Contents
6 | COVER STORY
22 Spot thermal coal offers move in narrow range 23 Chinese, Indian demand boost Oct coking coal offers
Global steam coal prices to stay firm till 2018-end
24 India’s August coal imports up 10% y-o-y
Demand by end-2018 may grow 77 mt but also fall short by 9.6 mt while the market may be undersupplied by around 3 mt.
25 Coal India production up 3.8% in September y-o-y 26 SCCL’s September production up 13% y-o-y 27 Aug sponge iron production dips 1.6% y-o-y 28 No power capacity addition in August 29 India’s Aug cement production up 14% y-o-y
20 | COVER STORY XMP Consulting to strengthen India focus XMP Consulting is now focusing on countries less endowed with coal mines, but are growing much more that SA at present.
30 Monsoon impacts coal stock at 33 TPPs
Is safety the key to long-term profit?
36 Traffic handled by major ports up 5% in Apr-Sept 37 Indian Railways’ Sept coal handling up almost 3% y-o-y 38 MoC identifies six thrust areas to boost coal sector 42 ‘Macneill Engineering may enter water logistics space’ 48 Is global coking coal market looking up again? 49 US coal production estimated to decline 2% in 2018 52 Russia’s coal exports up 4.97% y-o-y in September 54 BKT firms up $100 m capex 56 Corporate update 58 E-auction 60 Port data
4 Coal Insights, October 2018
31 | SAFETY
40 | OPINION
Coal handling operators are concerned with workplace safety but many still put profit first, ignoring evidence that efficiency and safety are intrinsically linked.
Jhanjra: A success story This mine, belonging to Eastern Coalfields, was developed on an indigenous electrical backbone from Mine Line in 1994. Today it’s a bustling centre of activity.
45 | Interview
VECV to set up new manufacturing facility in Bhopal There is a shift towards larger GVW trucks which carry more coal load, says Rama Rao AS.
Cover Story
Global steam coal prices to stay firm till 2018-end Madhumita Mookerji
Demand pegged at 1,000 mt but may fall short by 9.6 mt while the market may be undersupplied by around 3 mt
6 Coal Insights, October 2018
Cover Story
C
oal is often called the phoenix commodity. The fuel that international experts thought was dead in 2016 is back on its ashes. It seems to have reignited hopes in those who internationally trade in the material since there seems to have been a resurgence in 2017-18. Going into the last quarter of calendar 2018 as well as the new year of 2019, analysts do not see any major tectonic changes in terms of demand and supply as such except for may be a marginal rise in prices. But they do see an uncertainty that entails from a trade war looming between the United States of America and China. But, at the same time, they assure that coal cannot be written off, especially in the Asia Pacific region. Demand will not dull, they say, because of a rising demand for power worldwide but especially in our part of the globe. Demand for thermal coal continued to rise in emerging regions such as South and South East Asia on the back of growing power demand. Global thermal coal demand is expected to edge upwards to 2020, in tandem with economic growth, but show decline in Europe and the United States. Rising economic growth, increasing manufacturing base and rise in demand for electricity are some of the key factors propelling this market growth between 2017-2026, indicates a study. Indeed, as per the APEC Coal Market Report, 2017, published in February 2018, nearly 75 percent of global coal consumption occurred in the Asia Pacific Economic Cooperation (APEC) member economies in 2016. The region is home to five of the world’s 10 largest net coal exporters and six of the world’s top 10 net coal importers. Strong economic growth over the period 2005-2015 (averaging 3.1 percent a year) increased coal demand by more than 30 percent, from 2,274 million tons oil equivalent (mtoe) in 2005 to 2,897 Mtoe in 2015, an annual rate of 2.5 percent (equivalent to 62 mtoe per year or Canada’s and Australia total coal demand in 2015 combined). By 2015, coal continued to dominate the power mix in the APEC region, accounting for more than half of electricity generation. Booming Asian economies have created a huge middle class population in the APEC region, which has subsequently increased demand for iron and steel, which reached 1.2 billion tons (bt) in 2015 from
around 750 million tons (mt) in 2005, while cement demand has more than doubled since 2005 to reach 3 billion tons in 2015. The power generation segment witnessed significant growth in the APEC markets due to rising utilisation of electricity generated. Based on geography, the Asia Pacific is expected to have a considerable growth in the market during the forecast period of 201726. Several countries in the Asia Pacific – such as Korea, China and Japan – lack energy resources and are thus importing natural energy resources to meet their needs. On the other hand, price instability has been restricting the growth of the market, warn analysts. The period between 2009 and 2013 saw the biggest increase in demand in the history of the coal industry, but prices fell nevertheless. Part of the reasons for this trend could be attributed to a mix of demand growth. Some of the new demand was volatile and motivated by price arbritages versus domestic coal, observes Rodrigo Echeverri, Head of Research, Noble Group, to Coal Insights. Demand fell by more than 75 mt in 2015 and 50 mt in 2016 across markets. Prices also scraped the bottom of the barrel in these two years, hovering anywhere between $45-65 per ton. But, demand is expected to remain on an even keel in 2018, aided by a sizeable appetite from India and the Asia Pacific region. Yet, although coal-fired power generation increases by 1.2 percent per year from 2016 to 2022, its share in the mix is set to decrease
to below 36 percent by 2022, the lowest level on record with coal’s share in primary energy expected to decline to below 26 percent. The recent release by the International Energy Agency (IEA) forecasts that global demand will remain flat between 2017 and 2022. But the drop in demand for coal in the European Union and the United States is being filled up by the increase in demand for coal in India and some countries in South East Asia. Many feel that it is a positive forecast for coal as it is able to retain stable global demand despite strong competition from other sources of fuel. Yes, despite the naysayers, coal is not going to disappear overnight, says Xavier Prévost, Senior Coal Analyst, XMP Consulting CC, based out of South Africa. “Global trends mask significant differences at regional level. In Europe, coal decline began years ago and will continue. Most countries in West Europe are gradually closing their coal-fired power plants. But the story is different in East Europe. And countries like Bulgaria, Czech Republic, Greece and especially Poland are coal dependent. Given problems related with mine closures and energy safety measures, a coal reduction in those countries is unlikely,” Prévost tells Coal Insights. In India, Prévost says, despite renewables growth, coal usage will continue to rise. With a growing number of coal-fired plants with less than 60 percent capacity utilisation and strong demand growth, coal-fired power will increase by four percent per year in
The correlation between demand and prices
Source: Noble Research
Coal Insights, October 2018
7
Safety
Safety – Part VIII
community that the organisation is dedicated to a safe, sustainable and profitable mode of production.
Is safety the key to long-term profit?
Accounting for safety
Proper chute design includes belt sealing and a higher profile, amongst other components.
Bill Shukla
C
oal handling o p e r a t o r s throughout India are concerned with workplace safety around moving conveyors, but too many still put profit first, ignoring evidence that efficiency and safety are intrinsically linked. This ‘profit first’ philosophy espouses temporary or antiquated flow solutions using cheaper construction over a slightly larger initial investment in safer and more efficient equipment with a longer operational life. However, operators who cut corners expose workers to potential injuries and accrue a higher cost of operation over the long term. Business-savvy managers know that the
lasting benefits and return on investment for safe conveyor design make organisations more competitive.[1] Production Done Safely™ is a cultural shift within an organisation, which tells workers, investors, regulators and the
As the saying goes, “If you think safety is expensive, try an accident.” Expenditures for injuries can be split into two categories: direct costs and indirect costs. Workplace conditions in India that lead to injuries are not as tightly regulated as in Britain or Europe, and not as litigious as in North America, but are no less consequential. [Figure 1] From a profit margin perspective, the penalties in fines, insurance and legal settlements associated with workplace injuries in India can be proportionally equivalent to western markets. These are considered ‘direct costs’. Organisations that purchase equipment expressly based on price frequently experience short-lived benefits and ignore the high life-cycle costs that result from those decisions. Low-bid suppliers often use substandard materials and inferior design for conveyors and transfer chutes, meeting only the minimum regulatory standards. This means low-bid projects not only contribute to workplace injuries, but can also lead to inefficient flow, more downtime, increased labour for maintenance and clean-up, and a higher cost of operation, ie, ‘indirect costs’. However, when purchases are made based on lowest long-term cost (life cycle cost), benefits usually continue to accrue and costs go down, resulting in a net savings over time. [Figure 2] Engineers and safety experts encourage operators to consider the life cycle cost when reviewing bids. With a small additional capital investment for safer and more reliable
The Cost of Industrial Accidents (in USD) Fatal Accident Cost
Lost Time Accident Cost
First Aid Accident Cost
$2,750,000
$150,000
$2,750
$500,000
$28,000
$500
India
$60,000
$3,000
$60
China
$100,000
$6,000
$100
$1,000,000
$56,000
$1,000
$210,000
$12,000
$200
Established Market Economies Former Socialist Countries
Other Asian & Islands Sub Saharan Africa Latin America & Caribbean
$600,000
$33,000
$600
Middle East Crescent
$1,140,000
$64,000
$1,100
World Average Rate
$¬¬795,000
$44,000
$789
Based on averaged sources from US, Canadian, Australian HSE Organisations and International Labour Organisation estimates
Figure 1 - Regional Statistics on Costs of Accidents
Coal Insights, October 2018
31
OPINION
Jhanjra: A success story … scripted on an indigenous electrical backbone
Nandini Chakravarty
J
hanjra, once a sleepy hamlet about 200 km from Kolkata, nestled in the middle of the lush sal forests of Durgapur, is today a centre of bustling activity. Jhanjra is the centre of a mega mine, which last year had produced over 3.2 million tons (mt) of coal. This production is achieved from its one longwall and two continuous miner projects. It is considered to be India’s most productive underground mine, and there are extensive plans for further expansion of the installed mining capacity. Jhanjra is a mine belonging to the Eastern Coalfields subsidiary of Coal India Limited. Total underground proven reserves are 200 million tons, and majority of these
40 Coal Insights, October 2018
deposits were found suitable for mechanised mining. In the early 1980’s Jhanjra was first conceived by the Russians as a prospective mechanised mine, with proven reserves, which could be capable of running 7 longwall systems, simultaneously, spread over Sarpi, Pandaveswar, Jhanra and Kothadih. Mining and Allied Machinery Corporation (MAMC), located at Durgapur, was considered to be an optimum nodal point for the manufacture of mining equipment needed to run such mechanised projects, under foreign technology transfer agreements. In its heyday, MAMC retained joint ventures and transfer of technology with at least 15 of the world’s leading mining equipment manufacturing companies. Alas, this was not to be. The rest is history, and the closed gates of the MAMC factory in Durgapur is a silent sentinel to all that went wrong. Perestroika
took its toll on the Russian projects and there was a severe setback. Future generations continue to pay the price of allowing this asset to degenerate into oblivion. At Jhanjra, initially, four sets of powered supports were supplied by the Russians, out of which two were put into operation, with reasonable success, to bring home the fact that longwall technology was suitable for Indian soil. In 1994, Mine Line developed the first indigenous transwitch of 500 KVA capacity, with a primary voltage of 6,600 volts and secondary dual voltage of 1,100/550 volts. This transwitch was used for the entry drivage of Khottadih Longwall project at R5 seam. Design and development of this transwitch was a tremendous effort in the introduction of foreign technology on to Indian soil, and it was made possible through successful transfer of technology, and subsequent joint venture with SAIT Mining SA of France. This equipment is still in operation today, along with a population of about 60 transwitches of 6600 volts. Rapid strides were taken to complete the design and development for the entire range of 6600 volts electricals so as to meet the increasing demand at Jhanjra mines. It was a major step forward in the indigenous development of a sophisticated piece of FLP equipment. High voltage flameproof electricals were hitherto imported at a considerably higher price. Moreover, indigenous equipment met the need of the mine operator for 24x7 local service support, which was a major issue with the imported equipment. Jhanjra became the cradle for further developmental activity and the mine authorities in return supported the indigenisation endeavour by providing valuable inputs. The biggest challenge for any mechanised mine is to provide adequate capacity for outbye transportation of the coal to match the capacity of the coal getting machine. This has been the bane of several mechanised mines. Jhanjra was lucky, since it was planned from the very first as a mega mine by the Russians with better surface and underground infrastructure, wider galleries and wider steel chord trunk belt conveyors of 1,200 mm width, when most mechanised mines struggled to upgrade from 800 mm to 1,000 mm. The high inbuilt capacity led
INTERVIEW
VECV to set up new manufacturing facility in Bhopal
V
E Commercial Vehicles Limited (VECV), a joint venture between the Volvo Group and Eicher Motors Limited, seems to be all geared up for the future. With coal imports going up there is a need for efficient transporting solutions during the inbound movement of coal from ports. There has been a clear shift towards usage of larger GVW trucks which can carry more load in coal transportation applications. Therefore, the company sees sales of 31T and 37T GVW haulage tippers going up along with 40-49T tip trailers as these vehicles can carry more coal per trip and improve the efficiency of the entire application, Rama Rao AS, EVP, Sales, Marketing and Aftermarket, HD Trucks, VECV, tells Madhumita Mookerji. Further, VECV will be investing in a new series of light duty truck (4-9T) and two new BSVI compliant engine models (2 litre and 3 litre), at a total investment of around `200 crore. Excerpts from an interview:
Also, what sort of fresh investments has it lined up over the next three years, in what projects and how will this be funded? We will be investing around `400 croresin the Bhopal facility. In its first phase, the investment will cater to capacity building up to 40,000 vehicles per annum. Depending on the market requirements, we will further expand the facility which might entail further investments. As mentioned above, we will continue to invest in upgrading our product lines, and new technologies for the Eicher Pro range. Please give us an overview of VE Commercial Vehicles? What are its areas of operation and plants locations? What is its product portfolios like? VE Commercial Vehicles Limited (VECV)
Coal Insights, October 2018
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62 Coal Insights, October 2018
Tear along the dotted line
Tear along the dotted line