Coal Insights, July 2022

CONTENTS

6 | COVER STORY

14 Seaborne thermal coal offers witness mixed trends in July 15 Seaborne coking coal offers fall in July

Coal Logistics Plan – Groundwork for commercial miners

16 India’s June coal imports up 49% y-o-y

A detail look at the plan document and financing proposals.

17 CIL’s coal production up 29% in Q1 18 SCCL’s coal production up 9% in Q1 21 JSW, Jindal Power, Vedanta bid for Ghogharpalli block 26 Power plants stock up imported coal ahead of monsoon 27 Coal shortage set to ease as generation drops, despatches rise 29 June sponge iron production up 6.6% y-o-y

19 |

FEATURE

IEA sees 6% growth in coal demand in 2022 Revises India 2022 power demand growth upwards.

30 No power capacity addition in May

24 | FEATURE

34 RE remains cost-competitive amid fuel crisis: IRENA

India’s Russian imports to stay subdued: Aussie report

36 Coal handled by major ports up 17% in Q1 37 Indian Railways’ coal handling up 19% in Q1 40 Whitehaven June quarter realisation touches record level 42 US coal production to rise by 3% in 2022: EIA 46 Coal India’ 53 new mine projects to contribute 102 mt by FY25 48 Tata Steel, BHP explore low-carbon tech in steelmaking 50 Vedanta to operationalise 2 coal blocks by Q3 52 Corporate update 54 Government update 57 E-auction data 59 Port Data

4 Coal Insights, July 2022

Russian coal is of higher calorific quality.

38 | INTERNATIONAL

Queensland coal royalty hike to impact investments: BHP There is near tripling of top-end coal royalties.

44 | CORPORATE

Adani eyes 4 mt coal output from Indonesia ops in FY23 Benefits from faster operationalisation of mines.

COVER STORY

Coal Logistics Plan: Groundwork for commercial miners Sumit Maitra

6 Coal Insights, July 2022

COVER STORY

A

s the country’s resources sector prepares for the new crop of commercial miners to start operating their coal blocks, the government has come out with its maiden ‘National Coal Logistics Plan’ – a detailed study of the state of coal evacuation and transportation and the future roadmap of how to build capacity to accommodate the expected growth in production and offtake from such mines.

SBI Caps along with Primus Partners has done a comprehensive analysis of coal blocks allocated to private players across 17 coalfields located in 7 states in the report and have given their recommendations.

This will serve as a guide to investors, to be invited by the Coal Ministry to develop common-use coal evacuation projects, which can be used by the commercial coal miners.

“The private investors must be provided with the optimum evacuation infrastructure in the future so that such stakeholders are encouraged to commit continuing investments to achieve the nation’s ambitious coal production targets,” the National coal logistics plan said in its report.

For this, SBI Caps has submitted a framework for transaction structure for such projects while SBI Caps along with

Primus Partners have prepared a ‘Smart Coal Logistics Plan’ as a guide for the logistics projects.

As the importance of coal will sustain for some more time, it becomes important to examine ways and means to impact greater efficiency in the entire cycle of coal mining, supply, and consumption in the coming years.

“It is critical to examine and bring in methods for efficient coal evacuation and supply chain logistics. It has to be done in a manner that makes the process greener, and at the same time, decreases costs,” the report, which has been released for comments by stakeholders, says.

Coal production potential

♦ CIL mines: Coal India is the single largest coal producer in the world accounting for more than 80 percent of coal production in the country.

As per the estimates, Coal India is planning to produce 1,218 million tons (mt) of coal during FY30 from its subsidiaries and majority production of coal will be from the states of Odisha, Jharkhand, Chhattisgarh, and Madhya Pradesh. ♦ Non-CIL mines: So far, more than 100

“The private investors must be provided with the optimum evacuation infrastructure in the future so that such stakeholders are encouraged to commit continuing investments to achieve the nation’s ambitious coal production targets.”

National Coal Logistics Plan coal blocks have been allocated to parties other than Coal India. In addition, 45 operational and 7 upcoming mines of Singareni Collieries Co Ltd (SCCL) are expected to contribute about 71.7 mt by FY30. Collectively it is estimated that non-Coal India mines have the potential to produce approximately 480 mt of coal

by FY30.

There is an additional potential of around 470 mt from the mines, which are to be allocated and listed under the second tranche. For unexplored blocks, the extractable reserve is evaluated considering 60 percent of the geological reserve and assuming mine life of 25 years Peak Rated Capacity is calculated.

Odisha has the largest output potential from mines to be allocated.

Coal logistics plan structure

The comprehensive analysis of coal blocks allocated to private players looked at the existing and planned infrastructure around the blocks, focusing on road and

Coal Insights, July 2022

7

FEATURE

IEA sees 6% growth in coal demand in 2022

Coal Insights Bureau

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nternational Energy Agency (IEA) has revised upwards its forecast for power demand growth in India for 2022 to 7 percent from the earlier 6 percent with heatwave – driving up temperature to upwards of 50°C in some place - pushing up use of air conditioning.

This, IEA says, has created a significant surge in electricity demand, including new all-time highs accompanied by supply shortages.

“In India, the second-fastest growing country in terms of absolute demand in recent years, a significant heatwave is driving an upwards revision of our electricity demand forecast for 2022,” its July 2022 update of the IEA Electricity Market Report said.

However, as opposed to most of the rest of the Asia Pacific region, coal is expected to grow significantly in 2022 (up 6 percent) and to meet the majority of new demand, with rising renewables generation (up 9 percent) providing most of the rest.

Supply has been challenged since 2021 due to fuel supply issues for coal power plants, which has resulted in a 9-year-low inventory of coal. In response, India’s Ministry of

Power is implementing measures to increase coal supply.

High temperatures in spring 2022 triggered demand spikes, further straining the electricity system and leading to supply interruptions in several states.

“For 2023, we expect coal growth to slow to less than 2 percent, at which point it contributes to serving growing demand on a level similar to additional nuclear generation, which could grow by more than one-third as more than 4 GW are scheduled to start operating by 2023,” IEA said.

The majority of incremental generation is set to come from renewables, which could grow by more than 10 percent.

In India, wholesale prices soared since March 2022, as higher power demand outpaced coal availability, leading to severe power shortages. The average price almost doubled in the first half of 2022 year on year, reaching a record high in more than a decade.

China demand to grow by 3% in 2022

In China, demand in the first five months of 2022 exhibited a mere 0.5 percent growth compared to the same period in 2021.

In April and May, demand even declined

“The outlook (for China) for the rest of 2022 remains highly uncertain and will depend on the stringency of sanitary measures. Potential reform of China’s ‘dual control’ policy, which would replace caps on total energy consumption and energy intensity by caps on total carbon emissions and carbon intensity, could trigger an increase in total demand.” year-on-year as the authorities adopted zeroCovid strategy measures in response to new outbreaks, which strongly affected energy consumption and forced some industries to stop operating.

“The outlook for the rest of 2022 remains highly uncertain and will depend on the stringency of sanitary measures. Potential reform of China’s ‘dual control’ policy, which would replace caps on total energy consumption and energy intensity by caps on total carbon emissions and carbon intensity, could trigger an increase in total demand,” IEA said.

If renewables supply the additional

Coal Insights, July 2022

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FEATURE

India’s Russian coal imports to remain subdued: Aussie report Coal Insights Bureau

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hile India may gain some respite from rising import bill by increasing imports of displaced Russian coal, such shipments are likely to stay restricted as Russian coal is of a generally higher calorific quality than the coal typically imported which may restrain its utility given India’s price sensitivity, the Australian industry ministry said in its quarterly Resources and Energy Quarterly.

“India is traditionally only a minor importer of Russian product, but has some capacity to take up Russian exports within the limits imposed by costs, infrastructure and shipping constraints,” the report says adding that at present, India appears to be more interested in drawing greater supply from Indonesia, in growing competition with China.

With rising prices of Australian coal, imports to India from Australia fell by almost 10 percent between March and April, and by almost half since November 2021.

“Prices of Australian coal have surged since the Russian invasion of Ukraine, increasing its cost relative to Indonesian coal — which is of lower grade than Russian output,” the report says.

Earlier, Indian government had stated it remains committed to diversifying its coal supply and reducing its dependency on Australian supply, which is relatively expensive and vulnerable to weather disruptions.

“While electricity demand is expected to remain robust, high prices and potential power curbs will likely constrain demand somewhat over the outlook period. Indian thermal coal importers are typically highly price sensitive, and are expected to flatten import levels somewhat in the rest of 2022,” the report says.

Electricity demand growth in India remains broad-based, driven by household consumption as well as industrial activity.

With domestic output unable to increase sufficiently, the resulting growth in coal use has been met by import markets.

Global thermal coal imports

“India is traditionally only a minor importer of Russian product, but has some capacity to take up Russian exports within the limits imposed by costs, infrastructure and shipping constraints. At present India appears to be more interested in drawing greater supply from Indonesia, in growing competition with China.”

Indian thermal coal imports grew by more than a third in March, with the government instructing power plants to build inventories by importing at least 10 percent of their needs.

Despite the high prices on offer, domestic coal supply stalled in the March quarter, and declined in the month of March.

India’s thermal coal imports

Note: e estimate; f Forecast

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FEATURE

Coal shortage set to ease as generation drops, despatches rise Coal Insights Bureau

T

he country’s coal supply woes are set to ease with significant rise in coal production and despatches, fall in power generation along with arrival of imported coal.

However, with the arrival of monsoon leading to likely drop in coal output, the Coal Ministry is now closely monitoring the monsoon preparedness of the sector.

Thermal generation falls 3% in first half of July

India’s coal-based power generation was down by 3.1 percent during the first fortnight of July to 43,863.04 million units (MU) from 45,270.74 MU in corresponding period same month of the previous year, according to data by the Central Electricity Authority (CEA).

Compared to the previous month, thermal power generation till July 15 was down by 15 percent from 51,701.97 MU generated during the first 15 days of June.

The easing of generation in July is in sharp contrast to a growth of 26.58 percent seen in June 2022 as compared to June 2021.

The overall power generation in June 2022 has been 17.73 percent higher than in June 2021.

However, coal-based power generation in June has been 95880 MU in comparison to 98609 MU in May 2022 and registered a negative growth of 2.77 percent.

Total power generation decreased in June to 138995 MU from 140059 MU in May, a fall of 0.76 percent.

During April-July 15, 2022, country’s coal-based power generation stood at 351,810.58 MU, up by 16.5 percent as compared to 301,993.70 MU during the corresponding period of 2021. Coal-based power generation target during the period was at 352,678.61 MU. Earlier, coal based generation during FY22 stood at 1,041,393.93 MU, up by 9.55 percent as compared to 950,567.95 MU in FY21.

“The 28.3 mt stock available as of July 14 is sufficient to run the plants for an average of 10 days at 85% PLF,” Power Minister R K Singh Coal production jumps 33% in June

Following sustained efforts by Coal India and other captive and commercial miners, India’s coal production rose 32.57 percent to 67.59 million tons (mt) from 50.98 mt during June, 2022 as compared to June 2021.

Coal India Ltd (CIL), Singareni Collieries Co Ltd (SCCL) and captive mines and others registered growth of 28.87 percent, 5.50 percent and 83.53 percent producing 51.56 mt, 5.56 mt and 10.47 mt respectively.

Of the top 37 coal mines, as many as 22 mines produced more than 100 percent and production of another nine mines stood between 80 percent and 100 percent.

Coal despatch increased by 20.69 percent to 75.46 mt from 62.53 mt during June.

During the month, CIL and captives and other mines registered a growth of 15.20 percent and 88.23 percent by despatching 58.98 mt and 11.05 mt respectively. SCCL’s production suffered due to flooding of its mines leading to a negative growth of 0.46 percent during the month.

Despatch to power utilities grew 30.77 percent to 64.89 mt during June this year as compared to 49.62 mt in June 2021 due to increase in power demand.

Coal India supply to power plants up 29% in June

Coal Minister Pralhad Joshi reviewing coal production and despatch of Coal India

Coal despatches to the power sector by CIL grew 28.79 percent in June 2022 over the same month of the previous year touching 51.09 mt against 39.67 mt in June 2021.

When compared to the previous month,

Coal Insights, July 2022

27

INTERNATIONAL

Queensland coal royalty hike to impact investments: BHP

Coal Insights Bureau

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he near tripling of top-end coal royalties has worsened what was already one of the world’s highest coal royalty regimes, threatening investment and jobs in the coal-rich Queensland state of Australia, mining major BHP has said.

“BHP is assessing the impacts on BMA economic reserves and mine lives as a result of the increase in coal royalties by the Queensland government,” BHP Chief

38 Coal Insights, July 2022

Executive Officer, Mike Henry, said while announcing the production report for the June quarter.

At spot metallurgical coal prices, the effective pre-tax royalty rate has increased by approximately 7 percentage points to 19 percent.

“This further cost pressure will discourage investment, operational growth, job creation and local business spending across the state. The new tax damages Queensland’s reputation as a stable place to invest, and

“The near tripling of top end royalties has worsened what was already one of the world’s highest coal royalty regimes, threatening investment and jobs in Queensland.”

Mike Henry, Chief Executive Officer, BHP

CORPORATE

Adani eyes 4 mt coal output from Indonesia ops in FY23

Coal Insights Bureau

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ith an upsurge in demand and recovery in coal prices, Adani’s Indonesian arm has set a production target of 4 million tons (mt) in FY23, Adani Enterprises Ltd (AEL) has said in its recently released annual report.

PT Adani Global, a wholly-owned step down subsidiary of AEL was awarded a coal mining concession in PT Lamindo Inter Multikon (stepdown subsidiary in Bunyu Island, Indonesia).

The Bunyu mines has a Joint Ore

Reserves Committee (JORC) - compliant resource of 269 mt combined.

Production from the mine during FY22 was at 2.16 mt.

Sees opportunities in India coal import rise

“With non-fulfilment of coal demand still addressed by imports, the company is optimistic about leveraging its integrated presence across the supply chain with embedded technologies to drive operational efficiencies,” Adani in its recently-published annual report for FY22.

“With non-fulfilment of coal demand still addressed by imports, the company is optimistic about leveraging its integrated presence across the supply chain with embedded technologies to drive operational efficiencies.”

Adani Enterprises AEL is a major coal mining entity with significant presence in Mine Development and Operations (MDO) since 2008.

It addresses the gap between coal demand and supply through mining and imports from South Africa, Australia, USA and Russia in addition to other coal-rich geographies.

Within just a decade, AEL has emerged as one of the largest developers and operators of coal mines in India in addition to international footprints in Indonesia and Australia.

The company’s mining projects are located in Chhattisgarh, Madhya Pradesh, Odisha and Jharkhand with a book size of 131 mtpa (101 mtpa coal blocks and 16 mtpa iron ore blocks) comprises MDO and commercial coal mining capacities of 14 mtpa.

“India’s coal consumption is anticipated to rise 3.9 percent annually to 1.18 billion tons in 2024 based on 7.4 percent GDP growth rate between 2022 and 2024, this growth partly catalysed by the timely availability of coal mined from within the country,” Adani said.

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