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CONTENTS 12 Seaborne thermal coal offers ease in February 13 Seaborne coking coal offers decline in February 14 India’s December coal imports up 15% on year 15 CIL’s coal production flat at 453.3 mt till January 16 SCCL’s coal production down 26.4% till January 17 ECL adopts mine planning software of Dassault Systems 20 India coal-fired generation may have peaked in 2018: Ember 22 The OTR growth story: Pioneering a new era for coal & Indian markets 24 India’s energy demand to explode: IEA 28 December power capacity addition at 270 MW 30 December cement production down 10% 31 January sponge iron output down 4.5% on year 36 US coal output estimated at 589 MMst in 2021 37 Traffic handled by major ports down 7% till January 38 Railways’ coal handling down 10% in April-January 39 CIL’s project monitoring: Urgent requirement for an infrastructure subsidiary 48 NTPC coal output falls 18.24% till December 50 JSW Energy sees 5% power demand growth in H2 52 Tata Power expands distribution footprint 54 Corporate update 56 Government update 58 E-auction data 60 Port Data
4 Coal Insights, February 2021
6 | COVER STORY
“Coal India can elevate production to mandated levels if demand is conducive” CMD Pramod Agrawal charts out the way ahead for world’s largest coal miner.
18 | FEATURE Second tranche of commercial block auction lists 75 mines Of these, 5 are pure coking coal blocks.
34 | INTERNATIONAL Coal to stay competitive in India: BHP Globally, thermal power to grow at less than population growth rate.
41 | INTERVIEW
“Commercial coal mining to boost demand for large-size mining equipment.” Arvind K Garg, EVP & Head, Construction & Mining Machinery Business at L&T.
44 | CORPORATE
Coal India sees thermal power plants raising offtake in March Thermal generation is now higher during morning and evening peak demand hours.
COVER STORY
“Coal India can elevate production to mandated levels if demand is conducive”
6 Coal Insights, February 2021
COVER STORY
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oal India Ltd. has its work cut out to expand its production capacity by opening new mines and leveraging ‘digital technology’ to enhance performance from its existing projects. Additionally, the state-owned miner faces the stupendous task of substituting imports of thermal coal and also diversifying into new areas like aluminum and solar power. Pramod Agrawal, chairman-cum-managing director, Coal India Ltd., in an exclusive interview to Arindam Bandyopadhyay, charts out the way ahead for the world’s largest coal miner, confiding that CIL would remain a valuable company and a company with values in years to come.
At the outset, let me extend our best wishes to you and Coal India for 2021. What has been your experience in leading the world’s largest coal company so far? So far the experience has been challenging and satisfying. Leading a company of the magnitude of Coal India (CIL) is a constant learning curve. The company has an invisible yet undeniable presence in most of the industrial sectors of the country. CIL has an indelible significance in the country’s energy, economic and social fronts. It contributes to around 83 percent of the nation’s entire coal output. I don’t think there is any other industry or company that single-handedly adds to that humongous share to such particular product. About 67 percent of India’s coal-based power generation comes from supplies linked to Coal India’s coal. We are one of the highest contributors to the government exchequer – both Centre and states through dividend, corporate tax and a slew of other duties and levies. But, Coal India also has a uniqueness beyond its numbers. Apart from our core operations we are also one of the largest spenders on Corporate Social Responsibility, which touches the lives of large sections of the society.
Leading a company imbued with such multiple hues is certainly a matter of pride. What are your major mining projects in the pipeline currently? Our major emphasis is on brownfield projects and going forward, in the subsequent years this is where our production would come from. We are focused on maximizing our production with minimal ecological disturbance. CIL’s major mining projects constitute 35 opencast mines which contribute to more than 70 percent of the total annual coal output. During the last fiscal these mines at around 434 million tons (mt) accounted for 72 percent of the total production of 602 mt. We constantly monitor the progress of these mines. This year so far these large mines have contributed 75 percent of the total output. Plans are on the anvil for leveraging ‘digital technology’ as an accelerator for performance enhancement of selected mines of the company. It would also enable transformation across business value chains. A tender has already been issued in the context. Seven high capacity opencast mines from two subsidiaries of CIL have been selected and put under two clusters.
Three mines, namely Kusmunda, Gevra and Dipka from SECL and Nigahi, Jayant, Dudhichua and Khadia from NCL form the two clusters. The idea is to fit together and use the available data analytics techniques and other technologies to raise mine productivity and efficiency levels at lower costs while extracting as much coal as possible. Learning from the outcome of the experiment we will adopt it further in our large mines. Standing close to the end deadline of 202324, how confident are you about achieving 1 billion tons of coal production, which entails an incremental output of around 350 million tons in 3 years’ time? How feasible is it to produce 100 mt more every year? We have the wherewithal to elevate our production to the mandated levels if the conditions are conducive. We are vigorously pursuing for green clearances, both environmental and forestry, which is beginning to show results. The Hon’ble Coal Minister is taking keen interest in facilitating the conditions and the Ministry of Coal is lending its support in overcoming the constraints like possession of land and statutory clearances. We have identified high yielding mines and are adopting newer technologies to ramp up our production. We have already initiated process for operating 15 mines
“Our major emphasis is on brownfield projects and going forward, in the subsequent years this is where our production would come from.” Coal Insights, February 2021
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FEATURE
Government puts 75 coal mines in second tranche of commercial block auctions
Coal Insights Bureau
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oal Ministry has initiated the next tranche of commercial coal mine auction, inviting Expression of Interest for 75 mines of which five are pure coking coal blocks, two are a mix of coking and non-coking coal while the rest are thermal coal. “Buoyed with the success of the 1stever auctions for commercial coal mining, Coal Ministry has come up with the next tranche of commercial coal mine auctions. Expression of interest has been invited for 64 coal mines,” Pralhad Joshi, Coal and Mines Minister, tweeted. Out of 75, 50 blocks are being offered under Mines and Minerals (Development and Regulation) Act, 1957 while the balance under Coal Mines (Special Provisions) Act, 2015.
18 Coal Insights, February 2021
There shall be no restriction on the sale and or utilisation of coal produced from the coal mine and successful bidders shall be free to sell coal in any manner. “The list has been finalised post detailed deliberations,” the ministry said. During the deliberations, the ministry followed the following issues: ♦ Blocks falling under un-notified Lemru Elephant Reserve of Chhattisgarh, wildlife habitat of Great Indian Bustard, Kinnersani ESZ, Tiger Reserve/ Corridor, heavily built up area etc. have been excluded.
♦ Blocks presently under litigation have been excluded. Interested bidders and stakeholders have been asked to submit feedback and preferences by February 24. Initially, the ministry came up with a list of 64 blocks and added 11 more mines later. Coking coal block details
Coking coal 1. Choritand Tiliaya Location: West Bokaro, Jharkhand
♦ Blocks having over 40 percent of green cover have been excluded
Target Capacity: 0.78 mtpa
♦ Blocks with ongoing exploration activities or having overlap with active CBM blocks have been excluded
Geological Block Area: 2.49 sq.km. y Forest Area Approx. 1% y Non-Forest Area Approx. 99%
Geological Reserve: 97.035 mt
FEATURE
India’s energy demand to explode: IEA
Coal Insights Bureau
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s India recovers from a Covidinduced slump, the country is reentering a very dynamic period in its energy development as it would add over 270 million people to urban population, who, over the coming years, are set to buy new appliances, air conditioning units and vehicles triggering an explosion in energy needs, says International Energy Agency in its India Energy Outlook 2021 report. India will soon become the world’s most populous country, adding the equivalent of a city the size of Los Angeles to its urban population each year. “To meet growth in electricity demand over the next twenty years, India will need to add a power system the size of the European Union to what it has now,” the report said. India’s sheer size means that 270 million people are still set to be added to India’s urban population over the next two decades.
24 Coal Insights, February 2021
This leads to rapid growth in the building stock and other infrastructure. The resulting surge in demand for a range of construction materials, notably steel and cement,
“To meet growth in electricity demand over the next twenty years, India will need to add a power system the size of the European Union to what it has now.” IEA highlights the pivot in global manufacturing towards India. As India develops and modernises, its rate of energy demand growth is three times the global average, the report said. India is the world’s third-largest energy consuming country, thanks to rising incomes and improving standards of living. Energy use has doubled since 2000, with 80 percent of demand still being met by coal, oil and solid biomass. On a per capita basis, India’s energy use and emissions are less than half the world average, as are other key indicators such as vehicle ownership, steel and cement output. India’s electricity demand is set to increase much more rapidly than its overall energy demand.
INTERNATIONAL
Coal to stay competitive in India: BHP
Coal Insights Bureau
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oal-fired power is expected to retain competitiveness in India for a long time because of the relatively young age of the coal fleet of around 10 years on average, or one quarter of a normal lifetime, says BHP in its Economic and Commodity Outlook for first half of FY2021. Globally, the energy major believes total primary energy derived from coal (power and non–power) to expand at a compound rate slower than that of global population growth. “Coal power is expected to progressively lose competitiveness to renewables on a new build basis in the developed world and in China. On a conservative estimate, the cross over point should have occurred in each of these major markets by the end of this decade,” BHP said. Despite late improvement in prices,
34 Coal Insights, February 2021
calendar 2020 will go down as a very challenging one for the coal industry, says BHP. Seaborne imports declined by around -68 million tons (-6.8 percent) from the calendar 2019 level. While China and Vietnam saw import volumes grow in calendar 2020, Japan, South Korea and India saw their collective imports fall. This placed considerable pressure on exporters. With more than half of seaborne supply earning negative margins, major regions responded with lower shipments, with Australia (-12 mt), Colombia (-21 mt) and Indonesia (-56 Mt) absorbing much of that burden, although COVID-19, wet weather and infrastructure issues were arguably as important as discretionary economic curtailments. Energy coal prices were weak for much
“Coal power is expected to retain competitiveness in India, (where the coal fleet is only around 10 years old on average: one quarter of a normal lifetime), and other populous, developing nations, for a much longer time.” of the first half of financial year 2021, before rallying late in the period on strong winter power demand from North Asia. The gCNewc 6000 kcal/kg FOB Newcastle index averaged around $59/ton over the first half of financial 2021, down from around $62/ton in the prior half. Prices ranged from a high of around $85/ ton to a low of around $48/ton, with the high achieved in the final trading week of the second half of December. The low point of $48/ton is below the 2015-16 trough in real terms. “Based on the Wood Mackenzie operating cost curve, more than half of seaborne supply (comprising all grades of energy coal) was likely experiencing negative margins with 6000 kcal prices in the high $40s or low $50s,” the report said. The 5500kcal index averaged around $40/ton over the first half of financial 2021, with a high of around $58/t and a low of around $35/ton. Similar to 6000 kcal 5500 kcal closed the half year near its highs. The spread between the spot indexes for gCNewc 6000 kcal and 5500 kcal was volatile, driven by Chinese import uncertainty and rates of recovery in the rest of the world. On
INTERVIEW
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“Commercial coal mining to boost demand for largesize mining equipment” ith commercial mining gaining ground and the
utilisation of coal blocks likely to go up in the near future as India’s energy demand soars, L&T, which already has a strong presence in both CIL and SCCL opencast projects, is expecting significant growth in acquisition of new equipment and latest models. Further, the company is also looking forward to the Government continuing with the existing policies of mine allocations and the CEPA/ FTA agreements for mining equipment imports, Arvind K Garg, EVP & Head, Construction & Mining Machinery Business at L&T tells Ritwik Sinha of Coal Insights.
What is the present size and growth rate of mining equipment market in India? How do you see the mining equipment market evolve in coming years? What could be the major growth driver? The mining industry in India has evolved over the last few years with the market size growing substantially. With political stability and policy continuity, there is an increased confidence from investors in the Indian mining sector. The amendment to MMDR Act has brought in a transparent mechanism for mineral resources allocation, exploration, and sale. The enthusiastic participation by major industrial houses, in the recent auction of coal, iron ore and limestone blocks is highly encouraging for the economy and augurs well for the long-term growth of this sector. With commercial mining gaining ground and the utilization of coal blocks in the near future, this will spur the fleet acquisition for new equipment and latest technology models. Kindly brief us about your products and their presence in different verticals of infra development. We at L&T Construction & Mining Machinery, are celebrating 75 years of our service to the nation. In fact, we are one of the oldest verticals of L&T Group and are working closely with our customers to become their ‘trusted partner in nation building’. Our range of construction equipment and road machinery caters to the spectrum of infrastructure development like roads, railways, ports, airports, irrigation, quarry, land development,
Coal Insights, February 2021
41
CORPORATE
Coal India sees thermal power plants raising offtake in March Sumit Maitra
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oal India’s own analysis has shown that there has been a marked shift in thermal generation at the cost of competing renewable energy in recent months despite renewable energy generation remaining more or less consistent in recent months with hydro generation varying as per seasons. Thermal generation is now higher during the morning and evening peak demand hours
(when renewable energy generation is low) and is also higher in absolute terms. “This trend is expected to continue and aid coal offtake,” the company said in a presentation to analysts post third quarter financial performance announcement. Rise in power demand is yet to get reflected fully in CIL’s offtake as power plants have been holding coal stocks of up to 34 days during lockdown, which has now fallen to 18 days. Power demand continues to recover
Consequently, demand for coal increases
Source: CIL
44 Coal Insights, February 2021
Since power plants are mandated to keep 19 day’s stock, Coal India expects power plants to raise offtake beginning March to keep adequate stocks. “From the highest stock of 51 million tons in July at the power stations, it has now come down to 34 mt. We have tried to compensate this (comparatively lower sales to power sector) by raising our offtake to the non-regulated sector raising it by 60-70 percent,” CIL chairman Pramod Agrawal told analysts. “We expect the business to perform well in the short to medium-term, as the demand from power plants would witness sharp increase once their inventory levels deplete. The long-term outlook remains positive with improvement in realization and the ability of the company to protect margins by improving efficiency,” a report by Geojit Securities said.
62 Coal Insights, February 2021
Tear along the dotted line
Tear along the dotted line
