CONTENTS
6 | COVER STORY
16 Thermal coal offers rise in January 18 Coking coal offers ease in January
SCCL targets 85 mt of coal production by 2024
20 India’s Nov coal imports up 27% y-o-y 22 Coal India’s production up 0.79% in December y-o-y 23 India’s cement production in Nov up 17% y-o-y 24 No power capacity addition in December 25 Indian power plants’ coal stocks up 13% m-o-m 26 ‘Impact of CIL’s new pricing on power sector to be minimal’
The miner has lined up 13 new mines for next 5 years, says N Sridhar, CMD, SCCL.
35 | INTERNATIONAL
New Sulphur cap norm: will it impact Indian seaborne coal trade? The new norm of IMO will increase coal freight, justify the drive to cut imports.
28 Singareni’s production down 1% till December
36 | SPECIAL FEATURE
29 India’s sponge iron production down y-o-y till Nov
India’s conveyor belt industry at cross-roads
30 Solar energy players seek cost-efficient energy solutions in Budget
The industry is evolving technologically and may see consolidation, say manufacturers.
34 US coal production up 6% in 2017 38 New expansion in India was slow in 2017: Martin Engineering 40 Improved high capacity conveyor designs 48 Traffic handled by major ports up 3.6% in Apr-Dec 50 Railways’ December coal handling up 6% y-o-y 52 Puzzolana targets $400 million topline in 3-4 years 55 Corporate update 57 E-auction data
4 Coal Insights, January 2018
42 | SPECIAL FEATURE
Phoenix aims at tech intense market Phoenix is leveraging on technology intense market to make a difference to customers.
44 | IN FOCUS Tasra sets SAIL
After a prolong wait, SAIL has finally started production from its largest captive block.
COVER STORY
SCCL targets 85 mt of coal production by 2024
S
ingareni Collieries Company Limited (SCCL), jointly owned by the Government of India and the Telangana state government, has done many a first in the Indian coal mining sector and is currently on a steady growth path. During 2017-18, SCCL is expecting to record 63 mt of coal production and 65 mt of despatches. The coal PSU has chalked out a detailed production roadmap to reach 85 mt by 2024, N Sridhar, Chairman & Managing Director, SCCL, tells Arindam Bandyopadhyay. Furthermore, in the next 5 years, SSCL plans to open 13 mines (6 new underground mines and 7 opencast ones) which will add capacity of 32 mt. On the financial front, the company plans to achieve `2,000 crore in net profit with an annual turnover of `28,000 crore during fiscal 2020-21. In washeries, apart from the existing 3 units, SCCL is planning to establish 3 more at Bellampalli, Ramagundam and Sathupalli. However, owing to the current dynamics in the global coal market and falling coal prices, overseas block acquisition has been slowed down and, at present, there are no such proposals on the anvil. Excerpts from a free-wheeling interview:
6 Coal Insights, January 2018
COVER STORY You have just completed 3 years as the chairman-cum-managing director (CMD) of Singareni Collieries Company Limited (SCCL). How would you describe your tenure at this state-owned coal mining company? The last 3 years has been a period of overall growth for SCCL. There has been a significant growth in both physical and financial terms. Coal production, during my tenure, has increased from 52 million tons (mt) to 62 mt. The average growth rate in production for the past 3 years has been 6 percent as against 1.5 percent seen for 5 years prior to 2015. In terms of despatches, the average growth rate for the past 3 years has been 8 percent versus 1.5 percent seen for the preceding 5 years. Where overburden (OB) removal is concerned, the average growth rate for the past 3 years has been 16 percent as compared to 4 percent seen for the last 5 years prior to 2015. In gross sales, the average growth rate for the past 3 years has been 23 percent against 12.8 percent reported for the 5 years before that. The output per man shift (OMS), a measure of productivity, has increased from 3.33 tons to 3.72 tons and the average growth rate in PAT for the past 3 years has been 74.6 percent against 13.3 percent clocked for the 5 years preceding 2015. Your first full year as CMD saw a record growth in SCCL’s production in 2015-16, but only a marginal increase thereafter. What went wrong after the impressive debut? In 2014-15, SCCL had achieved 52.5 mt of production whereas in 2015-16, this had jumped to 60.38 mt, with a growth of 15 percent. The record growth of 15
Overall, if you notice, the growth rate in despatches at SCCL in the last 3 years has surpassed that of CIL over the same period.
percent during 2015-16 was mainly from the enhancement in operational efficiency, improvement in discipline, motivation etc. We took a slew of measures to bring changes on these fronts. However, due to delay in grounding of new projects, we achieved only 2 percent growth in 2016-17. But again in 2017-18, we are growing at an impressive rate of 9 percent in despatches (up to December, 2017), and expect to touch 65 mt in despatches in the current year. Overall, if you notice, the growth rate in despatches at SCCL in the last 3 years has surpassed that of CIL over the same period. Where do you see the company ending the current year in terms of production and off-take? What is your (revised) roadmap for the next two years for achieving the 2020 targets? During 2017-18, SCCL is expected to register 63 mt of coal production and 65 mt in terms of despatches. Going forward, we plan to reach 85 mt in 2024 for which detailed planning is under preparation. What was the financial performance of the company like in 2016-17? Do you have any financial targets set for 2018 and 2020? SCCL earned `490 crore in profit after tax (PAT) during 2014-15. But we increased our net profit to an impressive `1,066 crore in 2015-16. In 2016-17, profit went down to `400 crore due to the impact of the wage increase (under the National Coal Wage Agreement-X). However, in 2017-18, we expect to touch `1,100 crore in PAT by year-end. We have planned to achieve `2,000 crore in net profit with an annual turnover of `28,000 crore during fiscal year 2020-21. It is often said that there is limited scope before SCCL in terms of increasing production because of limited reserves. Could you give a break-up of the age-profile of SCCL’s mines and the aggregate reserves left therein? Coal reserves in SCCL are available in sufficient quantities. As of April 1, 2017, the proven coal reserves in the Godavari Valley
13 new mines (6 UG and 7 OC) SCCL aims to open in 5 years New Project
OC/UG
Capacity in mtpa
Kasipet-2 Incline
UG
0.470
KK-6 Inc
UG
0.800
Kondapuram mine
UG
0.700
Rampuram Shaft Block
UG
1.400
KTK-3 Inc. with LW
UG
1.000
Expansion of KTK-5 Inc. with LW
UG
0.700
Indaram OCP
OC
1.200
KOC-III
OC
3.600
Kistaram OCP
OC
2.000
KTK OC-III Project
OC
2.500
Sravanapalli OC
OC
1.700
GDK - 10 OC
OC
5.000
Naini Project
OC
10.00
coalfields in Telangana amounted to 10,846 mt which is anticipated to last around 60 years at the present level of production. At present, 47 mines (29 underground and 18 opencast) are under operation. However, it is true that most of the underground mines are old, expensive and incurring losses. But we have a number of new projects in the pipeline to augment production. What are the new mines coming up at SCCL and their rated capacity? In the next 5 years, SSCL plans to open 13 mines (6 new underground mines and 7 opencast mines) with a capacity addition of 32 mt. These include projects like KTK OCIII, KOC-III, Kistaram OCP, GDK - 10 OC, Indaram OCP, Rampuram Shaft Block etc. The largest of these will be the Naini project in Odisha. What is the current status of the Naini coal block which was allotted to the company in 2015? Are you scouting for similar blocks outside the state (Telangana)? The Naini coal mine in Odisha that had been allotted to SCCL is currently in the development stage. We are following the milestones provided by the Nominated Authority, the Ministry of Coal (MoC),
Coal Insights, January 2018
7
INTERNATIONAL
New sulphur cap norm: will it impact Indian seaborne coal trade?
Kingshuk Banerjee
C
ome January 1, 2020, and the global seaborne trade industry would be facing rough weather. Naturally, seaborne coal trade would be facing turbulent sea too. The recent regulation of global sulphur cap of 0.5 percent on marine fuels would come into effect on January 1, 2020. The new norm, to be imposed by the International Maritime Organisation’s (IMO) Marine Environmental Protection Committee, is a sharp decline from the current limit of 3.5 percent. In other words, it means that from January 2020, all vessels will need to burn cleaner and hence more expensive fuels to comply to the new norm. According to experts, the most likely impact is a sharp increase in costs for ship owners who would, in all likelihood, pass on the same to the customers. For all users, this will result in a dramatic, long-term increase in freight rates.
A rough estimate shows that cost enhancement would be ranging from a modest $5 billion to $70 billion a year. This would be problem for not only the shipping industry but section of unwilling ship owners who would definitely try to pass on the lion’s share to their customers. There, however, might be a few possible way outs. As per trade experts, using special fuel oil blends, which would fall below the 0.5 percent cap, could be one solution. But the experts are doubtful that the global refining industry will be able to supply these in sufficient quantity and variety in time for 2020. Another way out could be burning Marine Gas Oil (MGO), which many expect will be the most popular option, albeit for the time being. MGO is compliant to the new norm and also more readily available, but the problem is that it is much more expensive than conventional IFO 380 bunker fuel. According to marine experts, it would take $3-6 million to install a scrubber on a
dry bulk vessel, with costs depending on the size of the ship and the type of the scrubber. Hence, the cost of retrofitting a 5-10 year old ship would be quite expensive, given current vessels prices. Impact on India’s seaborne coal trade
Meanwhile, according to German coal importers lobby VDKI (Verein der Kohlenimporteure), world coal seaborne trade was up by 1.5 percent in 2017, due to a recovery in output in major producing countries such as China, the US and Russia and an accompanying rise in exports. VDKI trade statistics put imports and exports figures for 2017 at 1.143 billion tons, up from 1.126 billion tons in 2016. In India’s case, overall coal import has seen marginal de-growth in the current financial year (April 2017 to March 2018). During April-November, 2017, non-coking coal imports were lower at 95.79 mt as against 101.63 mt imported in the same period last year. Coking coal imports, however, increased to 31.42 mt during April-November, 2017 as against 28.54 mt recorded for AprilNovember, 2016. Lately, the imports have seen an increasing trend in the December 2017 quarter, following a decrease in coal stock at power plants. In fact, India’s coal and coke imports during November 2017 through 31 major and non-major ports are estimated to be up by 27.43 percent compared to November 2016, according to a compilation by Coal Insights, based on monitoring of vessels’ positions and data received from shipping companies and various sources. Imports during November 2017 stood at 17.68 mt (million tons) as compared to 13.88 mt imported in November 2016. The rising trend of late is of concern to the government which is determined to stop imports of thermal coal for power generation. According to Coal Ministry statistics, coal import was 217.78 mt in 2014-15 and has been falling since then and reached 190.05 mt in 2016-17. The new sulphur norm in global shipping would further corroborate the stance of the government on restricting imports. If the power sector can minimise the use of imported material, the new norm would have minimal impact.
Coal Insights, January 2018
35
SPECIAL FEATURE
Phoenix AIMS AT tech intense MARKET
T
he conveyor belt market is going through tough times. Project execution could not be achieved due to lack of clearances, impacting margins. In this scenario, Phoenix is leveraging on the technology intense market of pipe belts, tubular belts, high temperature resistance solutions, steep angle belts and mega pipe belt solutions to make a world of difference to customers, Smita Pandit Chakraborty, Managing Director (Business Operations) at Phoenix Conveyor Belt India Pvt Ltd, tells Madhumita Mookerji of Coal Insights. Excerpts: What has been the scenario like in the conveyor belting market? Signals had been good at the beginning of 2016. How have things changed since then and why? The conveyor belt market has been driven through tough times despite good signals in 2016 and also Q1 2017. The underlying problems have been in project requirements where despite good order intake situation execution could not be achieved due to lack of manufacturing clearances post ordering impacting severe erosion in margins. Also the raw material price impact was more than 30-40 percent which has been solitary in comparison to past years. What is the ordering scenario like and ordering to project execution scenario over the last one year? The turbulence in project execution has been primarily due to project sites not being ready and environmental clearance not obtained. This has led to unwanted inventory of material for some and in some cases directly hit the turnover of companies who has considered execution of projects and included in the Annual business plan. Where do you see the enables in the market at present? The enablers are in terms of the new initiatives of demonetisation, uniform tax structure through GST, Make in India philosophy which are all boosting transparency, ownership and better governance. The Make in India concept is a great boon to enhance local
42 Coal Insights, January 2018
manufacturing which will have favourable impact in the long run. Where do the challenges lie and how can they be resolved? The challenges lie in handling liquidity crunch and insolvency in the market due to which payments are held up impacting working capital and rising inventories. Filing with NCLT has been a good recourse which is yielding results in terms of realisation of money. Investment slowdown is also impacting GDP and hence improvement in FDI will lead to better availability of financial resources. Please give an overview of the conveyor belting market segmentation in India. Also, the total market size and growth/degrowth being experienced at present The present market size of conveyor belts are approximately 144 Million EUR(textile conveyor belts) and 34 Million EUR (steel cord conveyor belts) and is estimated to grow at approx. 7 percent in the coming years. The de-growth has happened primarily due to low volume of transaction in the market , cap on internal capex and opex for organisations putting severe pressure to extract better returns on existing investments and sweating of assets rather than look for new investments. CIL has a plan to touch 1 billion tons of production by 2020. What opportunities do you see in this figure? What could be a reasonable potential conveyor belt procurement plans in this?
The opportunities are in pipe belts and steep angle belts to reduce footprint in space and deliver a faster movement of bulk material through intense mechanisation How much of this pie is Phoenix Conveyor looking to corner? Phoenix is already playing a role in the subsidiaries of Coal India and is reasonably expected to occupy a significant share of the conveyor belt opportunities. How has business been for Phoenix Conveyor in the last one year? The business has been subject to a situation where there is a raw material price increase and low volumes of transaction in the market. There was a reasonably good order intake but due to lack of manufacturing clearances from project promoters / OEMS, the business plan was impacted since orders could not be executed and are taking shape now. Going forward, what is Phoenix’s outlook on the conveyor belting market globally and in India? Phoenix is very strong in leveraging the technology intense market of pipe belts, tubular belts, high temperature resistance solutions, steep angle belts and mega pipe belt solutions worldwide. The belts coupled with high end service equipment offerings, monitoring and scanning technologies, service materials for bonding and splicing and new product portfolio is expected to make a world of difference to customers. 
IN FOCUS every sense, before they can finally celebrate their success! Such a long wait
Tasra sets SAIL After a prolong wait, the steel major finally starts mining coal from its largest captive coking coal mine. Coal Insights Bureau
T
his one story has every element of a corporate thriller. At first, there was a windfall allotment of a dream project – a large captive coking coal block rich in reserves of premium/medium grade coking coal. Then, there was a decade long struggle to get the mining lease renewed, coupled with a 10-fold rise in land acquisition costs. That was followed by a missed deadline for commercial production. Then, just when the hurdles were being removed, one after another, the Reserve Bank of India directed the lead bank to initiate insolvency proceeding against the mine-developer-cum-operator (MDO). So, when Steel Authority of India (SAIL) finally started its mining activity at Tasra captive coking coal block, precisely
44 Coal Insights, January 2018
on December 5, 2017, there was less of jubilation, more of a gritty resolve to make up for the lost time! The immediate target is to produce 300,000 tons of coal from the block by the end of the current fiscal year, ie March 2018. And then, the project must produce 1.50 million tons (mt) of coal in the first year of commercial production (2019-20); 3 mt in the second year and reach the rated capacity of 4 mt by March 2022. Meanwhile, the entire land area has to be acquired by 2023. A 3.5 mtpa throughput capacity coal washery is to be set up and made operational, and a 200-300 MW power plant is to be erected to use the secondary product produced by the washery. Currently, the dedicated teams of SAIL and that of the MDO, Lanco Infratech, are working on war-footing to make the most of the time available, for there are miles to go, in
The Tasra coal block of the Jharia Coalfield, located in the district of Dhanbad, Jharkhand, was originally held by Bharat Coking Coal Ltd (BCCL), but was later allocated to SAIL in October 1995 by the Ministry of Coal (MoC). Subsequently, in 2002, the mining lease of a small area of the block was transferred from BCCL to ISP-SAIL. The Tasra block has a total geological reserves of prime/medium coking coal amounting to 251.88 million tons (mt). It is interesting to note that mixed mining methods need to be deployed at Tasra. Opencast mining has to be conducted initially and then underground mining for extracting the balance reserves which are located deeper into the ground. The mineable reserves of the opencast mine are estimated to be 96.78 mt. The mine has a life expectancy or sustained production span of 26 years. A mining plan for 4 million tons per annum (mtpa) capacity was approved by the Ministry of Coal (MoC) in June 2009. Environmental clearance (EC) and no-objection certificate (NOC) from the Jharkhand State Pollution Control Board had also been obtained in October of that year. Initially, SAIL had approved the land acquisition cost for the Tasra opencast block at `163.27 crore. It had also approved the Rehabilitation and Resettlement (R&R) plan for the block at an estimated `219.53 crore. The company, in order to implement the project, appointed Lanco Infratech Ltd. as MDO in 2013. The scope of the work included development and operation of Tasra opencast mine, setting up of a 3.5 mtpa throughput coal washery and also the setting up, operation and maintenance of a power plant (in JV with SAIL). It was proposed that the power plant would run on secondary products to be generated by the washery. Hurdles galore
However, there were two major hurdles that Tasra was fated to suffer. The first hurdle was the mining lease which had been allotted to BCCL but had been transferred to SAIL by the former in 2002. SAIL had applied for a renewal six years later. However, it was only in
62 Coal Insights, January 2018
Tear along the dotted line
Tear along the dotted line