW), the country imported 63.59 mt of thermal coal during the corresponding period last year.

Overall imports went up 20 per cent to 105.78 mt during the period. This includes coking coal, petroleum and metallurgical coke, anthracite coal and others used in the steel sector.

While country-wise import figures for the period are not available, according to traders, import of Indonesian coal (thermal) grew at a faster rate. The rise is attributed to increasing demand for Indonesian coal from power utilities and the captive generation sector in the metallurgical sector such as steel and aluminium.
Weak Indonesian price

According to Siddharth Kasera, Vice-President of Concord Fortune, a mineral trading company, weak prices of Indonesian coal has acted as a major driver for such demand growth.

India primarily imports low calorific value coal of 3,800 GAR (gross-as-received) and 4,200 GAR from Indonesia.

During the last three months, price of both the varieties fell 9-10 per cent to $32 a tonne ($35 a tonne) and $39 a tonne ($43 a tonne), respectively.

Indonesian coal prices remained weak for last one year due to a drop in demand from China and over-production. On a year-on-year basis, prices remained flat.
S. African varieties

Demand for high sulphur South African thermal coal – used in the cement and sponge iron sectors – also grew, but at a lower pace. According to ICMW, imports from South Africa grew 7.5 per cent to 18.14 mt (16.87 mt) during January-October 2013.

Unlike the Indonesian coal, prices of commonly used South African varieties have firmed up by 6-10 per cent in the last couple of months. Moreover, the price difference between 6,000 and 5,500 calorific value (net-as-received) coal has widened.

According to Kasera, increasing prices coupled with a devalued rupee forced the sponge iron sector to switch preference to 5,500 calorific value coal now priced at $83 a tonne ($78 a tonne). This is to ensure that the final landed cost of coal to plant-end is restricted at Rs 7,000-7,200 per tonne.
Difficult times

Interestingly, though prices of Indonesian coal remain the same on a year-on-year basis, the outgo of Indian consumers have gone up substantially, due to falling rupee (by nearly Rs 7 a dollar, in last one year), and firming up of shipping rates.

The higher landed cost of fuel, coupled with pressure on final product prices, has made coal users extremely price-sensitive, leading to a squeeze in margins at the trading end.

As the consumers are avoiding long-term contracts with traders to take advantage of weak prices in the spot market, the traders are missing the opportunity to hedge risks of price volatility.

pratim.bose@thehindu.co.in
(This article was published on November 27, 2013)

Source: The Hindu Business Line