Coal Insights, November 2022

16 Ther mal coal offers drop in November 18 Seabor ne coking coal fall in November 19 October coal impor ts up 20.9% y-o-y 20 CIL’s coal production up 6% in October 21 SCCL output down 2% in October 23 Coal secretar y Meena eyes better logistics support 24 Coal Ministr y to commission 51 FMC project by FY25 25 COP27 non-committal to $100 bn pledge 28 Coal India ar ms may levy sustainable mine closure cess 29 Power Min 25% RE generation from new coal plants 30 Power capacity addition down 88% in H1 32 October sponge iron production up 5% 33 Coal handled by por ts up 31% till October 34 Indian Railways’ coal handling up 16% till October 36 Mining machiner y makers see demand growth ahead 39 Glencore coking coal output drops 40 China sees rising coal storage amid supply push 41 G20 mobilises $20bn for Indonesia’s just energy transition 43 US coal production to rise by 3% in 2022: EIA 44 Tata Power benefits from high power prices 48 Adani’s commercial mine Dhirauli to star t ops in FY24

22 | FEATURE

Biggest ever coal mine auction launched

A total of 133 mines put up for auction including 71 new blocks.

6 | COVER STORY

Winter of global discontent: Indian coal stays hot A peek into what lies ahead for the coal sector.

35 | EVENT

India must exploit its mineral potentials: Industry leaders Incentives, streamlined processes needed for mining sector.

38 | INTERVIEW

“The Indian market is going to grow more than it has grown ever.”

P K Ganguly, Head of Marketing, OTR share plans and outlook of the company.

46 | CORPORATE

Coal India Q2 profit zooms 106% E-auction premium touches all-time high.

Winter of global discontent INDIAN COAL STAYS HOT

Sumit Maitra

The global energy crisis continues to be a real threat to social harmony and economic stability. “We meet at a time of climate and energy crises, compounded by geopolitical challenges. We are experiencing volatility in energy prices and markets and shortage/disruptions to energy supply,” says the G20 declaration issued following the conclusion of the group’s meeting in Bali.

As gas stopped flowing from Russia to Europe, coal-fired power plants were revived triggering a global rush for thermal coal.

“Thermal coal prices went up two months back, when Europe started buying a lot of thermal coal. And as you know, thermal coal prices were higher than coking coal prices. So, the overall sentiment changed a bit, and many coking coal producers also found they could make more money by selling it as thermal coal. So, there were all these things happening. But I think there is more stability now,” T V Narendran, CEO and MD, Tata Steel recently said during a conference call summing up the unprecedented development in the global coal sector in recent times.

Thanks to India’s prudent decision not to raise domestic coal prices, energy inflation remained well under control.

While Coal India was selling coal under Fuel Supply Agreement at an average price of `1,413.75 a ton during the July-September, or Q2 of FY23, it was importing coal at an average price of `13,529.69 per ton, 9.5 times the domestic prices!

The demand for coal was so much that imports continued despite improvement in domestic supply and India’s coal stocks at their power plants increased throughout the quarter supported by strong domestic coal supply and continued imports.

There could have been a coal availability issue but increased monsoon rainfall provided a boost to hydropower generation supplementing thermal power output.

Weather-related moderation in power demand

Power demand in Q2 was impacted by heavy rains with power generation witnessing 5 percent y-o-y growth, down from 17 percent during Q1 of FY23, on account of the low base due to Covid-19.

October saw flattish power demand, with generation from Renewable Energy witnessing 17 percent growth while conventional sources saw a decline. Thermal generation was down 2.2 percent year-onyear, with 3-year CAGR at 3.7 percent.

NTPC at the standalone level witnessed a 12 percent y-o-y decline, largely due to seasonally-low demand scenario.

As for coal, while production was up 6 percent, offtake declined by 5 percent y-o-y.

Thermal coal import demand growth slowing down

Demand from India and Southeast Asia has so far supported Indonesian thermal coal exports – due to inclement weather and also supply crunch, Adaro Energy of Indonesia has told investors.

NTPC’s blending of imported coal touched a high of 7.9 percent in the first half of FY23, which has currently come down to only 3 percent, NTPC management told analysts.

“Right now, right as of today, the blending is only 3 percent. As the domestic coal situation increases, blending proportion will obviously come down. And in this Q3, the coal received would be more. So therefore, the blending requirement will come down. So hopefully, there should not be much of blending in the remaining half year,” NTPC officials told analysts during a conference call.

During H1 of FY23, NTPC’s coal imports jumped to 10 mt, up from just 0.88 mt in the corresponding period of FY22.

This despite NTPC registering highest ever coal production of 8.76 mt in H1 of FY23, up by over 58 percent over 5.54 mt mined in H1 of FY22.

Higher imports pushed up average tariff to `4.77 an unit in H1 of FY23 from `3.86 per unit in the corresponding period of FY22.

For NTPC, materialisation of coal in H1 against ACQ was 99.93 percent as against 96.04 percent in the corresponding previous period.

Adani Enterprises Ltd sees continued requirement of imported thermal coal in India.

“Considering that there was a lot of supply-demand gap in the first half of FY23, we were in the right position to supply to them that quantity... As for the future is concerned, we strongly believe that we are in position to continue having similar high market share and industry will require lot of coal to get imported and considering this volume is something which has gone up compared to last year,” Vinay Prakash, Director, Adani Enterprises Ltd and Chief Executive Officer, Natural Resources, told analysts during a conference call.

Non-availability of high-grade thermal coal due to global energy crisis would also keep power generation restricted, believe analysts with Motilal Oswal.

“Right now, right as of today, the blending is only 3 percent. As the domestic coal situation increases, blending proportion will obviously come down. And in this Q3, the coal received would be more. So therefore, the blending requirement will come down. So hopefully, there should not be much of blending in the remaining half year,” NTPC official

Biggest ever coal mine auction launched

The government has launched the auction of 133 coal blocks under 16th tranche of auction under Coal Mines (Special Provisions) Act, 2015 corresponding to 6th tranche of auction under Mines and Minerals (Development and Regulation) Act, 1957 and 8 coal mines under Second Attempt of 15th tranche of Auction under CM(SP) Act.

A total of 133 coal mines have been put up for auction in the 6th round of commercial auctions, out of which 71 are new coal mines and 62 coal mines are rolling over from earlier tranches of commercial auctions.

Additionally, 8 coal mines under second attempt of 5th round of commercial auctions are included for which single bids were received in the first attempt. Mines falling under protected areas, wildlife sanctuaries, critical habitats, having

forest cover greater than 40 percent, heavily built-up area have been excluded.

The block boundaries of some of the coal mines where there was presence of dense habitation, high green cover or critical infrastructure etc. have been modified based on comments received during stakeholder consultations to enhance bidders’ interest and participation in these coal blocks.

The mines being auctioned are spread across states of Madhya Pradesh, Odisha, Jharkhand, Chhattisgarh, Bihar, Maharashtra, West Bengal, Andhra Pradesh, Telangana, Rajasthan and Tamil Nadu. Revision has been done considering mainly the following: ♦ Splitting of larger blocks considering geological structures, surface features

Exclusion of highly geologically disturbed areas ♦

Exclusion of densely populated areas particularly close to the boundary ♦ Exclusion of dense forest areas from the block area ♦

Exclusion of existing highways, railway lines

Under the 6th tranche, number of explored coal blocks are 64 while there are 61 partially-explored blocks. Total estimated coal reserve is 66,026.89 million tons while peak rated capacity is 294.42 million tons a year.

Coal Insights Bureau

Coal Minister Pralhad Joshi and Finance Minister Nirmala Sitharaman at the launch of the auction event.

terms

limit the global temperature rise to 1.7 °C – a great achievement that would be close to the Paris Agreement goal of well below 2 °C but still short of the critical 1.5 °C goal, which demands both greater ambition and efforts.

“The COP27 talks have been making progress, but international divisions over how to limit global warming have been exposed,” WoodMackenzie said in its report.

Representatives from 198 countries congregated in Egypt for the United Nations Framework Convention on Climate Change (UNFCCC), during the 27th Conference of Parties (COP27) to address how the world can band together to address the most pressing environmental issues.

The talks, so far, remained inconclusive on several key deliverables while ignoring India’s push to phase out all fossil fuel and not just coal.

A draft of the final decision addresses the 1.5 degree Celsius target and refers to science, reiterates the Glasgow Climate Pact call to phase down coal but does not mention oil and gas. It also references the doubling of adaptation finance and welcomes the agenda

item on loss and damage, but it doesn’t call for the establishment of a new financial facility.

“We are on a highway to climate hell with our foot still on the accelerator,” UN Secretary-General Antonio Guterres said at the Sharm El-Sheikh Climate Implementation Summit, adding that “the planet is fast approaching the tipping point that will make climate chaos irreversible.”

International Energy Agency Executive Director Dr Birol commented on how the current energy crisis triggered by Russia’s invasion of Ukraine is set to be a historic turning point towards a cleaner and more secure energy future.

In his remarks to leaders, he highlighted IEA’s findings published in its World Energy Outlook 2022 that if all countries reach their climate targets in full and on time, it would

In August India updated its Nationally Determined Contribution, its programme of emissions pledges submitted to the UN, and is now aiming to have about 50 percent of its power generation capacity in non-fossil fuel sources by 2030, and to cut the emissions intensity of its economy by 45 percent from 2005 levels, also by 2030.

Renewed call for climate financing

The draft COP decision on long-term climate finance notes with “deep regret that the goal of developed country parties to mobilise jointly $100 billion per year by 2020 in the context of meaningful mitigation actions and transparency on implementation has not been met, including due to challenges in mobilising finance from private sources”.

The draft urged developed countries to fully deliver on the $100 billion goal per year urgently and through 2025, noting the significant role of public funds, and ensure

Coal Insights Bureau

COP27 stays non-committal to $100 bn pledge, ignores India’s

“Adaptation needs in the developing world are set to skyrocket to as much as $340 billion a year by 2030. Yet adaptation support today stands at less than one-tenth of that amount,” Antonio Guterres, SecretaryGeneral, UN

UN Secretary-General António Guterres speaks at the COP27 with COP27 President, Sameh Shoukry, standing to his right.

Mining machinery makers see demand growth ahead

Mining equipment makers are witnessing renewed demand for their offerings as Coal India goes for aggressive mechanisation in times of growing energy needs and commercial mines coming into operations, industry leaders told Coal Insights at the International Mining and Machinery Exhibition (IMME) recently held in Kolkata.

“We are a major player is dumpers and dozers. For us, the mining and construction business is almost nearing 45 percent of our total revenue. While government companies are BEML’s major customer, private miners also buy from us,” Amit Banerjee, Chairmancum-Managing Director of state-owned mining equipment major BEML Ltd said on the sidelines of IMME 2022 exhibition.

BEML is seeing increasing order flows from Coal India including 200-150 tons dumpers and also electric excavators.

BEML in 2020 bagged trial order for 8 200-ton and 7 units of 150-tons dump trucks which were indigenously developed

and handed over to Coal India in September 2021.

“Coal India had earlier given us development and trial orders and are now talking of giving us some more orders to us. Apart from dumpers and electric excavators, they have now given us development order for 20 cubic meter (CuM) rope shovels,” he said.

As per the order signed in April 2022, BEML will be supplying 1 rope shovel valued at `118 crores which would be indigenously developed for the first time under the Atmanirbhar Bharat initiative by BEML.

BEML is a major player in mining equipment manufacturing, serving with a wide range of products such as rope shovel of 21 CuM bucket capacity, 190 ton and 150 ton dump trucks, 180 ton hydroelectric excavator, 860 HP bulldozer etc.

BEML has supplied equipment to more than 70 countries globally. BEML, having its nationwide sales network and after-sales-service support with parts depots and full-fledged service centres, enables its customers to access a wide range of products

and services, thus ensuring overall customer satisfaction.

“The Indian market is going to grow more than it has grown ever in pre-Covid times. Growth trajectory post-Covid is gaining ground because of segments like infrastructure development, mining and agriculture. For all these sectors, BKT is preparing for meeting the challenges,” P K Ganguly, Head Marketing, OTR at Balkrishna Industries Ltd said.

“All these sectors can’t grow without the support of equipment and components. For most of the equipment in use in these sectors, tyres are an important component,” he added.

Balkrishna Ind is the Indian multinational group and a leading global player in the OffHighway tire market widely known for its BKT brand.

BKT showcased its breakthrough technology, EARTHMAX SR 468, with all steel structure casing designed to support the huge load of a 240 ton dump Trucks in highly challenging mining conditions.

Tata Hitachi, in collaboration with Hitachi Construction Machinery of Japan, has been a pioneer in introducing the latest

Coal Insights Bureau

“Coal India had earlier given us development and trial orders and are now talking of giving us some more. Apart from dumpers and electric excavators, they have now given development order for 20 CuM rope shovels,” Amit Banerjee, CMD, BEML

China sees rising coal storage amid supply push

Coal Insights Bureau

Coal stockpiles at China’s power plants have gone up considerably as its fears rising demand

Stocks at the plant sites have been increased to ensure energy supply during the winter, according to the country’s energy regulator.

Storage of coal at the country’s power plants has crossed 170 million tons (mt) since September, the National Energy Administration of China has said.

Faced with a grave and complex international energy situation, China has stepped up efforts to ensure stable coal supply and increased production, according to Liu Tao, an official with the energy regulator.

Chinese Vice Premier Han Zheng has called for efforts to secure the nation’s energy supply and ensure heating this winter.

To keep energy prices stable, Vice Premier said measures should be taken to ensure the steady production of coal and increase natural gas storage and production, calling for more support from fiscal and financial policies to provide greater relief to enterprises facing difficulties.

Stressing production safety, he also said that safety inspections should be carried out to defuse potential risks.

Coal output of major enterprises totaled 3.32 billion tons (bt) in the first nine months of 2022, up 11.2 percent year-on-year (y-o-y), while coal production capacity has expanded by more than 62 mt this year, the regulator said.

Data also showed that renewable energy accounted for 78.8 percent of the newly installed power generation capacity in the first three quarters.

From 2012 to 2021, China sustained average economic growth of 6.6 percent with an annual increase of 3 percent in energy consumption.

Carbon dioxide emissions per unit of GDP reduced by 34.4 percent, and energy consumption per unit of GDP decreased by 26.4 percent, equivalent to saving of 1.4 bt of standard coal.

China also drew a timetable and roadmap for carbon peak and carbon neutrality, and steadily promote energy transformation with installed capacities of hydropower, wind power and solar power generation ranking first in the world.

China has become a major producer and buyer of new energy vehicles and established the world’s largest carbon market, three times bigger than the European Union’s.

Coal production China’s raw coal output posted stable expansion in September, official data showed.

The country produced 390 mt of raw coal last month, up 12.3 percent y-o-y, according to the National Bureau of Statistics.

The average daily output of coal came in at 12.89 mt last month, showed the data. In the first nine months of 2022, the output was 11.2 percent higher than a year earlier at 3.32 bt, it said.

The geographical concentration of coal use marks it out from other globally-used fuels: China accounts for over half of global coal demand and the share of all emerging market and developing economies exceeds 80 percent, up from half in 2000.

China’s power sector, on its own, accounts for one-third of global coal demand. China produces more than half of the world’s steel and cement, and so also plays a dominant role in coal use in industry.

During this decade, emerging market and developing economies’ share of historical emissions from coal-fired power generation will overtake that of advanced economies.

China meets more than half of its total energy demand with domestic coal.

For other emerging market and developing economies, domestic coal accounts for around 15 percent of total energy demand, and in advanced economies for about 10 percent.

In the context of the current energy crisis, coal suppliers are under pressure to increase production. Coal production failed to keep pace with rebounding coal demand in 2021, especially during the first-half of the year, which led to lower stock levels and higher prices.

In 2022, the European Union banned coal imports from Russia in retaliation for its invasion of Ukraine, which further tightened coal markets. The main coal exporting countries were prevented from fully taking advantage of high prices by supply chain disruptions and events such as flooding in Indonesian mines.

“Some countries, led by China and India, responded to these conditions with policies to ramp up domestic coal production to meet demand and reduce coal shortages. In other countries, most additional production in 2021 came from existing mines or reopened mines that had been idled during periods of low prices, as investment in new mines has been limited in recent years,´ IEA said in its report titled Coal in Net Zero transition.

Storage of coal at the country’s power plants has crossed 170 mt since September, National Energy Administration said.

Coal India Q2 profit zooms

106% with all-time high e-auction premium

The company recorded a higher OBR provision in the quarter again taking advantage of existing coal inventory to prepare for another round of strong production in second half of FY23.

“Coal Warriors are playing a significant role in fulfilling India’s energy and industrial needs. Congratulations to Coal India for the exceptional performance,” Coal Minister Pralhad Joshi said following the announcement of the results. CIL’s average realisation from e-auction in Q2 has gone up to `6,061.51 per ton from `4,339.97 a ton in Q1, a growth of 40 percent.

Coal India sold imported coal at an average price of `13,529.69 per ton during Q2. This is 9.5 times more than its realization from sale of coal under FSA at an average price of `1,413.75 a ton. This is for the first time that Coal India has undertaken and disclosed sale of imported coal in a quarter.

E-auction continues to drive profitability

While e-auction volumes dropped 50 percent q-o-q, the premium soared 40 percent q–o-q to a record 329 percent.

“We believe that the Q3 performance will be better q-o-q with higher volume on e-auction with almost similar levels on premium,” investment research house Motilal Oswal said in a report.

E-auction premium for SeptemberOctober stood at 312 percent and 276 percent while volumes improved to 4.3 mt and 4.7 mt, respectively.

Coal India (CIL) reported yet another quarter of strong performance with e-auction premium at an all-time high of 329 percent.

Net sales grew 28 percent year-on-year (y-o-y) but was down 15 percent quarter-onquarter (q-o-q) to in the second quarter (Q2) of FY23.

Adjusted EBITDA -net of Over Burden Removal (OBR) - grew 100 percent y-o-y after a strong growth of 178 percent y-o-y in Q1 of FY23, but was down 37 percent q-o-q to `8,000 crore, the highest ever second quarter EBITDA for Coal India.

There has been 106 percent increase in its consolidated net profit at `6043.55 crore during Q2 as compared to `2,936.91 crore in the same quarter of last fiscal.

CIL’s consolidated revenue from operations during the quarter increased 28 percent to `29,838 crore, compared to `23,291 crore in the year-ago period.

The profit before tax (PBT) for the September quarter came in at `7,687 crore, up over 111 percent from `3,643 crore in the year-ago quarter.

During Q2 FY23, CIL’s total expenses increased to `23,770 crore from `20,424.52 crore in the corresponding quarter of the previous fiscal.

“This indicates that the marginal drop in premium in Q3 q-o-q will be more than compensated by higher volumes. With the onset of winters, we believe the demand for coal for power should slow down somewhat giving the company some headroom for higher non-power and e-auction dispatches. This in turn should help deliver another record set of profits for Q3FY23,” Motilal Oswal said.

Motilal Oswal expects e-auction premium estimate for FY23 to be 239 percent, which is expected to fall to 81 percent in FY24.

Green mining push

Production through Surface Miners (SMs)

Coal Insights Bureau

Pramod Agrawal, Chairman, Coal India during the signing of Memorandum of Understanding (MoU) for its key performance areas for FY23 with Amrit Lal Meena, Secretary (Coal).