Contents 23 Thermal coal offers see marginal rebound, demand weak 24 Seaborne coking coal offers weaken on low buying 25 India’s October coal imports up 4% y-o-y 26 Coal India production growth dips to 1.6% in November 27 SCCL’s Nov production surges 28.5% y-o-y 28 Sponge iron October production down y-o-y, m-o-m 29 Power capacity addition in Oct at 600 MW 30 India’s cement production in Oct up 18.5% y-o-y 31 35-MW grid-connected rooftop bids underway 34 Traffic handled by major ports up 5% in Apr-Nov 35 Indian Railways’ Nov coal handling up 8% y-o-y 39 India’s coal imports up 9.1% in FY18: Goyal 40 NLCI’s lignite production at 13.5 mt in Apr-Nov 41 ‘Maximise use of indigenous coal postbeneficiation’ 43 RVUN to commission another 1,980 MW soon 56 Domestic consumption to dominate Indonesian coal sector 62 US coal production estimated to decline to 742 MMst in 2019 63 Corporate updates 66 Indian coal markets conference 2018 68 E-auction data
4 Coal Insights, December 2018
6 | COVER STORY Moving forward
A look at how India’s coal logistic infrastructure is gearing up for future
32 | FEATURE ICFRE completes environmental audit of 20 CIL mines Mines’ index rating will help in expansion of existing projects
45 | IN-DEPTH
Tracing the geological formation and classification of coal Study of rock characteristics is sine-qua-non to predict the behavioral properties of coal
51 | interview
“Indian coal is not on radar of overseas miners” Opening up of coal should be accompanied by freeing of power tariff, says Dr Neil Bristow
57 | InterNATIONAL
COP24 and increasingly tough time for coal Is King Coal steadily losing its grip over global energy throne?
Cover Story
Moving forward A look at how India’s coal logistic infrastructure is gearing up for future Madhumita Mookerji
T
he one train of thought uppermost on the minds of all the coal industry players is logistics or its inadequacy thereof that is impacting supply-side issues deeply. There is no point in mining all that coal if it cannot be transported to the enduser plants and on time. And the needle of suspicion mainly points toward Indian Railways (IR) which is already heavily burdened with coal cargo load. On the other hand, coal is IR’s cash cow, which makes
6 Coal Insights, December 2018
the domestic producers and other industry stakeholders take umbrage when enough rakes are not available. Understandably, underscoring the importance of coal transportation, Coal India Limited’s Coal Vision 2030, a forward-looking document, gives enough space to logistics and its future. In India, almost 63 percent of coal coming into the country is moved by rail. In net ton kilometres (NTKM) it will be higher than 75 percent because rail transport over
longer leads, say 500-km-plus, is done mostly through rail. And despite this being the case, the relationship between both coal and rail has been a stormy one, racked by lack of rakes and a blame game. As says an official from a coal transporting company, “Earlier, when we used to talk to Coal India about indigenous coal, it would always put the blame on Railways and when we talked to Railways, it would put the blame on CIL! The government, perhaps in a bid to
Cover Story apply salve on singed nerves subsequently decided to put a single minister in charge of both coal and railways so that the ministry could identify, sympathise with and try to resolve the problems at both ends (read coal and railways) and industry circles swear that of late there has been some improvement in co-ordination between both the ministries. IR, on its part, has undertaken several expansion projects which are in various stages of completion and, once completed, these are likely to ease coal congestion. It may be recalled that non-power producers have been at the receiving end in particular despite having signed fuel supply agreements (FSAs) with CIL which guarantee 60-70 percent of coal supplies but which of course has been eluding them. Some blame the pressure on the coal miners to divert most of the coal to the power sector which has been experiencing a return of shortage for the last one year or so. As a result, many players in the non-regulated sector, especially steel, aluminium, cement glass, fertiliser etc, are resorting to imports, at a higher cost but their ordeal does not end there. Often, there are not enough railway rakes to carry that coal to the plants. “So, under such circumstances, what do they do with the units in which they have invested a lot of capital from their own resources and bank funding?” asks V K Arora, Chief Mentor, KCT Group. As per a World Bank study, Indian logistics costs are one of the highest in the world. If the costs are 6-8 percent of the cost of production in developed countries, in China these are 10 percent against India’s rather steep 14 percent. Industry stakeholders say that freight costs of rail and road are high in India, because freight has always been the pulley on which passenger fares have hinged. It is a well-known fact that increasing passenger fares is not always politically correct despite a pressing need to do so. Consequently, the entire passenger fare segment is subsidised by freight. “Since freight rates are not raised either, indirect means of revenue earnings are implemented which actually do increase freight costs,” rues an industry source. In case of coal, railway freight for power grade coals (G12-13) varies from 50-60 percent of the landed price of coal for a distance of 1,000 km. Now, that is high, adding to the power cost burden.
As per the estimates of Nitin Gadkari, the Minister for Road Transport & Highways, Shipping and Water Resources, the cost of movement of goods through rail is `1-1.20 per km, road `2-2.20 per km and inland waterways, `0.20 per km, with the government, of late, putting a lot of stress on the last mode, it being the cheapest and cleanest. According to a shipping ministry statement, 1 horse power (HP) can move 150 kg on roads, 500 kg via rail and as much as 4,000 kg through waterways. What a big difference indeed! Similarly, 1 litre of fuel can move 24 tons per km on road, 85 tons on rail and 105 tons per km on waterways. Since waterways are still at a nascent stage in India, plants obviously prefer coal movement through rails. Poor logistics infrastructure is the biggest challenge being faced by Indian dry bulk cargo producing companies. Problems are bad roads, poor connectivity, poor sea port capabilities, inadequate rail transport capacity and non-development of alternatives like inland waterways. For cost-effective management of goods, it is imperative to marry the different modes of transport in a seamless network so that the effective cost is lower. Further, the sponge iron, aluminium and several other industries depend on India’s domestic coal industry. Therefore,
logistics infrastructure has emerged as a key bottleneck, necessitating Indian Railways to roll out several expansion projects. Coal resources in India are available in only 6-7 states, of which 80 percent is concentrated in 4 states. With the existing increased coal production plans in place, supply is estimated to get further concentrated in the eastern states. For instance, coal production in Jharkhand is estimated to treble by 2030 from the present level of approximately 110 million tons per day (mtpa) today. This rapid growth in production has to be supported by adequate infrastructure for loading, handling and transportation. Since the gestation period for railway projects is longer, long-term planning should be undertaken and key infrastructure facilities implemented in time. Increase in freight charges over the years due to cross-subsidisation has resulted in only 38 percent rail share for the main long haul hinterland in India (north-west). Despite long distances, road still dominates in terms of container movement from Ludhiana/ NCR to JNPT/Mundra. Railways
However, there is tremendous synergy between railways and coal carriage. As says Arora, “For shorter distances of transport, say about 400 km, road transport is a viable
Growth trends in IR’s freight loading and coal loading
Coal Insights, December 2018
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IN-Depth
Tracing the geological formation & classification of coal Study of rock characteristics is sine-qua-non to predict the behavioral properties of coal Dr Anurag Garg & Vineet Singh
C
oal and petroleum, commonly known as fossil fuels or earth’s resources, have been the main sources of energy leading to industrial revolution. They were formed from the degradation of biomass of plants and animals, respectively. These remains got buried deep under the earth due to natural calamities like flood etc. for millions of years and got converted into coal and petroleum as we see today, due to pressure from earth’s soil, temperature and lack of oxygen. Industrialisation and rapid usage at the present rate of consumption have resulted in such a situation that petroleum reserves are likely to last for just about 40 years. However, coal will last for about another 200 years.
Various researches indicate that coal was used by the Chinese long before it was used in Europe. Coal from the Fushun mine in northeastern China was used to smelt copper as early as 1000 BC. Some signs of outcrop coal being used in Britain during the Bronze Age was also found. Evidence of trade in coal (dated to about AD 200) has been found at the Roman settlement at Heron Bridge, near Chester and in the Fenlands of East Anglia, where coal from Midlands was transported via the Car Dyke for use in drying grain. In essence, usage of coal by humans has a long history. Coal deposits
Coal is found in beds or seams interstratified with shale, clays, sandstones or limestone
(rarely). To denote periodicity/age, geologists use abbreviation ‘Ma’ which refers to mega annum or million years. Coal was mainly formed in Carboniferous period (c. 360 - 290 Ma.), but deposits dating to Permian (c. 290 250 Ma.), Triassic (c.250 - 200 Ma.), Jurassic (c. 200 - 150 Ma.), Cretaceous (c. 150 - 70 Ma.) and Tertiary (c. 65 - 20 Ma) periods (Refer Fig 2) are also found. In India, coal is mainly from the rocks of Permian period. By the end of the 19th century, geology of the southern continents were well studied and it was postulated by Eduard Suess, an Austrian geologist, that Africa, South America, Australia and India were once part of a supercontinent, which he named as "Gondwanaland". Due to drift of continental plates, alignments over the period of time appear as below (Fig 1). Coal deposits in India are mainly from two different geological period and basinal set-up - Permian sediments deposited in intra-cratonic1 Gondwana basins and Early Tertiary coal and lignite occurrences in peri-cratonic2 near shore basins and shelf. Gondwana basins of Peninsular India are generally found in the east-central part of the country along some well-defined linear belts namely, Damodar-Koel, SonMahanadi, Satpura, Pranhita-Godavari valleys besides Rajmahal basin. Rocks belonging to Gondwana Formation are also reported beneath Ganga and Brahmaputra alluvium in Bengal basin and below Deccan Trap. Report of coal occurrences (mostly of academic importance) are also available from foot hills of Eastern Himalaya. Economic deposits of Tertiary coals occur in two distinct geo-tectonic domains of the Northeastern India- in the shelf sediments of Meghalaya and Assam and in the intricately thrusted belt (Schuppen Belt) of Assam, Nagaland and Arunachal Pradesh. Lignite occurrences of economic importance are found within the Tertiary sediments, along the peri-cratonic basins of South -Eastern and western Peninsular Region. Geologically, coal is combustible compact black or dark-brown carbonaceous sedimentary rock formed from natural compaction of layers of partially decomposed vegetation occurring in stratified deposits due A stable part of the earth’s continental crust or lithosphere that has not been deformed significantly for hundreds of millions of years
1
Fig.1 Source: Encyclopedia Britannica
Basins formed near or accreted to the margins of the craton
2
Coal Insights, December 2018
45
INTERVIEW
“Indian coal is not on radar of overseas miners�
G
lobal coal prices have largely been firm in 2018, although demand from China has been rather muted due to import restrictions and production cuts in user industries. This implies that the prices were impacted more by supply-side factors. The scenario, according to Dr Neil J Bristow, Managing Director, H&W Worldwide Consulting Pty Ltd, may not see any remarkable change in the coming year. Prices in both the thermal and met coal markets are expected to remain rangebound, other things remaining the same, and the supply situation may remain tight. India, with its growing power and steel sectors, will play a major role as the demand driver. However, India’s domestic coal sector does not hold much promise for commercial mining unless the government takes bold steps to open up the market, says Bristow, in an exclusive interview to Arindam Bandyopadhyay. Excerpts:
After remaining firm for the better part of 2018, global thermal coal prices have recently started softening. Met coal prices, on the other hand, have remained range-bound in 2018, after witnessing high volatility last year. What is you outlook for global coal prices in 2019? Let me start with seaborne metallurgical coal prices. Currently, coking coal prices are moderately firm and are expected to remain so in 2019. Spot prices may soften a bit in the first half of the year, but, overall, the prices are likely to remain in the range $190-210 per ton FOB Australia. As I said, initially, there could be a slight drop from the current levels, but if there is any supply issue in the early part of 2019, prices will again shoot up. Other things remaining the same, in 2020, the average price could be $195-200 per ton FOB. This, of course, is the range one may expect under normal weather conditions. If there is a cyclone or heavy rains disrupting
Coal Insights, December 2018
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INTERNATIONAL
COP24 and increasingly tough time for coal Kingshuk Banerjee
I
s King Coal steadily losing its grip over global energy throne? Judging from the sound of jeering that high level Trump administration faced while propagating for clean coal in COP24 conference in Poland, it’s amply clear that it’s been gathering dark clouds for fossil fuels on
global scale. If this kind of booing could be done on global stage in a coal friendly country like Poland, the oncoming days could be very alarming for the global coal industry. There emerges doubt whether even clean coal could hold the fortress amidst this kind of global outrage. On the other hand, Chinese media lambasted COP24 as agenda bearer of Global North and squandering much of its
time in bureaucratic process while ignoring the urgent matters. Moreover, though Trump administration took a pro-coal stance, The Sierra Club, America’s largest and most influential grassroots environmental organisation, with more than 3 million members and supporters, lent its support to limit fossil fuel campaign. The silver lining could be the pro-fossil fuel African approach. With “we have to use what we have”, they are steadily treading on coal-oil path. On the other hand, Greens gave Poland the ignominious “Fossil of the Day” award after Polish President Andrzej Duda opened the conference with a speech in which he argued that coal use and climate protection were compatible and Poland would continue to use coal indefinitely.
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70 Coal Insights, December 2018
Tear along the dotted line
Tear along the dotted line