Coal Insights, February 2022

CONTENTS 18 Seaborne thermal coal offers rise in February 19 Seaborne coking coal offers up in February 20 January coal imports down 36% y-o-y 21 CIL’s coal production up 6.7% in January 22 SCCL’s coal production up 1% in January 23 Union Budget FY23: Boost to green transition, coal gasification 29 Coal mine auction premium touches 345% in 3rd tranche 30 CCEA approves unified e-auction window 31 Green hydrogen policy to cut fossil fuel dependency 33 January sponge iron production up 2.1% y-o36 Power capacity addition at 3,108 MW till December 37 Infra push aids 25% cement output growth till December: Care Ratings 39 Coal handled by major ports up 17% till January 40 Indian Railways’ coal handling up 23% till Januar 46 Peabody sees higher coal production and exports in 2022 48 US launches initiative to accelerate hydrogen adoption 50 US coal production to rise by 5 percent in 2022: EIA 54 CMPDI floats tenders for coal gasification projects 55 NTPC Q3 coal production grows 55% to 4 mt 58 Corporate update 60 Government update 62 E-auction data 64 Port Data

4 Coal Insights, February 2022

6 | COVER STORY

Coal output: Gearing up to meet power surge A detailed look at strategies to raise production.

26 |

FEATURE

Coal Ministry seeks urgent completion of rail links Discusses 14 critical coal evacuation projects.

41 | INTERNATIONAL China moves to check coal prices, build new capacity Ask miners not to charge high prices.

44 | INTERNATIONAL

Origin to shut largest Aussie thermal plant in 3 years To set up battery storage, hydrogen facilities

51 | CORPORATE

“Coal India needs to raise prices soon”: CMD Agrawal To offer more coal via e-auction windows.

COVER STORY

Coal output: Gearing up to meet power surge Sumit Maitra

6 Coal Insights, February 2022

COVER STORY

O

n February 24, Coal Minister Pralhad Joshi along with senior officials of the ministry huddled in the ministry’s conference room with Pramod Agrawal, CMD of Coal India (CIL) and the heads of CIL’s subsidiaries to discuss the most important challenge in hand: How to raise coal production to meet the surge in demand of electricity.

In FY22, till February, NTPC’s power generation has grown 16 percent with 314.89 billion units (BU) being produced, up from 270 BU in the corresponding period of FY21.

In fact, generation till date is slightly more than what was achieved in the whole of FY21.

The Coal Ministry also has to fulfill the mandate of reducing coal imports even as demand for coal continues to rise.

“This is the time we should stop the entire import of substitutable coal. Imports are significantly down this year till date but with power generation touching 3.05 billion units a day it is a challenge to maintain coal stocks at the power plants. But we need to

“I’m looking forward to end this year with the production of more than 630 mt. We are targeting that we should try to achieve 640 million tons. And that is a slightly difficult target, but we will put everything to achieve this.”

Pramod Agrawal, CMD, Coal India

Coal production Production (in MT)

Growth % Growth % Growth % (Jan 22 v/s Jan 21) (Jan 21 v/s Jan 20) (Jan 22 v/s Jan 20)

Jan 2022

Jan 2021

Jan 2020

CIL

64.5

60.4

63.0

6.8%

-4.1%

2.3%

SCCL

6.0

6.0

5.7

1.2%

4.2%

5.4%

Captives

9.1

7.1

6.3

27.0%

14.1%

44.9%

Total

79.6

73.5

75.0

8.3%

-2.0%

6.1%

Production (in MT)

Apr 2021 to Jan 2022

Apr 2020 to Jan 2021

Apr 2021 to Jan 2022

Growth (FY22 v/s FY21)

Growth (FY21 v/s FY20)

Growth (FY22 v/s FY20)

CIL

478.1

453.2

451.2

5.5%

0.4%

6.0%

SCCL

52.5

38.6

52.5

36.1%

-26.4%

0.2%

Captives

71.3

54.1

51.7

31.7%

4.6%

37.8%

Total

602.0

545.9

555.4

10.3%

-1.7%

8.4%

* Indicates these growth numbers are for comparable penods In each of these financial years.

Source: Ministry of Coal, CareEdge Research

convert this challenge into an opportunity to ensure that all substitutable coal imports are stopped,” Joshi said while speaking at an event to mark the implementation of ERP in CIL. The problem of cutting down on “substitutable imports” has been solved to an extent by sharp rise in global coal prices which discouraged importers to import coal and go for domestic coal instead.

This has now put an additional burden on CIL to supply more of domestic coal to power plants that would otherwise have imported its requirements.

CIL’s ability to meet domestic as well as import substitution demand has so far been constrained by the toll of the pandemic and adverse weather conditions crippling mining capabilities in the first half of FY22.

As winter recedes and power demand expected to rise again, Coal Ministry along with CIL have started strategising on ways to boost output Coal India FY22 production seen in 630-640 mt range

CIL is trying hard to raise coal production and is likely to end the current year with output in the range of 630-640 mt, CMD Agrawal told investors during a conference call.

“I’m looking forward to ending this year with the production of more than 630 mt. We are targeting that we should try to achieve

640 mt. And that is a slightly difficult target, but we will put everything to achieve this,” Agrawal said.

In January, India’s coal production increased by 6.13 percent to 79.60 mt from 75 mt in the corresponding month of previous year.

Out of this, CIL produced 64.50 mt, a growth of 2.35 percent and Singareni Collieries Ltd’s output went up by 5.42 percent to 6.03 mt while captive blocks produced 45 percent more coal at 9.07 mt during the month.

Of the top 35 mines producing coal, 14 mines performed more than 100 percent and another six mines’ production stood between 80 and 100 percent.

Till January this fiscal, country’s coal production has touched 601.95 mt, 10.3 percent higher than 545.89 mt achieved during the same period of previous year.

Of the total production during AprilJanuary 2022, CIL achieved 478.14 mt (5.5 percent growth year-on-year) while Singareni Collieries output grew 36 percent at 52.54 mt while output from captive blocks went up 31.7 percent at 71.26 mt.

The production growth follows constrained output in the early months of the year. “Our production in April-June was very poor, at 14 lakh tons a day because of the Covid situation against capacity of 18-20 lakh tons a day. We are trying to maximise this,” Agrawal said.

Coal Insights, February 2022

7

FEATURE

Coal Ministry seeks urgent completion of rail links

Meeting of Coal Ministry to review Angul-Balram rail link, part of Inner Corridor being executed by Mahanadi Coal Railway Ltd (MCRL)- A JV of MCL, IDCO and IRCON

Coal Insights Bureau

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s demand for domestic coal rises sharply following revival of domestic demand and drop in imports due to surge in international prices, there is need to expedite rail linkage projects for coal evacuation, Coal Secretary Anil Kumar Jain said during a review meeting.

These projects are being constructed either by Coal India through the Special Purpose Vehicle route or by Indian Railways independently.

Coal Secretary recently reviewed the status/ progress of the 14 railway projects undertaken towards increasing the efficiency and further enhancing the capacity of the coal evacuation process during a meeting

26 Coal Insights, February 2022

with the stake holders on February 7, 2022, according to an official release.

Jain said Cabinet Secretary will be specially reviewing capability of Railways for transportation of coal upcountry as most of the imported coal based thermal power plant are located on coast and far off.

During the meeting, a presentation was made by Binay Dayal, Director (Technical), Coal India (CIL) on the present status/ progress since the last review meeting held on September 6, 2021.

On February 7, all the 14 critical coal evacuation railway projects were discussed individually.

Following the discussion certain decisions on the projects were also taken to expedite the processes. The total estimated

On February 7, all the 14 critical coal evacuation railway projects were discussed individually. Coal Ministry sought urgent completion of these projects. The cost is expected to be `22,067 crore. Once these projects are commenced, they are expected to augment the coal evacuation capacity to the amounts of 410 mtpa. The transportation of the coal through railway will also provide better connectivity and reach. cost for these projects is expected to be `22,067 crore.

Once these projects are commenced, they are expected to augment the coal evacuation capacity to the amounts of 410 million tons per annum (mtpa). The transportation of the coal through railway will also provide better connectivity and reach.

These projects will cover a distance of 2,680 Km approximately, which will be spread across the states of Jharkhand, Odisha and Chhattisgarh.

FEATURE

Coal mine auction premium touches 345% in 3rd tranche Mine-wise details S. No

1 2 3 4&5 6 7 8 9 10

Name of the State

PRC (MTPA)

Annual Revenue projected based on the PRC of mine (` cr.)

Estimated Capital Investment (` cr.)

Estimated Total Employment

14.970

0.20

422.49

30.00

100**

14.970 0.058 0.468 0.526 61.053 61.053 31.036 31.036 800.000 327.049 285.230 196.347 1,608.626 1,716.211

0.20 0.004 0.020 0.024 0.680 0.680 0.480 0.480 NA 5.260 12.000 3.370 20.630 22.014

422.49 2.54 35.90 38.44 92.44 92.44 76.26 76.26 NA 562.49 1,152.84 513.24 2,228.57 2,858.20

30.00 0.60 3.00 3.60 102.00 102.00 72.00 72.00 NA 789.00 1,800.00 505.50 3,094.50 3,302.10

100 10*** 10**** 20 919 919 649 649 NA 7,112 16,224 4,556 27,892 29,580

Geological Reserves (MT)

Name of the Mine

Arunachal Namchik Pradesh Namphuk Sub-Total Koilajan Assam Garampani Sub-Total Jharkhand Brinda & Sasai Sub-Total Maharashtra Majra Sub-Total Bankhui* Bijahan Odisha Meenakshi Utkal C Sub-Total Total

* PRC is not available for the partially explored coal mine. *** Assuming 10 days of operations

** Assuming 270 days of operations **** Assuming 60 days of operations

Cumulative results for the 3rd Tranche of commercial coal mine S. No.

Name of the Mine

State

PRC (mtpa)

1

Bankhui*

Odisha

NA

2

Bijahan

Odisha

5.26

3&4

Brinda & Sasai

Jharkhand

0.68

5

Koilajan

Assam

0.004

6

Meenakshi

Odisha

12.00

7

Garampani

Assam

0.02

8

Majra Namchik Namphuk

Maharashtra 0.48 Arunachal 0.20 Pradesh

Utkal C

Odisha

9 10

3.37

Geological Closing Bid Submitted Reserves (MT) by Yazdani Steel and 800.00 Power Limited/ 274545 Mahanadi Mines 327.05 and Minerals Private Limited/ 237318 Dalmia Cement Bharat 61.05 Limited/ 65013 Assam Mineral Development 0.06 Corporation Limited/ 265144 Hindalco Industries 285.23 Limited/64856 Assam Mineral Development 0.468 Corporation Limited/265144 31.036 BS Ispat Limited/64979 Platinum Alloys Private 14.970 Limited/274153 Jindal Steel And Power 196.347 Limited/64898

*PRC is not available for the partially explored coal mine.

Reserve Price (%)

Final Offer (%)

4.00

18.00

4.00

14.00

4.00

8.00

4.00

81.50

4.00

10.25

4.00

288.25

4.00

18.25

4.00

344.75

4.00

45.00

Coal Insights Bureau

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oal Ministry has auctioned 10 coal mines located at 5 states in its latest effort, providing a combined coal reserves of 1.7 billion tons.

With this, 42 mines have been auctioned so far under commercial coal mine auctioning.

Guwahati-based Platinum Alloys Pvt Ltd has emerged as the bidder quoting the highest premium of 344.75 percent in the 3rd tranche held on February 8.

The bid was for Namchik Namphuk coal mine in Arunachal Pradesh, the sole mine in the state.

Assam Mineral Dev Corp was the second highest bidder, bidding 288.25 percent for Garampani block and 81.5 percent for Koilajan block, both in Assam.

Other successful bidders are: Odishabased Yazdani Steel & Power, Odisha-based Mahanadi Mines and Minerals, Dalmia Bharat Cement, Hindalco, BS Ispat and JSPL. Coal Ministry had launched the auction of coal mines for commercial mining under 13 Tranche of CMSP Act and 3 Tranche of MMDR Act on October 12, 2021.

During the e-auction, cumulatively 10 coal mines were put up for auction of which 6 coal mines were CMSP coal mines and remaing 4 were MMDR coal mines.

Details of all the coal mines are as under: ♦ Nine coal mines are fully explored and one mine is partially explored ♦ The total geological reserves for these mines are 1.7 bt ♦ Cumulative Peak Rated Capacity (PRC) for these coal mines is 22.014 million tons a year.

Under the commercial coal mining auction process a total of 42 coal mines, including the above 10 coal mines auctioned in Tranche-3, have been auctioned till date with a total cumulative PRC of 86.404 mtpa.

February 28 was the due date for bids for the auction of coal mines under 4th tranche.

Announced in December, the 4th tranche offers 99 mines.

Coal Insights, February 2022

29

FEATURE

CCEA approves unified e-auction window

Tamajit Pain

C

abinet Committee on Economic Affairs (CCEA) on February 26 approved offering of coal by coal companies through a unified e-auction window.

The CCEA claimed in a statement that using a common e-auction window will replace the approach of holding sector-specific auctions, “removing market inefficiencies” and offering a “single rate for all consumers.”

According to the government, the Cabinet’s decision to allow a single e-auction window for coal offering will have a “major impact”, including the “potential for employment generation”.

The Cabinet has approved the “offering of all the non-linkage coal by coal companies through one e-auction window of CIL (CIL)/Singareni Collieries Company

30 Coal Insights, February 2022

Limited (SCCL),” it said. “This e-auction will cater to all the sectors namely power sector and non-regulated Sector (NRS) including traders and coal would be offered through this auction in place of the present system of sector-specific auctions,” the CCEA added.

The e-auctions, however, will be subject to CIL/SCCL meeting the coal linkage requirements against existing linkages and do not impact the current linkages to power and non-power consumers at contracted prices.

Coal offered through the single e-auction window shall be transport mode agnostic with the default option being through rail mode.

“It shall increase operational efficiencies and lead to an increase in domestic coal demand by efficiency in domestic coal market. Besides the discretion presently vested in coal companies of allocating coal to different end use sectors will be eliminated.

Further the coal companies shall be able to establish coal gasification plants by availing coal from their own mines. It shall help in developing clean coal technology in the country,” it said.

Welcoming the decision of CCEA, Coal Minister Pralhad Joshi said the new mechanism will club different auction heads under “1 e-auction window”.

“The new mechanism of coal e-auction will boost ease of doing business and promote coal gasification technology,” Pralhad Joshi said.

Removal of market distortions through offer of coal under a single e-auction window at the same rate for all the consumers of the economy will attract more consumers towards domestic coal, the CCEA said, adding that this will likely lead to a surge in demand for domestic coal.

The coal market is segmented and there are many different market-discovered rates for the same grade of coal in each segment of the market.

Segmentation with rate differentiation results in coal market distortions. With these reforms in the coal market, coal of any particular grade may be sold in the market at one rate (one grade, one rate), with the default mode of transport being Railways, through a transparent and objective e-auction mechanism.

The government also noted that offering coal through a common e-auction window would have no additional financial implications. “Clubbing of the e-auction windows would not involve any additional cost to the coal companies,” it added.

“Removal of market distortions through offer of coal under a single e-auction window at the same rate for all the consumers of the economy will attract more consumers towards domestic coal. Thus, the demand of domestic coal is expected to increase,” the government said in a release.

With Coal India planning to produce 1 billion ton of coal by 2023-24, better availability of domestic coal with better price stability and predictability will lead to lower import of coal.

INTERNATIONAL

China moves to check coal prices, build new capacities Coal Insights Bureau

C

hina is trying to keep coal prices stable even as it continues building new coal mines and coal-fired power plants to prevent any severe power crisis like the one seen in 2021.

National Development and Reform Commission (NDRC) and the National Energy Administration recently held a meeting to make further plans to stabilise coal prices.

The meeting issued warnings to companies that charged high coal prices and asked them to make rectifications.

Coal producers also should step up efforts to ensure coal supplies, the meeting said.

“For those that fail to rectify any outstanding problems after being issued reminders, further investigation and accountability measures will be taken,” reports said.

Local authorities should enhance their monitoring and maintain coal prices in a reasonable range, according to the meeting.

In response to the strategy to tame coal prices by the government, several data providers stopped publishing prices for different thermal coal indices.

The development comes at a time when coal prices in Asia and Australia are at their all time highs in 2022, up by more than 4 times from the lows of the pandemic.

NDRC had capped port prices of coal (5,500 kcal/kg NAR) at Yuan 1,000 a ton or $157.32/t FOB and later during a February 10 meeting urged domestic coal suppliers to keep prices below $141.59 at ports.

It was explained by the officials that China needs to maintain stability of prices during the Winter Olympics period in order to build a foundation for continued rejuvenation of economic activities during the in January-March period.

Daily coal output crosses 12 mt

After a dip in the January-February period due to the Spring Festival holiday, China’s coal output crossed 12 million tons (mt)a day on February 20, the average daily production of the fourth quarter of last year, according to NRDC. Production in Shanxi and inner Mongolia is likely to stabilise after temperature rises in these areas, NDRC said.

During the 7-day Spring Festival holiday, the daily output and supply rose over previous year’s levels.

Coal stocks at the power plants reached a comfortable level of 165 mt, up from 40 mt year-on-year, NDRC said.

Russia to supply 100 mt coal

Russia would be supplying close to 100 mt of coal to China following an intergovernmental agreement, according to the Head of Department of Foreign Economic Cooperation and Fuel Markets Development at the Russian Energy Ministry.

Russia in October signed an agreement with India to supply 40 mt of coal.

China is now eager to secure its coal supplies to prevent any energy crisis that it suffered in 2021 while Russia is exploring new export opportunities in the light of evolving global supply dynamics.

The share of Russian coal in the AsiaPacific market has rise to 12 percent in 2021 from a low of 4 percent in 2010.

On the eve of the recently held Winter Olympics in China, the two countries signed a major energy security agreement.

“Along with long-term supplies of Russian hydrocarbons to China, we have plans to implement a number of large-scale joint projects. The construction of four new power units at Chinese nuclear power plants with the participation of Rosatom State Corporation launched last year is one of them. All this significantly strengthens the energy security of China and the Asia region as a whole,” the Russian president emphasised,” Russian President Vladimir Putin had said in an article.

To develop new mines, power plants

Permitting new coal power projects was essentially frozen in 2021 in China as the leadership emphasised strictly controlling ‘high emissions’ projects.

However, reflecting shifting political signals, permitting has been restarted in 2022 with a bang, with 5 coal power projects totaling 7.3 GW of capacity cleared for construction in just the first six weeks of the

Coal Insights, February 2022

41

CORPORATE

Coal India needs to raise prices soon: CMD Agrawal The talks are likely to get concluded by end of FY23.

“It depends upon how the discussions go and what stand both of us take,” he told analysts.

For every month, Coal India is keeping a provisioning of `100 crore to cover expected outgo following wage negotiations completions.

Coal Insights Bureau

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oal India urgently needs to effect price hike but is yet to convince the stakeholders, its Chairman Pramod Agrawal has said “I am trying to bring in everybody onboard. For me, every day is critical.

Price hike should take place immediately, it has become very urgent for Coal India and for several subsidiaries, it has become so important that without that it would be difficult for them to survive,” Agrawal told analysts during a conference call adding that all the stakeholders are not on board and unilateral decision is not possible for the management.

In the 9 months of FY22, Coal India had to spent `2,000 crore extra on diesel consumption due to its higher prices.

In addition, Coal India is also accounting for the impending wage hike for its workers.

The company management just had the third round of meeting for wage negotiations and Agrawal doesn’t see negotiations getting concluded in the next 3-4 months.

“Our production is increasing, reaching a runrate of 23.5 mt a day and once we cross 24 mt, we will offer much more in the auction.”

Pramod Agrawal, CMD, Coal India

E-auction demand

E-auction premium in January was about 100 percent while lifting has also been good, he said.

In FY21, 124 mt got sold through the e-auction route and Coal India expects to achieve 110-115 mt in FY22.

In 9 months of FY22, 83 mt was sold via e-auction.

“Our production is increasing, reaching a run-rate of 23.5 mt a day and once we cross 24 mt, we will offer much more in the auction,” Agrawal said.

Production challenges in FY22

Production was constrained by heavy

rainfall and Covid situation during the current year.

“Despite the difficult circumstances in which we were working, our performance in the nine months is significantly better than the last year, we must keep in mind that the first three months are very difficult for Coal India. The time was very difficult because of Covid situation. We lost many of our miners and officers in that time period. Secondly, the rainfall in our area was very high this year,” he said.

In one single day, in Eastern Coalfields, there was rainfall almost 400 milimeter. And this resulted in submergence of almost all

Production & offtake Subsidiary

Production

Offtake

9M FY22

9M FY21

Y-o-Y %

FY21

FY20

Y-o-Y %

9M FY22

9M FY21

Y-o-Y %

FY21

FY20

Y-o-Y %

ECL

21.2

30.0

-29.2

45.0

50.4

-10.7

26.4

29.5

-10.4

42.0

49.3

-14.8

BCCL

20.1

17.5

14.7

24.7

27.7

-11.1

23.0

16.8

37.5

23.1

28.8

-19.6

CCL

42.8

39.8

7.5

62.6

66.9

-6.4

51.5

45.5

13.2

65.4

67.3

-2.9

NCL

86.4

84.2

2.5

115.0

108.1

6.5

92.2

79.6

15.8

108.6

107.4

1.1

WCL

34.2

28.6

19.5

50.3

57.6

-12.8

46.0

33.2

38.4

49.7

52.6

-5.5

SECL

91.8

90.7

1.2

150.6

150.5

0.04

113.3

98.4

15.1

138.8

141.9

-2.2

MCL

117.1

101.8

15.0

148.0

140.4

5.5

129.4

106.5

21.5

146.7

134.0

9.5

NEC

–

0.04

–

0.04

0.5

-93.0

–

0.09

–

0.09

0.6

-84.0

413.6

392.8

5.3

596.2

602.1

-1.0

481.8

409.6

17.6

574.5

581.9

-1.3

CIL - Total

Coal Insights, February 2022

51

66 Coal Insights, February 2022