Coal Insights, February 2017

Contents

6 | COVER STORY

16 Steam coal offers decline in February 18 Coking coal prices decline in February

Joy Global focusing on reducing miner’s costs

19 India’s December coal imports down 22% y-o-y

Company’s acquisition by Komatsu will dramatically increase its value chain in surface mining, says Shib Bhowmik.

20 SCCL’s coal production up 2.62% in Jan 22 CIL Q3 net down 22% on poor e-auction realisation 23 Fast Green clearances can boost mining: CII

21 | Feature

24 No new investments likely in coal in 10 years: TERI

Higher demand for SCCL’s tranche II linkage auction

25 India’s cement production in December up 7% m-o-m

The allocation rate still remains low, thanks to the low appetite of cement and other sectors.

26 Power sector worried about lukewarm demand in FY18: Ind-Ra

34 | Expert Speak

27 Infra allocation at record `3.96 lakh crore

Is coal going to be trumped?

30 Clearing the way for coal mine projects

Trump’s decisions on coal and climate will have a major bearing on countries like India, says V K Arora.

35 Govt may review grant of linkages to power sector 37 US coal production estimated to decline by 18% in 2017: EIA 39 Glencore’s coal production edges down 5% in 2016 40 Trump’s coal policy: could India benefit?

43 China keeps the market guessing about coal production curbs 47 Corporate updates 50 Indian Railways’ Jan coal handling slips 3% y-o-y 52 Traffic handled by major ports up 7.14% in Apr-Jan 54 E-auction data 56 Port data

4 Coal Insights, February 2017

38 | International

Asia’s coal imports from Colombia surge in 2016 After prolonged wait, Colombia finally seems to be making inroads into Asian marts.

44 | CORPORATE

Riding the Chinese monkey car Xiangtan Hengxin, China’s largest maker of man-riding systems, vows to offer the best for India.

Cover Story

Joy Global focusing on reducing miner’s costs

T

he global mining equipment market, dealt a body blow by the slump in commodity prices, has seen almost 50 percent reduction in its value since 2012, when the market had peaked at more than $ 100 billion. Consequently, in a bid to come back into the market, most global majors are looking to add value to their customers’ books by working closely with them. In India, the scenario was slightly different because of issues related to pending approvals and strict regulations in setting up new mining projects.

However, things have looked up since the last two years,

6 Coal Insights, February 2017

Cover Story with the government’s thrust on increasing coal production and reducing dependence on imports.

US-based mining equipment manufacturing giant Joy Global is thus focusing on ways to reduce its customer’s mining costs through localisation of several products, focus on life-cycle management of machines and new, energy-saving and high productivity state-ofthe-art equipment. Shib Bhowmik, Country Head and Managing Director, Joy Global (India) Limited, tells Madhumita Mookerji in an interview that the company is already getting paid for parts from many of the projects based on per hour of operation or per ton of mined coal in both underground and surface mining machines.

Excerpts:

Joy complete longwall systems are the ultimate solution for high-production mining.

Incorporating best-in-class shearers, roof supports, face conveyors, stageloaders, crushers and mobile belt tail pieces, Joy Global delivers a complete longwall system that is in a class of its own, solving mining’s toughest challenges.

What is the scenario like with regard to the mining equipment industry?

There are several sub-segments within the mining equipment industry. Some of them have grown, some de-grown. Joy Global is primarily a mining equipment company and not construction but, because of our acquisition of Montabert, we now have exposure in construction market as we offer rock breakers and tunnel conveyors, underground loading and drilling machines.

In India, our majority business is from coal mining.

Globally, there has been a lot of upheavals in the mining equipment industry because how commodity prices have moved in last few years. This has impacted all players in the industry. Some of the leading players have seen their revenues slide by almost 40-60 percent compared to the

peak of 2011-12. Thus, the global mining equipment market is almost half of what it was in 2012, when, in value terms, this market was probably worth around $100 billion.

In India, what was the scenario like?

India was in somewhat different scenario.

From 2011-12, mining here was affected not because of lack of demand but several other reasons. Regulatory approvals, environmental and forest clearances were missing. New projects were very hard to come by because of the strict laws. So, accordingly, the market was affected.

The mining industry in India is mainly characterised by two pillars. One is coal, dominated almost 85 percent by Coal

Some of the leading players have seen their revenues slide by almost 40-60 percent compared to the peak of 2011-12. Thus, the global mining equipment market is almost half of what it was in 2012, when, in value terms, this market was probably worth around $100 billion.

India, and the other is iron ore. In the latter, because of the China effect, banning of export of iron ore fines, clamp down on illegal mining and also severe fall in prices, got sliced drastically – from around 200 million tons (mt), India’s entire production got reduced to around 100 mt. If you travelled around Odisha, Karnataka, Goa, you would have seen a long line of these large equipment lying idle because of the reasons stated above.

Joy Global in India did not have an exposure to iron ore mining. Joy Global is into large-sized mechanized equipment and the average size of iron ore and limestone mines that we have in India are much smaller. So the equipment that many of these mines use is typically construction equipment. The latter are much smaller, and tyre-mounted etc. Thus, here, many Chinese and Indian construction equipment manufacturers were affected.

As I mentioned, Joy Global, in India, is mainly into coal mining equipment. Our machines can be used into select mines. For instance, only into mines where production is more than 4-5 mt per annum from surface

Coal Insights, February 2017

7

Expert Speak

Is coal going to be trumped?

V K Arora

F

or all the champions of climate control, coal has been an “undeclared villain” which is responsible for the entire cycle of climate change – the melting of the polar ice and increase in the temperature of the seven seas.

All the best brains who got together in Kyoto and then in Paris declared coal and the resultant CO2 as the biggest culprit perpetrating global warming.

They would show pictures of gasping seals and white polar bears, question the loss of the Arctic ice through supposedly CO2induced heating resulting in melting of ice all around. These painful pictures would also show alongside factories, mainly power plants, belching out smoke and copious quantities of CO2 in the atmosphere.

Left to them, they would shut down all power plants based on hydro-carbons, particularly coal, so that humans and animals could be saved. These conferences were held in large air-conditioned auditoriums and the protests were mainly in areas which had cold climate. These reactions would probably have been different, had been denied cooling in a hot, tropical climate, or the heating, in case of a cold environment.

In other words, they were quite used to the comforts of life - not realising that these comforts were coming out of extensive use of power which is predominantly based on coal.

All this raving and ranting resulted in politicians going overboard in declaring “coal as the villain”. President Obama declared a war on coal. US coal production fell to 800 million tons – about 25 percent reduction since 2008. Cheaper alternatives like shale gas, natural gas took centrestage and coal mines started shutting down.

In sympathy with US or China initiatives – ie, cut-down on coal production – other countries followed suit. Investments in wind and solar became the flavour of the season.

34 Coal Insights, February 2017

Prime Minister Modi set up very ambitious targets for renewables – 100,000 MW of solar and 60,000 MW of wind by 2020. Prices started coming down and it is expected, someday, renewables would be cheaper than coal.

And then comes President Donald Trump, who is trying to undo all the supposedly good work done by his predecessor.

He is questioning every hypothesis and accepted belief. He did not explicitly address the scientific legitimacy of human-caused climate change, but said: “We are going to deal with real environmental challenges, not the phony ones we are hearing about.”

What was music to the ears of coal miners was his resolve “to save the coal industry threatened by his predecessor’s agenda. Any regulation that is outdated, unnecessary and bad for workers will be scrapped.” As a result of this, there is optimism among coal miners in the Appalachian region of the US where so many mines had shut down and 50,000 coal miners had lost their jobs.

What does that mean for the rest of the world? ♦♦ Despite all the rhetoric, it is difficult for the US to walk out of the Paris Climate Agreement which has been signed by 196 nations, after many years of deliberations. ♦♦ Revival of coal mines, subsequent to the mandated higher use of coal for power generation, would depend not on the President’s directive but on the play of market forces. Whichever is cheaper – coal, oil, shale gas, natural gas, renewables or atomic – shall be used. ♦♦ Emphasis on clean coal technology will increase. This will increase the cost of coal-based power but if the increase is marginal, it will be absorbed. ♦♦ Greater use of coal will depend more on the price of natural gas – if the latter goes up, it will lead to higher use of coal. ♦♦ Wind and solar will continue to attract investments. Cost of both will come down as larger volumes are attracted. But the role will be supplementary and not primary. We have to appreciate that power, as of now, cannot be stored economically

and it has to be used, as and when it is produced. So while coal/shale gas/oil will remain the primary source, wind and solar will only supplement when conditions are ideal for generation. In other words, wind and solar shall play its part only when time is conducive for their generation. ♦♦ Storage of electricity will attract huge research for developing a technology for economic storage of power. Work done

by Tesla and other such companies is showing signs of an early break-through. ♦♦ Future of coal is significantly dependent on how China sees it. China is paying a heavy price due to the emergence of smog every winter in cities like Beijing and Shanghai, affecting health and welfare of its citizens. China will continue to expand its renewables portfolio to reduce dependence on coal. ♦♦ Lastly, India will have to use coal as a primary source to the extent of 60 percent. Renewables are expected to go up to 30 percent but coal will continue to remain the king.

Trump effect on developing economies like India

Trump had said that he would cancel the Paris Climate Agreement, which was ratified in November, 2016 and requires a three-year period to quit. He also said he would cut all money spent on climate change aid to developing nations and slash clean energy funding. The new President now says he has an open mind on the Paris accord to combat climate change.

If he decides to withdraw, developing countries like India would be left in the lurch, as they were expected to receive a compensation from developed countries for cutting down on carbon usage and in encouraging renewables.

Let us hope good sense prevails and newborn political leaders learn their lessons not in the hard way – causing serious damage to the economy of developing countries. Going against the accepted scientific hypothesis is not always the best way to start your innings.

The author is Chief Mentor, Karam Chand Thapar & Bros. (Coal Sales) Ltd. Note: The views expressed here are those of the author and not of Coal Insights. The publication does not take any responsibility for the article in part or in full.

INTERNATIONAL

Asia’s coal imports from Colombia surge in 2016 Arindam Bandyopadhyay

I

mports of coal from Colombia by Asian countries surged to 7.5 million tons (mt) in 2016 from a minuscule 0.02 mt a year ago, according to data available with Coal Insights from shipping agents.

Imports by the Asian countries picked up since the second quarter (April-June) of 2016 but dropped in the third quarter before staging a rebound in the fourth quarter of the year, the data showed.

Imports were particularly up in November and December when the sharp increase in spot coal prices in the international markets prompted buyers in Asian countries to look for alternative sources. Colombian coal being qualitatively competitive to South African coal attracted the Asia-Pacific buyers towards the end of the year.

A country-wise break-up shows that India and South Korea received the majority of Colombian coal, at around 2.50 mt and 1.95 mt respectively, during the year, after zero imports in 2015. However, a Colombian exporter of thermal coal claimed the volume supplied to India was greater than the numbers reported.

Commenting on the increasing acceptance of Colombian coal in India,

the industry source said that a comparison between delivered price of Colombian coal and South African coal to India’s west coast (CIF India) shows that the former was lower for a significant part of the year.

“Pricing is the buyer’s primary focus, but in situations where the relative economics are marginal and lead times are not important, the superior Colombian coal quality may provide an advantage,” he said, adding that the ash content in the material supplied also goes in favour of Colombian coal. Overall, Colombian coal is an excellent replacement for South African coal on quality grounds, he said.

Apart from Asia, Central America and Caribbean islands also posted a significant growth in imports from Colombia in 2016, clocking 7.13 mt during the year, compared to 4.77 mt a year ago.

Colombia’s coal exports up 9.93%

Meanwhile, total coal exports by Colombia registered a healthy 9.93 percent growth to 89.76 mt in 2016, compared to 81.65 mt exported in the previous year, the data showed.

This was the third consecutive year of growth in exports by the South American country since 2013. Given that the country

Coal exports by Colombia in 2015 and 2016 (in mt)

38 Coal Insights, February 2017

is consistently expanding its production, exports are likely to continue growing in coming years.

Exports in the last quarter (OctoberDecember) of 2016 dropped marginally to 22.94 mt from 23.32 mt achieved in the previous quarter, amid the surge in international spot prices.

A month-wise break-up of exports show that the highest volume was achieved in July at 8.52 mt, followed by 8.13 mt in June and 7.97 mt in December.

Colombia, primarily an exporter of thermal coal, competes directly with South

Coal imports by Europe and Asian countries from Colombia, 2016 (in mt)

CORPORATE

Riding the Chinese monkey car

X

iangtan Hengxin Industrial Corporation Ltd (XHICL), the largest manufacturer of manriding systems in China, has changed the domestic market scenario by replacing German machines in Chinese underground mines. After making a foray into several countries, the company is now eyeing India big time, says Xiao Gong-Ping, President, XHICL. Xiao, lovingly called the ‘King of the monkey car’ in China, tells Arindam Bandyopadhyay that the quality of equipment supplied by his company would help change the perception about the quality of Chinese equipment in India.

Excerpts: Please tell us about the company and its genesis.

Xiangtan Hengxin Industrial Co was founded in 1999 as a private company based out of the Shaoshan city in the Hunan province of China.

44 Coal Insights, February 2017

We are a leading manufacturer of underground transportation and communication systems which are supplied to the Chinese coal mining sector. In our area of operation, we are one of the largest in China with a significant share of the domestic market. We are also a significant player in the global market, including Europe and other locations.

We have four plants in Shaoshan City, which is the birthplace of Mao Tse Tung.

Currently, the company has manpower

of around 300 people. Total sales are about $30 million as of 2015 (JanuaryDecember).

What are the major products offered by the company?

Our product portfolio contains three major categories: Man-riding chairlift systems, shuttle cars for underground material transportation, and underground broadcasting or communications systems which include phone and display units and location tracking systems in underground mines.

Each of these product categories has many sub-categories, features and applications. Of these, the man-riding system or the ‘monkey vehicle’ is our flagship brand. In China, 4,000 units of the man-riding systems are currently in operation, of which 1,300 units are supplied by us. So, in this category, our market share is about 30 percent. Our man-riding systems cover a distance of about 1,300 km.

Could you elaborate on your ‘monkey vehicle’?

The man-riding chairlift system (MCS) of the monkey car is mainly used for personnel transport in inclined and horizontal roadways. It consists of a driving unit, rope carrying and rope pressing pulley device, pulling steel wire rope, man-riding device, return sheave device, tension device, safety protection device and electric control device, etc.

We are the largest manufacturers of the monkey car in China (in value terms) and also one of the largest in the world.

58 Coal Insights, February 2017

Tear along the dotted line

Tear along the dotted line