Indian coal imports seen rising as global prices fall
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Indian coal imports are expected to rise in the financial year through March 2013 as more end-users turn overseas, prompted by a narrowing gap between the domestic and international prices of thermal coal.

NEW DELHI: Indian coal imports are expected to rise in the financial year through March 2013 as more end-users turn overseas, prompted by a narrowing gap between the domestic and international prices of thermal coal.

Excess supply has hammered international thermal coal prices in recent months, with top exporter Indonesia cutting its output forecast to around 360 million tonnes from 390 million to 400 million for 2012.

Based on the current global supply and demand picture, end-users expect thermal coal prices to remain well below $100 a tonne for the next 10 to 12 months.

"International thermal coal prices have almost hit the bottom," said Vinod K. Singh, adviser to global chemical and textile company GHCL, which is also a leading producer of soda ash.

Coal of the grade 6,000 kcal/kg on a Net As Received basis now costs $88 to $89 a tonne free-on-board (FOB), for example, Singh said. "We do not expect it to go down any further."

India's coal supply is expected to fall short of demand by 192 million tonnes in the fiscal year to March 2013, a coal ministry official said.

Coal demand in India, which has the world's fifth-largest coal reserves and produces the most after China and the United States, is seen at around 772 million tonnes against an expected supply of about 580 million in the financial year to March 2013.

"More and more consumers are looking at imports from mainly Indonesia and Mozambique to fulfil at least 50 to 60 percent of their thermal coal demand," said V.R. Sharma, chief executive and deputy managing director of the steel business at Jindal Steel and Power Limited ( JSPL).

"The balance 40 to 50 percent they source from India. Then they blend these and use. We are one of them," Sharma said.

The cheapest domestic coal price or the notified price available from Coal India Ltd is around 1,600 rupees ($28.74) per tonne for E-grade coal or grade 9 and 10 (more than 4,300 kcal/kg but not exceeding 4,900 kcal/kg) coal.

But to secure this, buyers with captive power plants, or independent power producers, must sign fuel supply agreement (FSA) with state-run Coal India Ltd, the world's largest coal miner, which is often time-consuming.

The same grade coal of 3,800 GCV on e-auction by Coal India costs more than double at $71.85 per tonne, said Kamal Pokhariyal, deputy general manager of coal at GHCL.

In contrast, imported coal from Indonesia, with a comparable heat value but low ash content and high moisture, costs in the range of $30-$32 a tonne FOB, plus $15 per tonne for freight to the Indian coast for a 50,000 MT vessel, Pokhariyal said.

GHCL consumes about 400,000 tonnes of lignite from their captive mines and imports 250,000 tonnes of high gross calorific value (GCV) coal.

Jindal, on the other hand, imports through large traders. It meets almost all its coking coal needs with imports from the United States, Venezuela, Columbia, Russia, Australia and Mozambique.

Jindal imports more than 1.5 million tonnes of mainly coking coal, which includes hard, semi-hard, semi-soft and coke breeze varieties, and some thermal coal.

India is seen importing 96 million to 100 million tonnes of coal, including coking coal and thermal coal, in the fiscal year to March 2013, a coal market participant had said earlier.

"Until now, we thought e-auctions to be a better route (for buying coal). But now with international coal prices bottoming out, this is changing," JSPL's Sharma said.