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Vol. XLVI No. 24 Published on : 28.03.2019


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From the Editor’s Desk

Coal India, for the first time, achieved a record by produc ing more than 600 million tonnes coal in a financial year. The miner has produced 606.9 mi llion tonnes of coal during FY 2018-19, almost reaching its MoU target of 610 million tonnes. SECL, the largest Sub sidiary Coal Company of CIL is the first company in the cou ntry to have crossed coal production figure of 150 mi llion tonnes in a financial yea r. Coal production at captive mi nes also crossed its productio n target of this fiscal one month earlier. Increased coal supplies and low er power demand during winter have reduced the num ber of thermal power plants with critical or supercritical coal sto ck to zero. Presently thermal power plants are delaying for unloading of coal as their fuel stocks have risen and cut ting supplies also so that the y would not have a problem wh en they need more fuel to me et higher summer demand. Lat e improvement in coal supply has reduced the coal crisis for No n-power Sector as well. For allowing more power gen erating companies to procur e coal through Auction under Shakti Scheme, Coal Ministry has amended the eligibility norms for the Scheme where power plants without Power Purcha se Agreements can apply for coal linkages, provided electricity generated from this coal is sold through spot power exchanges or through the government’s ‘DEEP’ por tal, where bidding is conducted for bilateral sho rtterm electricity supply.

However, without specifying any reason, Government has cancelled the sixth and sevent h rounds of coal mines auctio n under which it was planning to put on sale 19 blocks. Apart from regulated Sectors, iron and steel, cement and alumi nium may suffer due to this decisio n as well.

It is a breather that impor ted coal price is gradually decreasing since last few mo nths in major coal exporting countries like South Africa, US A and others. Happy reading......

4 | CCAI Monthly Newsletter March 2019


Content Vol. XLVI No. 24 March 2019

06 Consumers’ Page

Official Organ of the Coal Consumers’ Association of India. Disseminates News and Views on Coal and all other sources of Energy. 4, India Exchange Place - 7th Floor Kolkata - 700 001 Landline : +91 33 22304488 / 22621516 E-mail : sec.ccai@gmail.com Website : www.ccai.co.in

08 Power

Editor : Subhasri Nandi

12 Domestic

Annual Subscription Rs. 400/(including postage) MO/DD to be made in favour of “Coal Consumers’ Association of India” CCAI do not necessarily share or support the views expressed in this Publication.

18 Global

21 |Energy Generation Report

22 |Monthly Summary Of Domestic Coal 23 |Monthly Summary Of Imported Coal &

Petcoke

25 |Overall Domestic Coal Scenario 26 |Production And Offtake Performance Of Cil And Subsidiary Companies

CCAI Monthly Newsletter March 2019

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CONSUMERS’ PAGE Present Coal Scenario Coal production by CIL has reached 79.2 million tonnes in March 2019 which is a growth of 9.6% compared to the same month last year. CIL, for the first time, achieved a record by producing more than 600 million tonnes coal in FY 2018-19. The miner has produced 606.9 millions of coal during 2018-19 almost reaching its MoU target of 610 million tonnes and a growth of 7% compared to FY 2017-18. Offtake stood at 59.6 million tonnes in March 2019 compared to 55.3 million tonnes in the same month of 2018, a growth of 7.8%. Thus, total coal supplies in FY 2018-19 has touched 608.1 million tonnes, a growth of 4.5% compared to the FY 2017-18 and a near MoU target achievement of 610 million tonnes.

Consumers’ Concern 1. Coal Stock Position Coal India has supplied 488 million tonnes of coal to the power sector in 2018-19, an increase of 7.4% compared to the last year. On an average 255.6 rakes per day were loaded to Power Sector in 2018-19, a healthy growth of 11.2%. With increased supply, coal stocks at coal linkage based power stations in the country is 30.41 million tonnes at the end of March that is 18 days stock and not a single power station in the country is in critical or supercritical list of CEA for want of coal. Late improvement in coal supply has reduced the coal crisis for Non-power Sector as well.

2. Coal Quality issues Inspite of best effort and continuous monitoring

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done by CIL & Subsidiaries, coal consumers are still facing the issue of quality variance in the grades allocated to them from Subsidiary Coal Companies of CIL. Though the quality has improved compared to the previous condition, consumers have expressed discontent over the grade variance mainly from ECL and BCCL. This problem also causes financial losses due to receipt of lower grade coal in comparison to the billed grades. Therefore, coal consumers have requested the Coal Controller, CIL & its Subsidiaries to kindly intervene into the matter so that actual grade of coal may be received as per the contracts from a few sources where grade slippages are occurring regularly.

3. Dissatisfaction over coal sample collection procedure for 3rd Party Sampling & Analysis


Present procedure of coal sample collection and preparation for Third Party Sampling & Analysis is inadequate to get an accurate representative sample for a particular consignment. Therefore, it should be as per IS: 436 (Part 1/Section 1), 1964. As per BIS norms, in case of sampling from loaded wagons 25% of the total wagons are to be covered under sampling but as per FSA only 10% of total wagons are being considered for sampling for supply through rail mode. Third Party Agencies engaged for sampling are following the procedures as per FSA. Consumers opine that if BIS norms are adopted in case of 3rd Party Sampling, there will be less variation in the analysis results. In road mode also about 13% of the loaded trucks are covered under sampling as 3rd Party Agencies are taking samples from every 8th truck. Similarly consumers have requested that samples may be collected based on random table of BIS covering 25% of total trucks loaded under road mode for a day.

has lead to an increase in cost of coal to a great extent. Therefore, consumers in both Power and Non-power Sectors have requested Coal Secretary, Revenue Secretary and GST Council for removal of Compensation Cess levied on supply of coal or ad valorem in rate of tax or allowing credit of Cess against GST liabilities other than Cess also.

7. Request for extension of exemption in advance payment of coal value CIL has provided relief to its customers by extending the exemption in advance payment of coal value till March, 2019. Due to pendency of coal rakes industries have requested CIL for extension of exemption pertaining to advance payment from April, 2019 for survival of the industrial sectors.

8. Framing of policy for making coal available in case of non-availability 4. Request for timely issuance of of contracted grade of coal from both the primary and secondary Referee Analysis Report and Credit/ sources Debit Notes Consumers are experiencing inordinate delay upto 6-8 months in getting Referee Analysis Report. Reports are yet to be issued for entire FY 2018-19 at CCL (Magadh - Amrapali Area) & ECL (Sonepur Bazari). Issuance of Credit Notes is still pending at SECL even after receipt of Referee Analysis Reports. Credit/debit notes are yet to be issued for entire FY’201819 at SECL (Raigarh Area), CCL (Magadh - Amrapali Area), ECL (Sonepur Bazari) and MCL (Basundhara Area & Lakhanpur Area). Therefore, coal consumers have requested for timely issuance of Referee Analysis Report and Credit/Debit Notes.

5. Short receipt of coal from Pandaveswar Area of ECL Power Sector consumers have communicated their grievance regarding short receipt of coal from Pandaveswar Area of Eastern Coalfields Limited in the tune of 5 to 6 %.

6. Request from consumers for dispensation of Compensation Cess on coal Imposition of Compensation Cess on supply of coal

Industries under Non-Regulated Sector are adversely affected due to non-availability of contracted grade of coal from both the primary and secondary sources. Therefore, they have urged CIL for making necessary amendments in the existing and future Fuel Supply Agreements (FSAs) so that coal can be made available from other available sources based on mutual consent in case of non-availability of contracted grade of coal from both primary and secondary sources.

9. Highest premium charged by CIL Subsidiaries for conversion of Rail to Road/RCR mode Though CIL has allowed the conversion of linked and auction quantity from Rail to Road/RCR mode on a monthly basis for better evacuation but Subsidiary Coal Companies are adding clause to CIL notice according to which they shall charge the highest premium of any sub-sector in the last 2 concluded tranches under NRS Linkage Auction, for allowing Change of Mode. Consumers have urged that for Change of Mode from Rail to Road/RCR due to huge backlog in loading of rakes, the premium fixed during initial agreement should only be charged instead of additional premium being levied on the auction consumers.

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POWER Shakti scheme: Govt eases eligi- ing coal stock bility norms for plants Thermal power plants have started delaying coal unThe coal ministry has amended the eligibility norms for the Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (Shakti scheme), effectively allowing more power generating companies to procure the fuel through this route. According to the new directive, power plants without power purchase agreements (PPAs) can apply for coal linkages, provided electricity generated from this coal is sold through spot power exchanges or through the government’s ‘DEEP’ portal, where bidding is conducted for bilateral short-term electricity supply. The original version of the scheme allowed coal supply only to power generation capacities with longterm and mid-term PPAs. The coal ministry has also allowed power plants which had won coal linkages in the first round of auctions under the scheme in September 2017 to participate in the upcoming Shakti bidding. Ten power plants had won 25-year coal linkages of 27.2 MTPA in the first, and till date, the only round of such auctions under Shakti

Power plants go slow on unload08 | CCAI Monthly Newsletter March 2019

loading as their fuel stocks have risen. Coal India executives say a few plants are trying to cut supplies without formally asking for a cut so that they would not have a problem when they need more fuel to meet higher summer demand. Power sector executives, however, say unloading takes longer than normal when coal is already heaped in the storage space. Industry executives said this is happening in Punjab, Haryana, Uttar Pradesh, Gujarat and Maharashtra. Some plants are running out of storage space while others are financially stressed and are not in a position to stock the coal. A power sector official said delay in releasing rakes attracts demurrage charges, payment of which requires approval from the management. Power plants try and balance demurrage charges with increased cost of maintaining inventory by reducing their stocks. Central Electricity Authority data shows 24 plants have stocks for more than 30 days. Average stocks at 126 plants are now about 30 million tonnes, enough for 17 days.

Coal-based power tariff may see hike to boost renewables


To make thermal power stations more flexible to accommodate renewable energy, tariffs of coal-based electricity may be raised by as much as Rs 0.45/ unit, depending on the quantum of green energy being generated by solar and wind plants. The tariff rise is about 13% of the average all-India price at which states procured non-renewable power in FY18. A recent report titled ‘Flexible operation of thermal power plant for integration of renewable generation’, prepared by the Central Electricity Authority, pointed out that “revision of tariff is essential to make profitable flexible operation of thermal units”.

CERC allows power plants to claim higher compensation for loss in fuel quality of coal

Flexibility is the extent to which a power system can modify electricity production or consumption in response to variability.

The latest regulations will impact the electricity tariff for 76 giga-watt (GW) power plants that sell power under the ‘cost-plus’ system between FY19 and FY24. Apart from state-run NTPC, the new regulations would also have a bearing on returns of stressed power assets such as Jaiprakash Power Ventures’ Nigrie and Bina plants, Avantha Group’s Jhabua plant, GVK Power’s Goindwal Sahib, KVK Group’s Nilachal unit and Lanco Babandh station, which supply part of their electricity under the ‘cost plus’ regime.

The country expects to have an installed renewable capacity of 175 GW by FY22, when daily net load swings are expected to be up to 80,000 MW.

CERC mulls regional power market for South Asia The Central Electricity Regulatory Commission (CERC) is in favour of setting up a regional market for power trade across South Asian countries. This will be an extension of proposals for facilitating crossborder power trade. The market is expected to connect member countries of South Asian Association for Regional Cooperation (SAARC), a senior CERC official said adding “South-Asian countries, namely Afghanistan, Bangladesh, Bhutan, Nepal, India and Sri Lanka, among others, do not have a Regional Market Platform to trade electricity” The electricity sector integration for developing a Regional Market is in an evolutionary stage, the official said. At present, transactions between nations take place through bilateral agreements. Bilateral agreements Investments in viable interconnections are favoured under the present structure of power trade through bilateral agreements. “But gradually, transaction standards, balancing mechanisms, and the strengthening of institutional cooperation, short-term transactions through energy exchanges would become increasingly feasible,” the official said.

The Central Electricity Regulatory Commission (CERC) has allowed power plants (selling electricity under the ‘cost plus’ system) to receive higher compensation for loss in fuel quality while coal is ferried and stored. Additionally, for computing tariff of power from such plants, the electricity regulator also maintained the base return on equity (RoE) at 15.5%.

The CERC has decided to continue with the prevalent two-part tariff structure, which comprises fixed and energy charges. Fixed charges represent fixed cost components, including debt service obligation and risk-free returns, while energy charges represent fuel costs, which vary according to the market.

India’s energy demand outpaces global growth India’s energy demand outpaced global demand growth in 2018, according to the International Energy Agency (IEA). The higher energy demand was driven by a global economy that expanded by 3.7 per cent in 2018, a higher pace than the average annual growth of 3.5 per cent seen since 2010. China, the US and India together accounted for nearly 70 per cent of the rise in energy demand. According to the IEA’s Global Energy & CO2 status report, India saw primary energy demand increase 4 per cent, or over 35 million tonnes of oil equivalent. This accounts for 11 per cent of global demand growth. Comparably, energy consumption worldwide grew 2.3 per cent in 2018. This is nearly twice the average rate of growth since 2010. The growth in global energy demand was driven by a robust economy as

CCAI Monthly Newsletter March 2019

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well as higher heating and cooling needs in some parts of the world, the IEA said. The growth in India was led by coal for power generation.

Coal India needs to up supply by at least 8% to meet GoM plan: report National miner Coal India needs to ramp up its output by at least 8 per cent from the present levels if the group of ministers’ (GoM) recommendations on allowing domestic coal linkage for short-term PPAs are to be met, says a report. The Cabinet Committee on Economic Affairs had approved the GoM recommendations on stressed power projects which include allowing domestic coal supplies to short-term PPAs and increase coal supplies for special forward e-auction for the power sector. “The measures approved such as allowing the use of domestic linkage coal for short-term PPAs and procurement of bulk power by nodal agencies against pre-declared linkages are a positive for thermal IPPs, given that coal-based operational capacities of 15-16 gw do not have long-term PPAs,” ICRA said in a report. It further said use of domestic coal will enable generators to offer more competitive tariffs for short-term sale, which is also likely to benefit discoms given that they purchase larger volumes through short-term PPAs.

Centre issue tenders for developing 30,000 MW of renewable projects In the rush to meet the target of 1.75 lakh MW of renewable energy capacity by 2020, the Centre and several states have issued tenders totalling 30,549 MW. Of this, only 4,000 MW are wind power projects, 1,800 MW are hybrid (solar+wind) and balance 24,749 MW are solar power projects. The bids for these projects are due in next three months. If concluded on time, these projects should be commissioned by March 2020. The earlier deadline for 1.75 lakh MW was 2022, but the government later said it would meet the target by

10 | CCAI Monthly Newsletter March 2019

2020 and achieve more than 2 lakh MW by 2022. Solar Energy Corporation of India (SECI), the nodal agency of ministry of new & renewable energy (MNRE) has issued 19 tender notices. This includes the mega 7,500 MW solar project in Ladakh region, 3,000 MW solar manufacturing and power plant, which failed last year and one floating solar project in Jharkhand.

Solar capacity addition at a three year low of 6500 MW this year India’s solar energy success story is showing signs of slowing down, with capacity addition this fiscal falling short of target at a three-year low. Developers added 6,500 mw of solar capacity in the financial year 2018-19, as against a target of 10,000 mw for the year. Capacity addition in 2017-18 was higher at 10,400 mw, while in the previous year, it was 9,100 mw, according to a senior official at the Ministry of New and Renewable Energy. Industry experts and developers said the imposition of safeguard duty and the cancellation of solar auctions were the main reasons for the relatively low addition. India imposed a 25% safeguard duty on the import of solar panels and modules, mostly from China and Malaysia, from end July for a year, followed by 20% for the next six months and 15% for another half-year. This increased the cost of installing solar projects and consequently tariffs, without so far leading to any appreciable growth in the domestic solar manufacturing industry. Both central and state agencies have been cancelling auctions whenever the winning tariffs seemed too high for them.

Solar power generation 5.8 per cent costlier with GST: Report The introduction of Goods and Services Tax (GST) has led to an increase in the cost of solar photovoltaic (PV) power generation by almost 6 per cent, an independent study by the Council on Energy, Environment and Water (CEEW) and the International Institute for Sustainable Development (IISD) said.


At the same time, the GST has resulted in a decline in the cost of thermal power generation by 1.6 per cent. “The uncertainty surrounding the GST rates for various solar PV contracting structures and the imposition of safeguard duty may constrain India’s progress toward its ambitious target of 100 GW (gigawatt) of installed solar capacity through delayed investments,” Abhinav Soman, CEEW Programme Associate and study lead author, said.

Power Ministry seeks enforcement of tariff rationalisation for hydropower projects The Ministry of Power has written to the Central and State Electricity Regulatory Commissions to enforce tariff rationalisation for hydropower projects. The measures are expected to bring down tariff for power generated from a new hydropower project, a Power Ministry notification said. Tariff rationalisation measures include providing flexibility to the developers to determine tariff by back loading of tariff after increasing project life to 40 years. Increasing the debt repayment period to 18 years and introducing escalating tariff of 2 per cent are also included in these measures, the notification said. “The levelised tariff over the useful life of the project

may be calculated on the basis of the norms specified in the Central Electricity Regulatory Commission regulations,” the notification added. The year-wise tariff, for a long-term power purchase agreement for the procurement of hydro power has been left at the discretion of negotiations between the project developer and the power distribution company.

Gujarat likely to provide land to central wind projects Wind power producers may soon get a breather from the stand-off over land allotment in Gujarat with the state finally planning to help centrally auctioned projects. The state’s revenue department has directed district collectors to help such projects. Gujarat was earlier helping developers to acquire land only for projects bid out by the state’s own distribution company, GUVNL (Gujarat Urja Vikas Nigam Limited). The order says “companies who have wind bids invited either by GUVNL or SECI or other agencies of the government of India, supported by a letter to that effect from GEDA (Gujarat Energy Development Agency)” should be allotted land. Solar Energy Corporation of India (SECI) is the nodal agency under the ministry of new and renewable energy’s nodal agency for conducting wind and solar auctions.

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DOMESTIC Coal output up 8% so far this fiscal Domestic coal production from April to February FY2019 stood at 638.46 million tonnes. This is 8 per cent higher than the 591.42 million tonnes reported during the same period of the previous financial year. The production target for Coal India (CIL) was fixed at 610 million tonnes for the current fiscal. This target is likely to be missed as coal production during AprilFebruary FY2019 was 527.70 mt. But this is higher than the 495.08 mt reported during the corresponding period of the previous fiscal. For Singareni Collieries Company Ltd (SCCL), coal production target was fixed at 65 mt for 2018-19. But production during the period under review stood at 57.94 mt. The coal production target for captive mines was fixed at 40 mt for the current fiscal.

Coal imports by state power plants up in FY19 Coal imports by state government-run power producers were up 2.6-fold in the first 10 months of the current fiscal as domestic supply dwindled, but overseas purchases by private generators and central entities declined 2.5% during the period. Overall imports by thermal plants rose 4.6% to 47.96 million tonnes (MT) in this period. A senior executive at a state-owned

12 | CCAI Monthly Newsletter March 2019

power generator said increased demand for thermal power forced some of them to step up imports as domestic coal was scarce last summer. The Centre had allowed government-owned generators to import. According to data compiled by the Central Electricity Authority (CEA), imports by state-run producers doubled to 5.4 MT during the first 10 months of fiscal 2018-19 from 2.05 MT a year ago.

Coal imports checked by CIL’s efforts: Piyush Goyal Railway and coal minister Piyush Goyal said that the country’s coal imports would have been 1.5 times higher than current volumes if Coal India had not increased its production rate. Commercial coal mining, which was approved by the Cabinet in February, 2018 will also reduce import dependency and bring energy security through assured coal supply, the minister added. Goyal was addressing the media on the five-year achievements of the ministries under his charge.

MDO model catches up in coal sector to meet rising demand With the private sector not allowed to do merchant


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mining of coal, the mine developer and operator (MDO) model is likely to dominate the Indian coal sector once all the mines allocated become operational in 5-6 years, official sources said. Over 40 mines with an annual capacity to produce more than 500 million tonne of coal have been allocated to state and central governments besides public sector units through competitive bidding. These entities are likely to outsource the mining to MDO contractors, sources said. Currently, coal for merchant mining is not allowed to the private sector and the only available route for them to enter the sector is through the mine developer-cum-operator route. The MDO contractor carries out the entire gamut of activities right from land acquisition, R&R, mine planning to development and operation of mine and coal extraction and coal transportation up to the owner’s loading silo on behalf of the mine owner who holds the mining lease.

The South Eastern Coalfields Ltd (SECL) has become the first company in the country to have crossed coal production figure of 150 million tonnes in a financial year. The SECL achieved the record during the 201819 fiscal and crossed the 150 million tonnes mark on March 20, a company official said. “In the wake of rising demand from the power sector, the SECL is striving hard to extract coal in full throttle. We have crossed 150 million tonnes on March 20 and are already at 153 million tonnes,” SECL chief manager (P&A) P Narendra Kumar told. SECL chairman and managing director A P Panda has taken all steps to expedite coal production as a result of which the SECL also touched the highest ever single day production of 7.44 lakh tonnes in this month, Kumar said.

RAILWAYS

Govt cancels sixth, seventh Indian Railways likely to surpass rounds of coal mines auction revised freight target for FY19 The Centre has cancelled the sixth and seventh rounds of coal mines auction under which it was planning to put on sale 19 blocks. However, the government did not specify the reasons for the cancellation. Under the sixth round, the Government had earlier announced the auction of 13 blocks for the regulated sectors, including iron and steel, cement and aluminium. The mines were Brahampuri, Bundu, Gondkari, Gondulpara, Jaganathpur — A, Jaganathpur—B, Khappa and Extn, Bhaskarpara, Marki Mangli — IV, Sondiha, Chitarpur, Jamkhani and Gare Palma IV/1. In the seventh tranche the coal ministry had said it would auction six coking coal blocks for iron and steel sector.

The Indian Railways has set a record by handling 1,175 million tonnes (mt) of freight till the middle of March in 2018-19, surpassing 1,160 MT in the previous fiscal year. The transporter has handled incremental freight traffic of 54.14 mt from April to February in 2018-19. At this pace, the railways is expected to surpass the revised freight target of 1,216 mt for the current fiscal year. From April to February 2018-19, the railways handled additional traffic of 5.16 per cent, totalling 1,103.53 mt against 1,049.39 mt during the same period last year. Freight earnings for the year have till now increased 11 per cent to Rs 1,23,391 crore.

The blocks were Brahmadiha, Choritand Tilaiya, Jogeshwar and Khas Jogeshwar, Rabodh, Rohne and Urtan North.

SCR registers record freight traffic volume

SECL crosses 150 million tonne coal production in FY19; first company in India to do so

The South Central Railway (SCR) has registered a highest-ever freight traffic business so far.

14 | CCAI Monthly Newsletter March 2019

The freight loading in the current financial year as on March 18, 2019 was at 117.16 million tonnes. Previ-


ously, the zone had set a recorded in freight loading at 116.80 million tonnes in 2014-15. The Railway Board had set a target of 111 million tonnes for SCR for the year 2018-19 and and it was surpassed shortly before the close of the year by this month-end. “The best ever freight traffic record of SCR’s achievement has been possible to a significant extent on account of the heavy rise in demand for coal from power houses in the region,’’ SCR said in a release.

CEMENT

Industry divided over reason for rise in cement prices As cement prices across India head north after displaying softness for over a year, consumer associations and infrastructure experts remain divided on the reason behind the increase: Supply controls or sustained revival in demand. A property-industry association in south India attributed the price increase to coordinated supply controls, an alleged monopolistic practice that has earlier drawn the attention of the federal competition panel. “The companies are indulging in cartelisation, which is evident as the demand has also not dramatically gone up,” said WS Habib, president of Confederation of Real Estate Developers Association of India (Credai), Chennai. According to research reports, cement prices in February increased by Rs 24-25 per bag of 50 kg, but the increase was more pronounced in south India, where prices increased by more than Rs 60 per bag since January after manufacturers raised prices twice last month. Prices typically are soft in the peninsula through the winter months because the region receives northeast monsoons, preventing construction.

STEEL

16 | CCAI Monthly Newsletter March 2019

India produces 8.74 MT crude steel in February: World Steel Association The country’s crude steel output in February grew 2.3 per cent to 8.74 million tonne (MT) from 8.54 MT in the year-ago month, according to global steel body World Steel Association (worldsteel). The crude steel production for the 64 countries reporting to the worldsteel was 137.27 MT in February, a 4.1 per cent increase compared to 131.92 MT in February 2018, the association said in its latest report. During the month, China produced 70.98 MT crude steel as against 65.02 MT, a jump of 9.2 per cent during same month a year ago. The US produced 6.9 MT of crude steel, a rise of 4.6 per cent as compared with February 2018, it said.

Steel prices to remain firm in coming months: Steel Authority of India Steel Authority of India (SAIL) has said a 7% plus growth in domestic steel consumption led by investment in construction and infrastructure, is tipped to keep steel prices firm in coming months, on the back of successive price hikes in February and March this year. As a responsible corporate, SAIL looks at all aspects to maintain prices and its pricing strategy maintains a uniform trend in tandem with the dynamics of the market, he added. While international hard coking coal prices have touched $213 per tonne, iron ore prices have shot up to $85-90 per tonne. While imports from CIS and Iran have been coming at $475-480 per tonne, of late Chinese (free on board) f.o.b prices have improved to $530 indicating the rising price trend. On the back of increased prices of raw materials, particularly coking coal and iron ore, international prices of steel products firmed up during February and March, 2019. Domestic producers too followed suit and raised prices by Rs 1,000-1,500 per tonne.


With Best Compliments From:

Sharda Ma

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COAL MERCHANTS, IMPORTERS & HANDLING AGENTS INDIA SOUTH AFRICA INDONESIA SINGAPORE HONG KONG NIGERIA

UGF 1& 2, Kanchenjunga Building, 18 Barakhamba Road, New Delhi-110001, India P : +91 11 23354046/47 F : +91-11-23354047 E : corporate@shardamaa.com W : www.shardamaa.com


GLOBAL Global coal supply could fall short of demand in coming years Global thermal coal demand is expected to increase in the coming years, but whether supply will be there to meet it remains questionable, panel members said. The main concern is a lack of investment in new mine projects for a number of reasons, including decarbonization policies, declining liquidity in derivatives markets and a lack of capital. John Hanekamp, a US-based thermal coal consultant noted the recent decision by authorities in the Netherlands to close the 630-MW Hemweg 8 coal-fired unit in Amsterdam four years earlier than scheduled as indicative of the bearish trend for coal demand in Western economies. In 2012, the US exported 29.5 million mt of thermal coal to Europe, led by the UK at 8.7 million mt, according to US Census data. In 2018, the US exported 14.5 million mt to Europe, led by the Netherlands at 5.6 million mt, while UK imports fell to 2.7 million mt.

Australian Coal Is Diverted From China After Imports Were Stalled, Miner Says 18 | CCAI Monthly Newsletter March 2019

Coal from Australia is being diverted from China as the top buyer slows custom clearance, and is instead making its way to countries including Japan and South Korea, according to miner New Hope Corp. Shipments from Australia to China slumped 19 percent in January from a year earlier, said Shane Stephan, the managing director of Queensland-based New Hope, citing government statistics. That’s about the time signs emerged that China was restricting Australian coal. Exports to Japan and South Korea rose 10 percent and 34 percent respectively during the period, he said.

Australia registers export records across key mining states Robust coal exports in both New South Wales and Queensland have proven that market demand remains strong amid carbon emission concerns and decisions to abandon the commodity from some companies. The latest data from Coal Services confirms 2018 was another positive year for New South Wales coal exports, with global demand increasing on the previous year at “near record levels.” New South Wales exported 164.6 million tonnes of coal in 2018, an increase of 838,000 tonnes on the previous year and over 23 per cent higher than in


2012. Exports of New South Wales thermal coal were up by 1.6 million tonnes in 2018, an increase of 1.2 per cent on the previous year.

U.S. coal exports in 2018 highest in 5 years While U.S. coal consumption has generally declined since its 2008 peak, the Energy Information Administration projects U.S. coal exports reached 116 million short tons (Mmst) in 2018 — the highest level in five years — based on foreign trade data collected by the U.S. Census Bureau. Exports of coal from the U.S. have increased since 2016, as international prices have made it more economic for U.S. producers to sell coal overseas, Kallanish Energy understands. U.S. exported 15% of its coal In 2018, the U.S. exported 15% of its coal, with the remaining 85% sold to end-use markets, primarily the power sector and industrial customers. Coal exports have increased during the past two years, driven by increasing international coal demand which in 2018 accounted for the largest share of total U.S. coal disposition on record. The U.S. exported 54 Mmst of steam coal and 62 Mmst of metallurgical coal last year, based on export data collected by the Census Bureau.

US 2019 coal production expected to fall 7.8% on year to 694.9 million st: EIA The US is estimated to produce 694.9 million st of coal in 2019, the US Energy Information Administration said, cutting its estimate from a month ago by 3.8%. The 2019 production would be 7.8% lower than the 753.7 million st produced in 2018, while 2020 production is estimated at 663.7 million st, the EIA said in its March Short-Term Energy Outlook.

Total consumption, including by petcoke plants and retail, is estimated at 613.4 million st in 2019 and 585.2 million st in 2020, down from the 2018 consumption of 688 million st. Coal is expected to make up 24.7% of US power generation in 2019 and 23.4% in 2020, down from 27.4% generated from coal in 2018.

The Coal Cost Crossover: 74% of US Coal Plants Now More Expensive than New Renewables, 86% By 2025 Renewable energy has been beating coal on cost in many parts of the United States for years, but now we know exactly where coal is out of the money compared to renewables – and exactly how far coal generation is in the red. New research from Energy Innovation and Vibrant Clean Energy (VCE) shows the U.S. has officially reached the coal cost crossover point, where fastfalling wind and solar prices make simply operating three-quarters of all existing coal generation plants more expensive than building new local renewable energy . In 2018, 74% of the national coal fleet was “at risk,” meaning the plants could be replaced with new wind or solar generation within 35 miles of each plant cheaper than the combined fuel, maintenance, and other going-forward costs of running those plants. By 2025, at-risk coal increases to a whopping 86% of the entire existing U.S. generation fleet, even as federal renewable energy tax credits phase out.

China boosts coal mining capacity despite climate pledges China added 194 million tonnes of coal mining capacity in 2018, data from the energy bureau showed, despite vows to eliminate excess capacity in the sector and to reduce fossil fuel consumption.

The 694.9 million st expected in 2019 would be the lowest production since 670.16 million st was produced in 1978.

Total coal mining capacity in the country was at 3.53 billion tonnes per year by the end of 2018, according to a statement from the National Energy Administration (NEA). That compares to 3.34 billion tonnes at the end of 2017.

Power-sector coal consumption is projected to be 563.9 million st in 2019 and 536.7 million st in 2020, compared with 636.5 million st in 2018.

The NEA said that excludes 1.03 billion tonnes per year of approved coal capacity currently under construction and 370 million tonnes per year under trial

CCAI Monthly Newsletter March 2019

| 19


operation. Additionally, the NEA has approved another seven coal mining projects with a combined capacity of 22.5 million tonnes per year since the beginning of 2019.

Indonesian coal faces uphill struggle to diversify exports away from China China represents a huge market for thermal coal, and for regional suppliers there is no way to avoid the dragon. That’s especially true for Indonesia, the world’s largest exporter of the commodity. According to the Bank of Indonesia, in 2017 the mining industry contributed about 4.7% to the Indonesian economy, if the commodity is priced in US dollars. China is Indonesia’s top destination for total thermal coal sales (including bituminous coal, sub-bituminous coal and lignite). Of the total 394 million mt thermal coal exported in 2018, about 31% headed to China and about 27% to India, according to S&P Global Analytics.

Indonesian coal prices steady in quiet trade Indonesian thermal coal prices were largely steady in a thinly traded market, with most participants holding back as they waited for more details of a large Chinese utility tender. Chinese state-controlled power utility Huaneng

20 | CCAI Monthly Newsletter March 2019

closed a tender at 10:00 Beijing time (02:00 GMT) seeking to buy 678,000t of imported coal for delivery to its coastal power plants between late March and the end of April. Price details only started to filter through to the market this afternoon. The tender sought coal mostly in a NAR 3,000-4,700 kcal/kg range, as well as two higher calorific value (CV) cargoes of NAR 5,500-6,200 kcal/kg. Most of the low-CV material is likely to be from Indonesia, the largest exporter of lower-CV coal to China, although the utility did not specify origins for the majority of the cargoes.

SA coal miners lose “hundreds of millions of rands” following Mpumalanga protests Community protests in South Africa’s Mpumalanga province may have cost the country’s thermal coal miners, including Anglo American, Glencore and South32, up to hundreds of millions of rands per month in revenue, said the Minerals Council South Africa. “The Minerals Council has not undertaken a formal survey of losses to coal mining companies as a result of protest action,” said spokeswoman, Charmane Russell in an e-mailed response to Southern African Coal Report (SACR), published by IHS Markit. “Informal estimates show that losses run into millions of rands per day for each stoppage, and could be as high as hundreds of millions per month,” she said. “These protests pose a threat to security and safety of employees, as well as supply of coal to Eskom which is already grappling with coal supply issues.”


CCAI Monthly Newsletter March 2019

| 21

81.81

NUCLEAR

14

Source CEA

TOTAL

BHUTAN IMP

64.42

63.4

13

MAR-2019

1265000

106990.5

79.76

8833.76

3249.37

64827.61

4

ACTUAL*

62.72

64.52

15

ACTUAL SAME MONTH 2017-18

105851.4

0

6999.67

3164.02

95687.71

5

ACTUAL SAME MONTH 2017-18

mar-2019

0 101.08

97.57

68.03

59.96

16

PROGRAM

63.49

61.01

17

ACTUAL*

126.2

102.7

99.1

7

% OF LAST YEAR (4/5)

64.56

59.83

18

ACTUAL SAME PERIOD 2017-18

1265000

5000

130000

38500

1091500

8

PROGRAM

GENERATION (GWH)

47.2

106.29

82.64

97.52

6

% OF PROGRAM (4/3)

AN OVERVIEW

APRIL 2018 - MAR 2019

PLANT LOAD FACTOR (%)

109655

169

8311

130000

5000

3932

97243

3

PROGRAM

38500

ACTUAL*

60.87

HYDRO

2

1091500

PROGRAM

275612.07

0

THERMAL

Category

TOTAL

BHUTAN IMP

45399.22

6780

NUCLEAR

HYDRO

223432.85

1

Monitored Target Capacity Apr 2018 to (MW) Mar 2019

THERMAL

Category

SUMMARY- ALL INDIA

10

1249191.6

4433.28

135040

37706.01

1206306.2

4778.33

126122.7

38346.12

1072012.34 1037059.1

9

ACTUAL*

ACTUAL SAME PERIOD 2017-18

PERIOD : march 2019

98.75

88.67

103.88

97.94

98.21

11

103.56

92.78

107.07

98.33

103.37

12

% OF % OF LAST PROGRAM YEAR (9/8) (9/10)

APRIL 2018 -MAR 2019

ENERGY GENERATION REPORT


MONTHLY SUMMARY OF DOMESTIC COAL Comparative Price of Domestic Coal: Power/Non-power. *The price shown in the Chart below is without: (a) Surface Transportation Charges. (b) State specific taxes. (c) Coal company or area wise charges if any. (d) Evacuation Facility Charges INR 50 per tonne w.e.f. 00:00 of 20.12.2017

GCV (Kcal/kg) (Mid-value)

G3-6400-6700

G5-5800-6100

G7-5200-5500

G10-4300-4600

G11-4000-4300

G12-3700-4000

Basic ROM price (Rs./te)

3144/ 3144

2737/2737

1926/2311

1024/1228

955/1145

886/1063

Tentative Ex-Mine Price*

4447/4447

3941/3941

2932/3411

1809/2063

1724/1959

1638/1858

coal The government has cancelled the proposed auction of coal blocks in which winners would have been allowed to sell 25% of the production in the open market. It was postponed five times after notice inviting tenders were issued in November. Official sources said there was some discrepancy between the tender documents, which led to the cancellation. The government had clarified that the successful bidder shall be required to pay an additional premium of 15% of its final bid price for coal sold in the open market. However, this was not clear in the tender documents, sources said. Coal production at captive mines has edged past the target for this fiscal. At the end of February, output at such mines stood at 44.41 million tonnes (mt) as against the target of 40 mt fixed for FY19. On a yearon-year (y-o-y) basis, the captive coal producers logged 31.6 per cent growth. The country’s total coal production during April-February rose eight per cent to 638.46 mt as against 591.42 mt in the year-ago period. Coal India Ltd (CIL), the largest producer, recorded an output of 527.7 mt, an increase of 6.6 per cent y-o-y, data sourced from the Ministry of Coal showed.

RAIL State-run Indian Railways carried 545.23 million mt of coal during the April 2018-February 2019 period, up 9% from the corresponding period a year ago, according to the latest data by the Directorate of Statistics and Economics released. Of the total coal transported, 93.22 million mt was imported coal, up about 11% on year, while 452.01 million mt was domestic coal, up almost 9%. The South Central Railway (SCR) has registered a highest-ever freight traffic business so far. The freight loading in the current financial year as on March 18, 2019 was at 117.16 million tonnes. Previously, the zone had set a recorded in freight loading at 116.80 million tonnes in 2014-15. The Railway Board had set a target of 111 million tonnes for SCR for the year 2018-19 and and it was surpassed shortly before the close of the year by this month-end.

power The coal ministry has amended the eligibility norms for the Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (Shakti scheme), effectively allowing more power generating companies to procure the fuel through this route. Increased fuel supplies and reduced power demand during winter have reduced the number of thermal

22 | CCAI Monthly Newsletter March 2019


power plants with critical coal stocks to zero, a position that was last attained four years ago. Average stocks at 126 power plants monitored by the Centre stood at 29 million tonnes, enough to run these plants for 17 days at a stretch. In contrast, in the middle of October last year, the number of plants with critical coal position was 33 and stocks at these power plants were down to 10 million tonnes then.

CEMENT Cement prices increased by Rs 24-25 per bag of 50 kg in February as compared to the previous month amid falling cost and rising demand growth, according to a report. The hike in the cement prices came after a “protracted stall” following the rollout of the goods and services tax in July 2017, said CRISIL Research in its report. The increase would help the cement industry increase profitability and margins, it added. All India prices of cement remained steady at Rs. 334 per bag during March despite increases in southern and eastern regions, according to a report by Kotak Institutional Equities. South and eastern regions witnessed a price hike of Rs. 5 per bag while prices declined by Rs. 1-11 per bag in north, central and west. Since January, cement prices in the south had increased by Rs.45 per bag.

steel India’s crude steel output in February grew 2.3 per cent to 8.74 million tonne (MT) from 8.54 MT in the year-ago month, according to global steel body World Steel Association (worldsteel). The crude steel production for the 64 countries reporting to the worldsteel was 137.27 MT in February, a 4.1 per cent increase compared to 131.92 MT in February 2018, the association said in its latest report.

MONTHLY SUMMARY OF IMPORTED COAL & PETCOKE Coal Price Index COAL

(kcal/kg)

Monthly Price - FOB

Monthly Price - FOB

Monthly Change (USD)

South Africa South Africa Australia Indonesia Indonesia USA

6000 NAR 5500 NAR 5500 NAR 5000 GAR 4200 GAR 6900 NAR

USD 79.94 USD 58.62 USD 58.60 USD 55.89 USD 38.73 USD 61.56

INR 5548 INR 4068 INR 4067 INR 3879 INR 2688 INR 4273

-4.79 -2.29 -3.34 0.43 2.07 -3.02

PET COKE

Sulphur

India-RIL(Ex-Ref.) Saudi Arabia (CIF) USA (CIF)

-5% + 8.5% - 6.5%

Price INR 9050 INR 6489 ($94) INR 6767 ($98)

Exchange Rate

Change (Monthly)

USD/INR 69.403

-1.83

Coking Coal Price: Premium Low Vol

HCC 64 MID Vol

Semi Soft

Low Vol PCI

Mid Tier PCI

MET COKE 62% CSR

FOB Aus

CFR China

FOB Aus

CFR China

FOB Aus

FOB Aus

FOB Aus

CFR India

FOB N China

211.85

210.25

181.16

192.03

115.01

126.95

125.20

335.94

326.19

CCAI Monthly Newsletter March 2019

| 23


South Africa: * Physical prices for South African coal have fallen to multi-year lows, while diverging quite markedly from the related API 4 paper market, amid oversupply and weak demand. The Global Coal Richards Bay (South Africa) index was assessed last at USD 69.40/t, its lowest level since September 2016. Coal stocks at Richards Bay were pegged last at around 3.75m tonnes.

Australia: * Australian thermal coal exports to China are under increasing pressure, with indications import restrictions are spreading to other key ports. The respected industry newsagency Platts reported restrictions targeting Australian thermal coal had spread to the southern port of Fangcheng. It follows reports last month thermal coal imports were being held up “indefinitely” by customs officials at the northern port of Dalian. The Platts report quoted unnamed sources saying customs officials were conducting tests for radioactivity in Australian coal.

Indonesia: * The Indonesian government has set the coal benchmark price (HBA) for March at $90.57 per tonne, marking a seventh consecutive month of price fall, Muhamad Hendrasto, director of coal at the energy ministry, told reporters. February’s benchmark price, which the government uses to calculate a miner’s royalties, was $91.80 per tonne.

USA: * Top US met coal export destination in 2018 was Brazil. US thermal coal exports to India up 53% in 2018. US coal exports totaled 104.9 million mt in 2018, up 19.3% from 2017 and the second highest total on record, according to US Census data. The

24 | CCAI CCAI Monthly Monthly Newsletter Newsletter January March 2019 2019

2018 total was second only to the 114.2 million mt exported in 2012. US producers benefited in 2018 from strong international markets, which helped increase demand. US thermal coal typically trades at a discount to global benchmarks because of higher sulfur content, while US metallurgical coal is particularly valued for its coking properties.

Pet Coke: *US petcoke exports totaled 38.8 million mt in 2018, down 0.4% from 2017, according to US Census data. It was the second highest total on record, followed only by the 38.9 million mt exported in 2017. Demand for US petcoke was again strong in 2018, despite a nearly 50% decline in exports to India due to that nation’s partial ban on petcoke consumption, while exports to Mexico, Turkey and Brazil wereall higher in 2018. * Petcoke Market size will exceed USD 25 billion by 2024 according to new research report. Increasing investments toward industrialization across developing economies coupled with growing demand for cost efficient and reliable alternate fuels will drive the global petcoke market size.

Shipping: * Growing coal demand in the Mediterranean and Middle East offers opportunities for US coal exporters, particularly as competing origins increase shipments to Asia, a spokesman for US exporter Xcoal said. “Asian demand is significant and will be significant going forward but it’s challenging for the US to participate in this market,” said Nicholas Cron, head of portfolio optimisation at Xcoal.


Overall Domestic Coal Scenario Coal Production (in MT) Company

February, 2019

February, 2018

% Growth

April 2018February, 2019

April 2017February, 2018

% Growth

CIL

58.0

SCCL

6.1

54.5

6.5%

527.7

495.1

6.6%

6.3

-3.0%

57.9

54.6

6.1%

Overall Offtake (in MT) Company

February, 2019

February, 2018

% Growth

April 2018– February, 2019

April 2017– February, 2018

% Growth

CIL

51.5

49.9

3.0%

548.5

525.0

4.5%

SCCL

5.9

5.4

8.0%

61.3

58.3

5.2%

Coal Despatch to Power (Coal and Coal Products) (in MT) Company

February, 2019

February, 2018

% Growth

April 2018– February, 2019

April 2017– February, 2018

% Growth

CIL

40.0

37.7

6.2%

441.2

411.5

7.2%

SCCL

4.8

4.4

9.6%

50.0

48.1

4.0%

Spot E-auction of Coal (in MT) Company

Coal Qty. Allocated February, 2019

Coal Qty. Allocated February, 2018

Increase over notified price

Coal Qty. Allocated April 2018February, 2019

Coal Qty. Allocated April 2017February, 2018

Increase over notified price

CIL

3.06

5.96

84%

30.15

51.38

95%

Special Forward E-auction for Power (in MT) Company CIL

Coal Qty. Allocated February, 2019

Coal Qty. Allocated February, 2018

Increase over notified price

Coal Qty. Allocated April 2018February, 2019

Coal Qty. Allocated April 2017February, 2018

Increase over notified price

0.38

0.70

14%

26.02

28.93

73%

Exclusive E-auction for Non- Power (in MT) Company

Coal Qty. Allocated February, 2019

Coal Qty. Allocated February, 2018

Increase over notified price

Coal Qty. Allocated April 2018February, 2019

Coal Qty. Allocated April 2017February, 2018

Increase over notified price

CIL

-

-

-

9.43

10.78

62%

Company

Coal Qty. Allocated February, 2019

Coal Qty. Allocated February, 2018

Increase over notified price

Coal Qty. Allocated April 2018February, 2019

Coal Qty. Allocated April 2017February, 2018

Increase over notified price

CIL

1.58

-

51%

3.58

0.70

72%

Special Spot E-auction (in MT)

CCAI CCAIMonthly MonthlyNewsletter NewsletterJanuary March 2019 2019

| 25


PRODUCTION AND OFFTAKE PERFORMANCE OF CIL AND SUBSIDIARY COMPANIES COAL PRODUCTION (Figs in Mill Te) MAR'19

SUB CO. ACTUAL THIS YEAR ECL

6.8

APR'18 - MAR'19

ACTUAL SAME % PERIOD LAST GROWTH YEAR 6

13

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

50.2

43.6

15.1

BCCL

3.7

4

-6.6

31

32.6

-4.8

CCL

13.2

13

1.9

68.7

63.4

8.4

NCL

9.3

9.1

2.4

101.5

93

9.1

WCL

9.1

7.9

14

53.2

46.2

15.1

SECL

18.9

15.5

22.2

157.4

144.7

8.7

MCL

18.1

16.7

8.1

144.2

143.1

0.8

NEC

0.1

0.1

14.6

0.8

0.8

0.4

CIL

79.2

72.3

9.6

606.9

567.4

7

OFFTAKE (Figs in Mill Te) MAR'19

SUB CO. ACTUAL THIS YEAR

APR'18 - MAR'19

ACTUAL SAME % PERIOD LAST GROWTH YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

5.8

5.1

13.3

50.4

43.6

15.4

BCCL

3.2

3.5

-8.8

33.1

33.4

-0.8

CCL

7.2

6.4

12.5

68.4

67.5

1.3

NCL

8.8

9.1

-2.8

101.6

96.8

5

WCL

5.5

4.8

16.4

55.6

48.7

14

SECL

14.8

13.3

11.3

156

151.1

3.3

MCL

14.2

13

9.1

142.3

138.3

2.9

NEC

0.1

0.1

-29.5

0.8

0.9

-15.7

CIL

59.6

55.3

7.8

608.1

580.3

4.8

26 | CCAI Monthly Newsletter March 2019


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Profile for Sheikh Murad

CCAI Newsletter March-19  

Coal Consumers' Association of India Monthly Newsletter, March-19 issue.

CCAI Newsletter March-19  

Coal Consumers' Association of India Monthly Newsletter, March-19 issue.

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