markets
India plugs coal gap with imports India’s massive domestic power expansion will require continuing coal imports – meaning more dry bulk business �������� India’s coal imports are set to rise, with the government setting ambitious power generation targets with thermal coal feeding most of the power plants. Demand for coking coal will also be heavy as steel plants beef up capacity. India is a major producer of coal, with hard coal reserves of 246Bn tonnes, 92Bn tonnes of ��� which�������������������������� are proven, according to the government. The quantity, however, is not sufficient as India scrambles to provide uninterrupted supply of electricity to industry and consumers. India imported 18M tonnes of coal in the fiscal year 2008-09 mainly from Indonesia, Australia and South Africa – but the quantity is expected to exceed 25M tonnes for the year ending 31 March 2010. India’s growing coal demand has provided opportunities for shipping companies to conclude long-term contracts, which provide earnings stability in contrast to the volatile spot markets where owners have lost heavily as rates plummeted during the downturn. STX Pan Ocean of South Korea
has been quick to tap the Indian opportunity, striking a shipping agreement with Dubai headquartered Coal & Oil Group to transport coal for a new power plant which the group is planning to build in the southeastern port city of Tuticorin. The 1,200MW plant is scheduled to come on stream in 2012 and STX has been awarded a 10-year contract worth $150M, sources at affiliate company Coastal Energen told Fairplay. STX is expected to order two or three geared Kamsarmax bulk carriers (82,000dwt each) on firm charter commitment. Coal & Oil is also active in India as a coal trader importing about 5M to 6M tonnes annually for distribution to domestic users. It has disposed of an ageing bulker and relies on chartered tonnage at present.
Fuelling growth Essar Energy, which recently announced a $2.5Bn London IPO, plans to install power plants with a total capacity of 10,250MW from 2011 to 2014. Meanwhile, group affiliate Essar Ports Shipping and Logistics is building a coal berth at Paradip in the eastern state of Orissa. “The power sector is crucial for fuelling the 10% GDP ����� growth we are aiming at,” prime minister Manmohan Singh told a meeting of the Planning Commission in March. India’s power
India’s hard coal reserves of
Coal imports by SAIL (M tonnes) 2007-08: 2008-09: 2009-10:
9.68 10.72 10.85
246Bn
[ Source: Indian government, Ministry of Steel ]
tonnes are not sufficient
10%
5
planned per annum growth in India’s GDP, which needs to be supported through coal imports
ministry recently approved five ‘super’ thermal power projects (about 4,000MW each) for grant of coal linkage. These plants together will add capacity up to 7,260MW by 2017. Indian power providers, including Essar and Mercator in the private sector and the government-owned National Thermal Power Corp, have acquired or are scouting for coal mines abroad to meet the demand for their expanding power and steel plants. India’s steel mills are also importing coal to meet shortfalls in the domestic supply of coking coal. Steel Authority of India Ltd (SAIL), a state-owned entity, consumed over 18M tonnes of coal in the financial year ending 31 March 2010, of which 10M
‘super’ thermal power projects (about 4,000MW each)� have ����� recently been ������������� approved ��������
tonnes were imported (see box). Other government-owned steel plants (such as Rashtriya Ispat Nigam, Visakhapatnam Steel Plant) imported over 3M tonnes of coal during the same period. While imported coal costs more than domestic coal, Sai ���� Pratha,���������������������������� Indian minister for steel, recently��������������������� said the quality of imported coal is different and prices are therefore “not strictly comparable.” Pratha�������������������� also revealed that expansion of hot metal capacity in SAIL plants would require an additional 23M tonnes of coking coal and 11M tonnes of boiler coal. The government is developing coking coal blocks to meet demand, but imports are expected to continue. F
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13 May 2010