Coal Insights, May 2023

16 Seabor ne thermal coal offers fall in May

17 Seabor ne coking coal prices drop in May

18 India’s April coal impor ts up 11,7% y-o-y

19 CIL’s coal production up 8% in April

20 SCCL’s coal production up 5% in April

21 Gover nment takes steps toward carbon market ecosystem development

27 Need to balance energy security with climate goals: Coal Secretar y Meena

30 Steelmakers see stable coking coal prices in FY24

35 CEA sees 1.02 billion tons of coal need for ther mal energy by FY30

36 Power capacity addition at 1,580 MW in FY23

37 Sponge iron production up 8% in April FY23

38 Coal handled by major por ts up 22% in April

39 Indian Railways’ coal handling up 7% in April

40 Circular carbon economy matchmaking for energy and environment

45 US coal production to decline by 3% in 2023: EIA

49 CIL to phase out HEMM impor ts in 5-6 years

50 Anjani Minerals & Resources sees huge demand for coal logistics

51 NTPC coal production jumps 65% in FY23

54 Corporate update

56 Gover nment update

58 E-auction data

60 Port Data

6

COVER STORY

India coal: eyeing 1 billion tons in FY24

A detailed look at efforts by public and private sectors to raise output.

13

INTERVIEW

“WBPDCL has touched the zenith, in frontline with national behemoths”

Interview of Dr. Pullichalil Bava Salim, IAS, CMD, WBPDCL

24

FEATURE

Experts see 50% fewer new coal-fired power plants than announced

In India, 60–84% of currently planned plants are likely to be built.

44

INTERNATIONAL

Peabody sees strong coal demand from India

Expects subdued demand in US due to low gas prices

46

CORPORATE

Coal India e-auction premium cools down to 192% in January-March

FY23 PAT up 62% despite wage provisions.

India coal: eyeing 1 billion tons in FY24

Sumit Maitra

India has set a target to produce a little over 1 billion tons (bt) of coal – 1.012 bt to be precise in the current financial year in the backdrop of robust energy demand, gradual commissioning of commercial mines and an effort to encash the vast untapped reserves of the fossil fuel before being destined to stay buried forever as the world rushes towards a decarbonised world.

Out of 1012 million tons (mt) of coal likely to be mined in FY24, Coal India would be taking care of 780 mt of the output, share of Singareni Collieries Co Ltd (SCCL) has been set at 70 mt while captive and commercial blocks would be contributing the rest 162 mt, or 16 percent of the planned output, as per the break-up disclosed by the Coal Ministry in its Coal Ministry Action Plan FY24, document.

“With record coal production of 893.08 mt in FY23 as compared to about 778.21 mt during FY22 with a growth of about 14.76 percent, the annual coal production target set for FY24 is 1012 mt,” Coal Ministry has said in its action plan.

Towards the target

Overall domestic coal production in the month of April, 2023 was 73.144 mt as against 67.202 mt in the corresponding month of 2022, registering a growth of about 8.84 percent.

It includes coal production of 57.57 mt by Coal India, 5.57 mt by SCCL and 10 mt by captive and other mines.

Overall domestic coal dispatch in April grew at a higher rate, at 80.306 mt as against 72.10 mt in the year-ago month, registering a growth of about 11.38 percent.

It includes dispatch of 62.31 mt by Coal India, 6.03 mt by SCCL and 11.97 mt by captive mines.

Supply to the power sector in the month of April by CIL and SCCL was 55.70 mt as against 54.02 mt in April of 2022.

Commercial and captive mines

As per the Coal Controller Organisation, total production of coal from the allocated captive coal blocks in April was 9.49 mt, out of which, aggregate coal production of those coal blocks which have not been cancelled by the Supreme Court - Pakri Barwadih (1.326 mt), Tasra (0.040 mt) and Moher and Moher Amlori Extn. (1.218 mt) has been 2.584 mt.

During FY23, the Coal Ministry signed agreements for a total of 23 coal mines having cumulative Peak Rated Capacity of 33.224 mtpa and these mines are expected to generate an annual revenue of `4,700.80 crores calculated at PRC.

“Considering good response received for 6th round of commercial auctions, it is expected that 25 coal mines will be allocated during FY24 for commercial mining,” Coal Ministry has said.

In early March, India’s coal production from captive and commercial mines crossed the 100 mt-mark for the first time.

According to the ministry, 4 new coal mines started production in FY23 and two other coal mines commerced operations after the close of the year.

Additionally, Coal Ministry aims for allocating 25 new mines for commercial mining in FY24.

Imports to stay elevated

Global coal miners see strong demand from India continuing on the back of strong rise in power demand.

US coal miner Peabody sees strong demand from Asia, particularly from India due to strong economic activity.

“India has shown signs of improved economic activity early in 2023 resulting in increased power demand and elevated coal imports despite elevated domestic production. Overall, the demand for seaborne thermal coal is robust and supply remains

Coal Ministry Action Plan FY24

constrained across the globe,” Jim Grech, CEO, Peabody said.

“Imports in key markets are expected to increase in the coming months, with continued tight global supply expected to provide support to pricing for higher CV coal. The outlook for the remainder of calendar year 2023 remains positive, with market forwards continuing to show a contango,” Australian coal miner New Hope told investors.

India’s coal and coke imports in March 2023 through the major and non-major ports increased by 10.29 percent over February 2023, according to data compiled by Coal Insights.

Imports in March 2023 stood around 21.12 mt as against 19.15 mt imported in February 2023, the data show.

Coal imports in March 2023 were up by 5.23 percent as against March 2022 when imports stood at 20.07 mt.

“Recent engagements with customers in China and India have reaffirmed our positive outlook for commodity demand, with China’s economic rebound and solid momentum in India’s steelmaking growth helping to offset the impact of slowing growth in the US,

“With record coal production of 893.08 mt in FY23 as compared to about 778.21 mt during FY22 with a growth of about 14.76 percent, the annual coal production target set for FY24 is 1012 mt.”

“WBPDCL has touched the zenith, in frontline with national behemoths”

West Bengal Power Development Corp

Ltd. has set a new benchmark in power generation, with its power plants securing top spots in the country's PLF rankings. Bakreshwar power station has claimed the first place, followed by Santaldih TPS and Sagardighi in second and fifth position, respectively. Dr. Pullichalil Bava Salim, IAS, Chairman & Managing Director of WBPDCL, has been spearheading the journey towards making the organisation energy efficient as well as self-sufficient in fuel supply by opening new captive coal mines. In an exclusive interview with Arindam Bandyopadhyay of Coal Insights, he shared the strategies being taken by the state genco as well as the state of the Indian power sector.

In 2022-23, India’s power generation has recorded the highest growth in over a decade, thanks to the primacy of coal as major fuel. What is your outlook on electricity demand and supply scenario in India over the next 10 years and the position of coal in the energy basket?

The current installed capacity of the country, as of March 31, 2023 is 415.4 gigawatt (GW), which includes 236.68 GW of thermal and 66.8 GW of solar.

As per the 20th Electric Power Survey, conducted by Central Electricity Authority (CEA), the peak electricity demand is expected to be 334.8 GW with annual energy requirement of 2,279.7 billion units (BU) by the year 2029-30.

Capacity addition within 2022-30 is expected to be 171 GW which comprises 26.9 GW from thermal and 92.5 GW from solar.

Expected gross generation from coal and lignite-based power plant is estimated to be 1,515.82 BU during 2029-30.

The impact of Electric Vehicles on demand in 2029-30 is likely to be 3 GW in Peak Demand and 15 BU in Energy requirement.

Additional energy requirement for the country on account of green hydrogen production of around 10 million tons (mt) (considering only 5 mt load on Grid) has been estimated as 250 BU by FY30.

All India energy requirements off set

due to Solar Roof Top installation has been estimated as 34.8 BU in 2029-30.

All India energy requirements offset due to solar pump installation has been estimated at 2.4 BU in 2029-30.

In FY23, power sector’s cumulative coal consumption was recorded at 776.8 mt against total receipt of 787.3 mt, including domestic (731.7 mt) and import (55.6 mt).

Coal requirement for 2029-30 has been worked out to be about 1,019.6 mt, considering specific coal consumption of 0.666 kg/kWh plus 1 percent transportation loss.

Despite the high demand facing the thermal power sector, the plant PLF has remained

Experts see 50% fewer new coal-fired power plants than announced

Astudy led by the Berlin-based climate research institute Mercator Research Institute on Global Commons and Climate Change (MCC), has shown that more than 50 percent of the new coal-fired power plants that have been announced might not get implemented.

It was earlier estimated - based on data compiled by the US information service Global Energy Monitor - that by the middle of last year, the capacity of new coal-fired power plants under construction or planned totalled 476 gigawatts worldwide and that if all were built and ran until the end of their economic lifetime, this would make the international goal of limiting global

heating to below 2 and preferably 1.5 degrees unattainable.

“For the negotiations on the global coal phase-out, it is important to have a realistic appreciation of the increase in power plants that still lies ahead,” said Jan Steckel, head of the MCC working group Climate and Development and co-author of the study.

“Planning, and even construction of new plants may be put on hold if, for example, changes occur in finance, national energy strategies, or costs of renewable energies. We shed light on the baseline and thus the level of ambition of past and future coal agreements, the so-called JETPs,” Steckel said.

Since 2021 Just Energy Transition Partnerships, representing countries in the Global South and industrialised countries

have been negotiating on aid programmes for phasing out coal-based power plants.

For South Africa, Indonesia and Vietnam, initial deals worth billions have already been struck.

The analysis by MCC reflects the views of 29 knowledgeable experts from 10 countries that account for 90 percent of the new coalfired power plants under construction or officially planned: Bangladesh, China, India, Indonesia, Laos, Mongolia, Pakistan, Turkey, Vietnam, and Zimbabwe.

The experts were contacted in autumn 2021, i.e. before the conclusion of the first JETP agreements, to provide expertise for their own country and, to an extent, for other countries.

The responses show that the reduction in future coal investments negotiated with Vietnam and Indonesia corresponds more or less to what had been expected among experts anyway.

The likely implementation of the

Coal Insights Bureau

Coal-fired power plant in Shanghai: fewer new projects are cancelled in China than in other countries.

Overall, the experts assume that in the coming years and decades, around 215 gigawatts of new coal-fired power plant capacity will be installed in the ten countries examined: Bangladesh, China, India, Indonesia, Laos, Mongolia, Pakistan, Turkey, Vietnam, and Zimbabwe.

CEA sees 1.02 billion tons of coal need for thermal energy by FY30

Coal Insights Bureau

Central Electricity Authority (CEA) has worked out coal requirement for 2029-30 at about 1019.6 million tons (mt) in its recently released Report on Optimal Generation mix 2030 (second revision).

The estimation of 1.02 billion tons (bt) of coal is based on estimates of gross generation from coal and lignite-based power plant of 1515.82 Billion Units (BU) for FY30.

The estimate includes likely increase in coal-based generation on account of the uncertainty in realisation of the expected/ scheduled capacity addition from Hydro, Nuclear and climactic factors like drought conditions, etc.

The resultant coal requirement for FY30 has been worked out to be 1019.6 mt considering specific coal consumption of 0.666 kg/kWh + 1 percent transportation loss.

“Coal-based capacity addition of 16,204.5 MW is required to meet electricity demand requirement in 2029-30 apart from the coalbased capacity of 26900 MW currently under construction (for likely benefits during 202223 to 2029-30),” the report predits.

Energy capacity to be 10% lower than 2020 estimates

As per the earlier study of 2020, the likely installed capacity by the end of 2029-30 was projected as 8,17,254 MW comprising of Hydro - 60,977 MW, Pumped Storage Plants - 10,151 MW, Small Hydro - 5,000 MW, Coal - 2,66,911 MW, Gas - 25,080 MW, Nuclear - 18,980 MW, Solar - 280,155 MW, Wind - 140,000 MW, Biomass - 10,000 MW along with Battery Energy Storage capacity

of 27,000 MW/108,000 MWh to meet the projected peak electricity demand of 340 GW and electrical energy requirement of 2400 BU as per the 19th report.

The installed capacity by the end of 202930 projected is 777,144 MW comprising of Hydro 53,860 MW (excluding Hydro Imports 5,856 MW), PSP 18,986 MW, Small Hydro 5,350 MW, Coal 2,51,683 MW, Gas 24,824 MW, Nuclear 15,480 MW, Solar 2,92,566 MW, Wind 99,895 MW and Biomass 14,500 MW along with a Battery Energy Storage capacity of 41,650 MW/208,250 MWh. With this installed capacity, the NDC commitment given by India i.e., the percentage of non- fossil fuel capacity in the total installed capacity is to be 50 percent by 2030 is likely to be met.

The projected installed capacity from RE sources excluding large hydro (Solar, wind, biomass and small hydro) in the year 202930 was projected as 435 GW.

In the previous year, 73 percent of India’s power came from coal which is expected to go down to 55 percent by 2030.

Renewable sources (such as small hydro, pumped hydro, solar, wind and biomass) will rise to 31 percent in 2030 from 12 percent right now, the report predicts.

The major highlights of the 20th projections are:

♦ Projected a peak electricity demand of 334.8 GW and electrical energy requirement of 2279.7 BU for FY30

♦ The impact of EVs on all India Demand in 2029-30 is likely to be 3 GW in Peak Demand and 15 BU in Energy requirement

♦ All India energy requirement offset due

to solar roof-top installation has been estimated as 34.8 BU in 2029-30

♦ All India energy requirement offset due to solar pump installation has been estimated as 2.4 BU in 2029-30

♦ Additional energy requirement for the country on account of green hydrogen production of around 10 mt (considering only 5 mt load on Grid) has been estimated as 250 BU by FY30.

In FY30, non-fossil based installed capacity is likely to be about 64 percent of the total installed capacity and non-fossil fuels contribute around 45 percent of the gross electricity generation during 2029-30.

Energy demand

The projected All India peak electricity demand and electrical energy requirement is 334.8 GW and 2279.7 BU for FY30 as per the draft projections.

Thermal capacity to rise by 19% Coal capacity, which is under construction and is expected to be commissioned during 2022-30, is around 26,900 MW.

Pit-head potential supercritical coal capacity totaling to 21,240 MW has been considered. Out of this, coal capacity totaling to 6,920 MW is under bidding.

Additionally, coal-based capacity of Central and state sector utilities, totaling to 9,420 MW which has been identified to be considered for development in future, if required, has been also taken into consideration for the studies.

The capex for new coal plants has been considered as `8.34 cr/MW (up from 7.85 cr/MW considered in the earlier studies) as per the latest inputs provided by various manufacturers/developers.

The likely share of thermal installed capacity reduces to 35.5 percent of the total installed capacity in FY30 as compared to 57 percent as of March, 2023 while the REbased installed capacity in 2029-30 (including Large Hydro) increases to 62.4 percent of the total installed capacity as compared to 41.4 percent as of March, 2023.

Peabody sees strong coal demand from India

Coal Insights Bureau

US-based thermal and coking coal major Peabody sees subdued demand for thermal coal in the domestic market due to low gas prices.

While global prices will be supported by import demand from India and other Asian countries, adequate coal stocks elsewhere will put coal prices under check, said Jim Grech, CEO, Peabody, to investors.

“We now have lower LNG prices and high coal inventory levels in Europe as shortterm headwinds in terms of pricing across the globe,” he said.

In US, during the March quarter, natural gas prices weakened further due to record gas production levels. US natural gas prompt prices are approximately $2.25 per mmbtu.

“Overall, near-term demand for US thermal coal is expected to be muted as a result of low gas prices and stronger renewable generation. However, as summer weather brings stronger total load demand an increased LNG export will pressure gas prices and demand has the potential to increase in the second half of 2023,” Grech said.

Peabody sees strong demand from Asia, particularly from India due to strong economic activity.

India has shown signs of improved economic activity early in 2023 resulting in increased power demand and elevated coal imports despite elevated domestic production. Overall, the demand for seaborne thermal coal is robust and supply remains constrained across the globe,” Peabody head said.

“Global thermal coal prices stabilised in March and recently showed improvement due to supply disruptions in Colombia, Africa and on-going strong demand from India, China and ASEAN countries. It will shoulder seasonal conditions and healthy field

stocks are influencing demand elsewhere,” Grech told investors.

China ended its official ban of Australian coal imports providing additional demand for Australian thermal coal which has resulted in Australia import rates of over 4 million tons per month.

“Domestic coal production and renewable generation have been trying to start the year. However, import demand has been higher year over year as overall coal demand has been strong. In the first quarter of 2023, the run rate of imports is close to all-time high of approximately 400 million tons,” he said.

The seaborne metallurgical coal market during the March quarter was characterised by ongoing volatility as global macroeconomic turbulence counteracted improving demand and further weather-induced supply disruptions in Australia, he said.

Met coal price volatility continued and early March increases was eroded in the second half of the month amid macroeconomic sentiments, he said.

January-March export realisation down 10%

Peabody’s thermal coal realisation from exports have fallen by 9.78 percent to Aussie $148.34 a ton during the March quarter from Aussie $151.61 earned during the previous quarter. During the quarter, the seaborne thermal segment shipped 3.6 mt, including 2.1 mt of exports.

Export shipments were 0.2 mt lower than the December quarter due to a longwall move at Wambo and continued recovery from heavy rains in the fourth quarter of 2022.

“The average realised export price was nearly flat with the fourth quarter of 2022 as lower hedged ton settlement volumes offset a 33 percent decline in average Newcastle benchmark prices. Total segment costs of $51.01 per ton were 18 percent higher

than the December quarter primarily due to anticipated lower production and less favorable Australian $ exchange rates. The segment reported Adjusted EBITDA margins of 47 percent and Adjusted EBITDA of $164.0 million, in the first quarter,” the company said. As for met coal, during the March quarter, the seaborne segment shipped 1.3 mt at an average realised price of $220.60 per ton.

Tons sold were 0.7 mt lower than the prior quarter due to lower production at Shoal Creek and CMJV (rail and port congestion from heavy rains in January), partially offset by higher production at Metropolitan.

Total segment costs of $151.13 per ton were 18 percent higher than the prior quarter primarily due to anticipated lower production and less favorable exchange rates.

The segment reported 31 percent Adjusted EBITDA margins and Adjusted EBITDA of Ausie $90.8 million, in the first quarter of 2023.

“India has shown signs of improved economic activity early in 2023 resulting in increased power demand and elevated coal imports despite elevated domestic production. Overall, the demand for seaborne thermal coal is robust and supply remains constrained across the globe,” Jim Grech, CEO, Peabody

Coal India e-auction premium cools down to 192% in January-March

Coal Insights Bureau

During the January-March period, Coal India’s (CIL) average selling price rose 13 percent year-on-year (y-o-y) and 2 percent quarter-on-quarter (q-o-q) to `1,877 a ton while e-auction average realisation jumped 86 percent y-o-y to `4,525/ton but was down 10 percent q-o-q.

E-auction premium eased to 192 percent from an all-time high of 329 percent in Q2FY23 and 241 percent in Q3FY23, but it was still above the historical average. According to analysts, the integration of all five different modes of auction into a single e-auction has led to better price discovery for coal and resulted in a structural shift in e-auction premiums.

“Though e-auction sales at 16.40 mt were lower by 41 percent in volume terms in Q4 compared to 27.65 mt of similar quarter FY22, higher premiums under the e-window

helped CIL in cranking up e-auction sales by `690 crores. The realisation per ton of coal was `4,526 under auction segment in Q4 against `2,434 in same quarter of FY22. The jump was `2,092 per ton or 86 percent,” Coal India said.

E-auction continues to drive profitability

Though e-auction premiums have cooled off from their highs, they were compensated by higher volumes in Q4FY23.

As coal availability to the nonregulated sector (NRS) increases, Coal India has an option of placing up to 10 percent of its total production or 20 percent of production after fulfilling FSA deliveries under e-auctions.

“We expect Coal India to sell 68-70 million tons (mt) of its volumes via e-auction determined prices in FY24. Higher sales volumes via the e-auction route improve profitability as the prices are higher than

Realisations

FSA-determined prices,” institutional research of brokerage house Motilal Oswal said. Motilal Oswal sees e-auction premium for FY24 at 99 percent.

PAT in FY23 up 62% despite wage provisions

Sustaining strong financial fundamentals, CIL’s profit after tax (PAT) for FY23 posted 62 percent growth at `28,125 crores compared to `17,378 crores of FY22.

This was despite provisioning `8,153 crores in the accounts in 2022- 23 towards wage revision of CIL’s non-executive manpower.

Climbing to an all-time high, the annual PAT bested the previous high of `17,464 crores recorded in FY19 by 61 percent.

Higher volume sales and increased premiums in e-auction bolstered the company’s profitability.

CIL recorded Profit Before Tax of `7,642 crores and PAT of `5,528 crores in Q4 of FY23.

“Both PBT and PAT have shrunk by 18 percent compared to the same quarter of FY22 primarily due to increased provision towards the wages in NCWA-XI,” Coal India said.

PAT would have been the highest-ever in any quarter had the provision not been made.

CIL lifted its profit into higher orbit despite the company capping its coal prices for over past 5 years amidst rising input costs, especially diesel and explosives and increased wage cost due to provisioning in the accounts.

Higher volume sale by 17.34 mt and better average realisation under FSA resulted in a net impact of around `3,879 crores in Q4. FSA sale increased to 167.45 mt in Q4 FY23 compared to 150.11 mt of preceding fiscal’s Q4.

Realisation per ton of coal under FSA category was `1,550, an increase of 5 percent, compared to `1,470 per ton of Q4 FY22.

Whereas, for entire FY23 realisation per ton of coal under e-auction was `4,841 against `1,879 per ton in FY22, up 157.6 percent. The same in case of FSA sales was `1,475 compared to `1,406 of FY22.