Coal Insights, March 2016

Contents 14 Steam coal offers remain volatile in March 16 Coking coal offers ‘March’ ahead 18 India’s coal output crosses 508 mt in January 22 Jharsuguda-Barpalli link to be ready by July: Swarup 30 India adds 2,295.6 MW capacity in Jan 31 India’s January cement output up 8.33% m-o-m 33 Power, cement cos feel Green cess hike heat 34 Sun rising on solar energy projects in India 35 MNRE exploring floating solar plants potential 38 ‘IEEMA cautiously optimistic about 2016’ 40 For Eickhoff, delivering value to both fossils & renewables will be way forward 43 Cement Corp plans to hike production 7-fold in 5 years 44 Uralmash-SRB JV to manufacture heavy machineries 45 Chinese equipment makers zero in on Indian market 46 Corporate Update 48 Event IME 2016 50 Coal’s share in power generation to remain high 59 Martin’s new conveyor belt cleaner design reduces cost 60 Haldia Dock to invest `860 cr in coal infrastructure 61 Railways unable to fully utilise rakes on low coal demand from power sector 62 Thermal coal handling by major ports up 13.29% in Apr-Feb 64 Railways’ January coal handling up marginally m-o-m

6 | COVER STORY

Adani makes a big splash in mining The company is going to emerge as first full-service MDO in Indian coal sector, says Vinay Prakash, CEO (mining and trading).

27 | Feature

China’s steel output reduction may spell doom for coking coal The global steel and coking coal markets look forward to China’s next steps, says N C Jha.

32 | SPECIAL Feature

Is domestic coal losing ground to imported coal?

The power sector finds imported coal cheaper than domestic coal.

42 | CORPORATE

Tata Power expanding Green footprint overseas Co exploring greenfield units and acquisitions in solar, hydro & wind, says Anil Sardana.

53 | Technology

Incidents of Fire in HEMM: An Insight In the first issue of a series of articles, A K Mukherjee deals with uncontrolled fire incidents causing damage to HEMM. Publisher’s Statement

Statement about ownership and other particulars about Coal Insights required to be published under Rule 8 of the Registration of Newspapers (Central) Rule, 1956.

FORM IV (See Rule 8) 1. Place of publication

:

Kolkata

2. Periodicity of publication

:

Monthly

3. Printer’s Name Whether citizen of India

: :

CDC Printers Yes

4. Publisher’s Name : Whether citizen of India : Address :

Rajarshi Chattopadhyay Yes Tata Centre, 43 J L Nehru Road Kolkata 700071

5. Editor’s Name : Whether citizen of India : Address :

6.

Rakesh Dubey Yes Tata Centre, 43 J L Nehru Road Kolkata 700071

Names and addresses of : mjunction services ltd individuals who own the Tata Centre, 43 J L Nehru Road newspaper and partners or Kolkata 700071 shareholders holding more than one per cent of the total capital

I, Rajarshi Chattopadhyay, hereby declare that the particulars given above are true to the best of my knowledge and belief.

Sd/ Rajarshi Chattopadhyay Dated: March 2016 Publisher

4 Coal Insights, March 2016

Cover Story

Adani makes a big splash in mining

“We are going to emerge as first full-service MDO in Indian coal�

Rakesh Dubey

6 Coal Insights, March 2016

Cover Story

A

dani Group, one of the world's largest integrated infrastructure companies operating across four key verticals, is all set to make waves in the stagnant pool of the Indian coal sector dominated by stateowned public sector miners.

The Ahmedabad-based conglomerate, having presence in resources, logistics, energy and agriculture, has set a target to emerge as India’s first ‘full-service’ mine developercum-operator (MDO), leveraging on its unmatched exposure to the global coal market and its robust infrastructure backbone.

To start with, the group has taken up a mining project for Rajasthan which is located in Chhattisgarh and group has another mine in Indonesia, together yielding about 12 million tons (mt) of output each year.

While the current output may look modest compared to the Group’s import business, plans are to make the mining vertical real big in not so distant future, said Vinay Prakash Goel, the 42-year old CEO heading the mining and trading verticals.

“We are very clear (about it). Along with import, we are focusing on mining business. Here also, we are not interested in conventional mining….we want to get into various process improvement activity and efficiency gains,” said Goel in an exclusive interview with Coal Insights.

“We are currently doing mining of close to 12 mt of which close to 7 mt is in India and 5 mt in Indonesia this year,” he informed.

Of this, the 7 mt project in India is located in Chhattisgarh. “It is a captive mine for Rajasthan, called Parsa East and Kanta Basan and the mine is having a total reserve of 450 mt having 15 mtpa peak rated capacity. Next year we are targeting 10 mt and the year after 15 mt. In terms of mining capacity that we have seen, that is the fastest ramping up,” informed Goel.

In order to expand its MDO activities, the group is planning to pitch to the captive

Global coal market to improve once China cuts down capacity: Goel

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he global coal market, currently going through a trough due to record low prices, is likely to see better days ahead once China makes a comeback to the market due to an expected reduction in its domestic production capacity, feels Vinay Prakash Goel, CEO (mining and trading), Adani group.

The current low prices in the international market coupled with the fall in domestic demand would result in a drop in China’s mining capacity, he said.

“Unlike India where we have a regulatory price, domestic prices in China are based on customers’ demand. So, I think China is going to cut down its production, may be by 400-500 million tons (mt), this is what our estimates are. If that happens, China will start importing,” Goel said.

Besides China, Korea, Taiwan, Vietnam and Thailand would see a surge in imports by another 150 mt over the next few years, he said, adding “that’s the plan that they have disclosed.”

“So an additional 150 mt of imports from these four countries coupled with another 100-150 mt from China and India is going to stabilise the market as it will bring demand and supply equilibrium,” he said.

On the supply side, Goel said, “What is happening in Australia is that their currency has depreciated a lot and because of that they are still finding these export prices to be on neck to neck. They are not bleeding actually. In Indonesia, it is happening differently.

In Indonesia also currency is depreciating, but their OB and coal contracts were in US Dollar. So, the impact of currency depreciation has not come in their cost and because of this Indonesia is bleeding now. Therefore, Australian export is still growing, while Indonesia’s export is going down.”

As far as South Africa is concerned, he said, “They will remain the way they are, because in South Africa, the currency had depreciated a lot and their all costs are in local currency. So South Africa is not having much impact, the way Indonesia is having.”

Overall, “in next two years, you will see equilibrium, though I don’t see the market going up to $100 per ton again. But definitely the market is going to go up from the current levels as these numbers, I don’t see, are going to sustain for a long time.”

block allottees and also the state governments holding captive coal blocks.

The group has recently participated in the tender floated by West Bengal government for Pachwara North and also the tender floated by Punjab for Pachwara Central.

Incidentally, both these tenders had some legacy issues.

“Earlier, those blocks were being operated

“You will not find any other party having this MDO concept on a full ownership basis. We do all acquisition of land, R&R, mine coal, wash coal, put investment on railway lines, put investment on logistics, transport the coal and deliver it to the TPS, which is the final point of consumption.”

by EMTA. So, when they came out with the tender, they put in a condition that you have to take over the manpower or use the existing equipment. You know when owner starts dictating what needs to be done, then efficiency of private sector goes,” Goel said.

Such hurdles are only too common in India’s captive coal block segment. However, the group is confident of its way forward, given its unique, holistic approach and inhouse knowledge and expertise.

A unique offering

About the genesis of this new business, Goel said the concept developed as a logical extension of the group’s coal trading business.

The group had started coal trading around the year 2001. Since then, the trading

Coal Insights, March 2016

7

FEATURE

China’s steel output reduction may spell doom for coking coal

Coal Insights Bureau

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his seems to be a Catch 22 situation.

Unless China cuts down on its whopping 800 million tons of steel production, the global steel industry will continue to remain sluggish. On the other hand, if the dragon country does decide to reduce output of the commodity, then there could be a disastrous impact on the global coking coal industry.

ICVL’s Managing Director and CEO NC Jha too admitted that, at present, there is an oversupply in the market and thus why would one buy Mozambique coal?

“Yes, there is oversupply and people are on the verge of closing down their businesses.

But if the current supply trend continues, then, at some point in time, people will incur huge losses and finally decide to quit,” he said, with an edge of gloom in his voice.

“But, it appears that since Chinese demand had overshot, the supply side had

also invested in coal to build capacities. Now, with lower demand levels, there is a glut in the market. The situation of oversupply is likely to continue till the next two years, ie, till 2017 and, perhaps, there will be a growth in the overall economic situation in the second half of 2017,” he hoped.

Analysts say that unless China reduces its steel production to 600-650 mt from current level of about 800 mt (its excess production is much more than our total capacity!), things will not improve as far as the steel sector is concerned.

Where Indian demand for coking coal is concerned, the nearest source is Australia. So long as Australia remains more competitive, there will be more demand for its coal from India and if the port and rail capacity in Mozambique improves, then this coal will also become competitive because, at present, the major part of the cost is transportation.

But, in the next two years, nothing is foreseeable, as port construction itself

takes two years and most of the coastline of Mozambique does not accommodate capsize vessels due to lack of sufficient draft.

Thus, Jha observed, there are two scenarios. One is, you load Panamax vessels at the berth or move smaller vessels into the high seas for transhipment, but this is not an option because costs will go up.

Admitting that the overall coal scenario is bleak throughout the globe Jha said the boom in the fuel had been driven by demand.

In fact, he said, that not just coal, but the markets for other commodities like steel, oil, gas, power thermal coal, coking coal, iron ore had also been driven by demand.

In tandem, players also started creating production capacities for iron ore, coking coal and thermal coal for power generation to feed this raging Chinese demand. Hence, capacity creation increased manifold. And, consequently, prices of the commodities had also been jacked up.

“Now, all of a sudden, in China, may be

Coal Insights, March 2016

27

Interview

IEEMA cautiously optimistic about 2016

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Excerpts: What is the current scenario in the Indian electrical equipment industry? What is the outlook on the power sector?

After years of low offtake across the industry, a few Indi an Electrical & Electronics Manufacturers’ Association (IEEMA) product divisions have recently seen some uptick in orders. The industry is cautiously optimistic about 2016 and expects larger infrastructural spend and also revival in industrial activities that need electrical equipment.

As regards the power sector outlook, the government has addressed fuel shortage issues effectively. This will further improve in 2016. With lower coal and gas prices as well as cheaper renewable energy equipment, the overall cost of generation should reduce.

Demand supply has reduced from around 9 percent to around 3 percent. However,

38 Coal Insights, March 2016

evacuation and inter-regional transmission constraints remain.

Several discoms are unable to pay for the purchased power and, therefore, resorting to power cuts in spite of adequate availability.

This will mean under-utilisation of generation assets and cheaper power on the exchanges. Discoms with effective revenue management and collection systems and low AT&C losses will benefit.

Tariff revisions are imminent in many states to reflect the true cost of power and delivery.

The ailing discoms seem to be holding back power sector growth. Do you think UDAY, launched by the government for reviving discoms, would deliver on its promises?

It is a very positive step as this programme would focus on increasing productivity, decreasing costs and enhancing fiscal discipline by directly involving the states.

he poor financial health of power distribution companies (discoms) has adversely impacted the Indian electrical and related electronics industry for the past several years. The Indian Electrical & Electronics Manufacturers’ Association (IEEMA), however, is pinning hopes on UDAY, the government scheme for bailing out discoms, though it feels it would be important to have the right people and processes in place for its correct implementation. China’s share in Indian imports of electrical equipment has dramatically increased in the last few years and stands at 44.92 percent of the total in 2012-13, from 15.26 percent in 2005-06. On a more positive note, after years of low offtake across the industry, a few IEEMA product divisions have recently seen an uptick in orders, Babu Babel, President, IEEMA, informs Tamajit Pain of Coal Insights. The industry expects larger infrastructural spend and also a revival in industrial activities that need electrical equipment.

UDAY will also help the banks, as they too cannot hold such large non-performing loans. The industry is determined to support the government. However, the key factor would be to tackle losses as a consequence of power theft and unsustainable direct subsidies.

IEEMA already has a programme to reach out to the distribution companies and aid them with technical solutions for complex problems related to mitigating losses and enhancing revenues.

UDAY is, overall, a very positive move, but it would be important to have the right

TECHNOLOGY

Incidents of Fire in HEMM: An Insight – Part I*

‘Know the cause of the fire’

In Taittiriya Upanishad we find mention of ‘Fire’ as follows: “athadhijautisham.h. agnih purvarupam.h. aditya uttararupam.h. apah sandhih.

Vaidyutah sandhanam.h. ityadhijyautisham.h .. 3 [1/3/2-5] Meaning: Next with regard to the heavenly lights: Fire is the first form, the sun is the second form, water is the union and lightning is the medium. Thus with regard to the heavenly lights.

Thus the phenomenon of ‘fire’ is inseparably associated with all events in this universe. With the help of science and application of technology, human being uses fire in a controlled manner to accomplish different functions. However, the untoward-incident, accident, disaster, destruction, caused by a ‘fire’ is something different from this aspect of ‘fire’. In the present context, fire is best defined by the International Labour Organisation (ILO) when it mentions the same as “Fire is a manifestation of uncontrolled combustion.”

Surface Mining involves extensive use of heavy earth moving machineries (HEMM) of different designs, types, models sourced from different manufacturers worldwide. As the name suggests, these are mobile equipment, some of high speed and some slow. Consequences of an untoward fire incident in a HEMM are well known – it may involve loss of life, injury to life besides loss of asset, demoralisation among the people and adversely affecting the environment.

HEMM is capital-intensive. HEMMs are required to function off the road, operate in remote and hostile terrains bereft of modern amenities, in an open environment, and operate on 24X7 basis not to mention the arduous nature of the job.

All these factors make HEMM-fire distinct from other types, say a building fire. The science of fire for a HEMM is something different; it encompasses a wide variety of stages starting from design to disposal, from skill to logistic support for operation and maintenance. So it needs elaborate analysis, specific to HEMM. Prevention is better than cure. An in-depth knowledge of causes leading to a fire incident shall result in corrective steps at each and every stage of functioning of a HEMM. Installation of a correct fire suppression system and maintaining its integrity throughout the life of a HEMM is another area which needs special attention, so that costly life is not endangered and minimum possible loss is suffered; if at all a fire occurs.

With a pragmatic and holistic approach towards understanding and tackling of HEMM fire, an effort has been made in this book to instil an all-time awareness in the reader’s mind to assess the risk involved and to take corrective actions required to militate against any such conceivable risks. * This is the first part of a series of articles on ‘Incidents of Fire in HEMM – An Insight,’ that Coal Insights will be running in its subsequent issues.

Coal Insights, March 2016

53

Tear along the dotted line

70 Coal Insights, March 2016 Tear along the dotted line