Contents 20 Iron ore exports can bolster India’s coal logistics: Drewry 24 DFCs will play key role in 1 bn ton coal scenario 27 Steam coal offers rise marginally in October 28 Coking coal offers fall in October 30 India’s Aug coal imports down 6% y-o-y 31 Coal India production up 10% in September y-o-y 32 SCCL production up 13% in September y-o-y 33 No power capacity addition in September 35 India’s cement production dips 1% in Aug y-o-y 40 Bevcon Wayors eyes innovative products, technical tie-ups for growth 48 SRB rides on new opportunities in Indian mining space 50 Uralmashplant plans expansion in Indian mining sector 52 Are we heading towards a full-fledged digital mine? 61 Volvo Trucks eyeing long-haul, construction segment in India 62 CIL must make course correction for survival 66 US coal production edges up 1% in Sept y-o-y 68 Martin Engineering unveils data trackers on conveyors 69 Advanced technologies protect workers at the face 72 Indian Railways’ September coal handling up 8% y-o-y 73 Traffic handled by major ports up 3% in Apr-Sep 2017 76 Corporate update
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6 | COVER STORY
Can India pare its high logistics costs?
36 | Interview
India has one of the highest freight costs in the world, but DFC and new rail projects can be game changers.
Mining & construction gear market stares at slowdown Emission norms, GST, renewables and coal inventory are impacting mining & construction equipment sales.
54 | Interview
WCA seeks greater role of FIs in funding clean coal tech
59 | Interview
Not the cheap solar tariff, the real challenge for coal is mass scale adoption of clean coal tech, says Benjamin Sporton.
Bio fuel a key alternative to biodiesel Volvo Trucks’ long-term objective is to have zero emissions from its trucks, says Lars Mårtensson.
74 | Corporate
Exxaro sees no likely dent in coal exports to India in H2 Despite an 11% drop in coal exports to India in H1 2017, the South African exporter remains bullish on the market.
Cover Story
Can India pare its high logistics costs? Madhumita Mookerji & Arindam Bandyopadhyay
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Cover Story
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omeone had once related a story of a paper mill situated in the heart of a captive forest in Kalimantan, Indonesia where the wood was at an arm’s length and a coal mine nearby. The fuel for captive power generation was thus easily accessible, along with limestone, the quarry being just a stone’s throw away. The mill was able to produce 2,000 tons of paper pulp per day! Cut to India. Alas, this paradisiacal setting is the stuff that dreams are made of. Most of the power plants are located inland, far away from the coalfields. And, if you happen to spot a plant close to the coastline, then be assured that the nearest coalfield will not be found just round the corner. Coal has to travel more than 1,000 km on average to the doorstep of the plant for the purpose of power generation. This may be via road, rail or both. In case the plant uses imported coal then that fuel has to make a long voyage across the seas to reach Indian shores before being carted by road and rail. And then there are problems of port congestion and bottlenecks. Add to that the pitfalls of stoppages on rail tracks and roads, which further delay travel time for that precious coal cargo. But, why are power plants located in logistically unsound locations. The politics of power may well be the answer with the powers that be keen on setting up electricity generation plants in their respective states to generate employment and earn brownie points. There are three ways by which coal is being moved across India. One is road, the second is railways and third, inland waterways, though the latter is yet to pick up, apart from, of course, the seaborne route, which is of prime importance since coal imports cannot be wished away from India. Overall, freight rates in India, say experts, are higher in India than in China. Ideally, coal transportation costs should be 10 percent of the overall cost of production but, unfortunately, these touch as high as 30 percent at times in India. As per TM International Logistics Limited data, India’s cost of logistics as a percentage of the GDP is 14 percent against 10 percent in the US and Japan, 11 percent in the European Union while China’s is higher at 17 percent. Where seaborne freight rates are concerned, Indian buyers of coal have no
choice because these are predetermined by the international dry bulk commodity market, but more of that later. As for rail freight, these have rarely ever been reduced in India since they bear a huge portion of the passenger fare burden, the latter often carrying the risk of being politically loaded. Where road transportation is concerned, as per government mandate, coal has to be carried via road for 350 km but beyond that railways becomes a compulsion. The need of the hour is to bring down freight rates. But, it is easier said than done. An interplay of global, local and political factors make this a daunting task, putting coal buyers in India at the receiving end. Seaborne freight
Out of the total logistics costs, seaborne shipping costs constitute the largest share and naturally so since the commodity is being shipped in from foreign shores. But it is the global supply-demand dynamics of the dry bulk commodity market that determine shipping costs for coal imported into India. As says Rahul Sharan, Lead Research Analyst, Drewry Maritime Research, “From the shipping perspective, demand supply balance in the coal sector doesn’t influence charter rates. The way it works is like this: A dry bulk vessel carries coal, grains, iron ore, bauxite, alumina, fertilisers etc. Now, what the shipping companies do is quantify the entire demand for all these commodities and then estimate the shipping demand for the same and then they supply the total number of vessels as per demand.” At the moment, there is an oversupply of almost 25 percent in the vessel chartering industry across dry bulk commodities globally, which is impacting freight rates. And the oversupply in the case of coal alone cannot be quantified or calculated simply because if a vessel is not carrying coal, it will carry iron ore instead! As a result, shipping companies do not ever experience over-supply in vessels for a particular commodity but in the overall dry bulk commodity space when vessel supply rises. It is important to note that Indian coal buyers have no control over international freight rates which are but a function of the demand and supply dynamics of the dry bulk cargo industry. That is why coal buyers in India and elsewhere in the world are regarded as “price takers” and not “price
buyers”. Consequently, these buyers will have to accept whatever freight rates are prevailing in the charter market. Moreover, the volume of coal coming to India out of the total dry bulk commodity segment is just a fraction (3 percent of the dry bulk cargo volume globally), further not allowing coal buyers to determine or influence the charter rates. However, Indian coal buyers can adopt 2 strategies that are within their control to bring down their freight costs. One is to select a geographical coal supply source closer to India and second is the size of the vessel they opt for. Two of the geographical locations closest to India from that perspective are Indonesia and South Africa. That is why Indonesia and South Africa are the 2 major steam coal trading partners of India with 91 percent of the coal imports requirement being met through them. In 2016, around 95 million tons (mt) of coal came in from Indonesia and almost 37 mt from South Africa. In fact, 67 percent of India’s coal imports originate in Indonesia and 24 percent in South Africa. On the other hand, India imports a mere 4 percent of its total coal from faraway countries like the US and Mozambique. It is interesting to see how distance does play a key role in determining buying trends. For instance, coal buyers do not experience a huge freight cost advantage when the coal comes in either from South Africa or Indonesia to the west coast of India. This is because, the distances between South Africa and Indonesia to India are not huge. The distance from a port in South Africa (the Richards Bay Coal Terminal, for instance) to Mundra Port in Gujarat is around 3,800 nautical miles and from Indonesia’s Samarinda Port to Mundra Port is around 3,816-odd miles, which is a negligible difference. However, when the coal is being imported to the east coast from Indonesia, coal buyers have a distinct cost advantage. It takes about 7 days to complete a one-way voyage from Indonesia to the east coast of India at a normal speed. The round voyage would comprise 14 days but if one adds bunkering, downtime, load rates, etc the total duration of a single voyage amounts to around 20 days. Around 18 voyages are completed from Indonesia to the east coast of India per annum and irrespective of the size of the vessels, these sail at an average 12 nautical miles per hour.
Coal Insights, October 2017
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EVENT
Mining & construction gear market stares at slowdown
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actors like emission norms, GST, renewables onslaught and high coal inventory are all combining to impact mining and construction equipment sales. However, in India, mining equipment growth will be propelled mostly by Coal India subsidiaries who are seeking replacement fleet for their loading and hauling equipment. Growth in private mining will be mostly muted, with MDOs struggling to start coal production from the newly allocated coal blocks. Moreover, one must take a realistic view of renewable, and the fight should be over carbon emissions and not coal versus renewables, Sharad Thussu, Senior General Manager & Business Unit Head (M&CE), Voltas Limited, tells Ritwik Sinha. Excerpts from an interview:
36 Coal Insights, October 2017
No major investment in coal mining is anticipated by any global mining company in India till 2020 unless government decides on disinvestment or disintegration of CIL What is the present size of the mining and construction equipment biz in India? What kind of growth has the industry witnessed in recent years and what is your growth outlook for the mid-term? With the demand for mining and construction equipment (MCE) continuing to grow mainly due to the increase in infrastructure spends, the sector is likely to grow by 13-17 percent during 2017. The demand for MCE grew by over 35 percent during CY2016, overcoming 4 consecutive years of weak demand, giving a boost to the sector. However, it may be noted that the industry growth this year has been somewhat curtailed despite strong growth during January-February, 2017 when the markets were temporarily hit by emissionrelated ambiguities and GST during April and July, 2017, respectively. As per industry analysts, however, the sector's growth rate
will be lower in 2018 by 8-10 percent. For 2019, industry experts predict the growth rate to further slow down to around 4 percent due to Union Government elections and high base effects. However, where the mining equipment sector is concerned, the focus on renewable energy and high coal inventory impacted equipment demand both in power plants and mines, and the outlook on the same continues to be negative. Though iron ore production has grown at a healthy rate during FY2017, demand from the domestic steel industry has remained subdued. "This is expected to keep demand from the iron ore mining segment muted in CY2017. Demand from the real estate segment, however, continues to be weak. How do you describe the presence of Voltas in this market which is dominated by global
Interview
WCA seeks greater role of international FIs in funding clean coal tech
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oal is going to play an important role in the global energy mix, and the growth in renewables, especially in India, in no way poses a challenge to king coal’s hegemony. This is because the present spurt in renewables makes up just a tiny piece of the nation’s total energy mix. On this basis, comparing renewables with conventional energy sources does not hold water. Moreover, the abysmally low solar tariffs render the entire investment story in renewables unviable. The real challenge for coal is to ensure we are using the right technologies – a suite of technologies known as high efficiency low emissions (HELE) technologies – to make it more efficient and reduce Co2 emissions. Working towards this end, the World Coal Association (WCA) is looking at a possible global coal alliance which would include India, Australia, the US and South East Asian nations to work out how to best advance HELE as the default technology choice for those countries that would continue to use coal. The WCA also wants the alliance to take a look at technology sharing, deployment and financial support for its large scale deployment around the world. Benjamin Sporton, Chief Executive, World Coal Association, tells Madhumita Mookerji that he would like to see greater support from the international community to accelerate the deployment of cleaner coal technologies, particularly by international financial institutions (FIs), such as the World Bank Excerpts from the interview:
What is the scenario like with regard to coal globally? What is the case for coal against the onslaught of renewables? Coal will continue to play a very important role in the world’s power generation mix. That is not going to change any time soon because it provides affordable, reliable electricity. Around 40 percent of the world’s electricity today is generated from thermal coal.
54 Coal Insights, October 2017
Emerging and developing economies are going to continue using coal in the foreseeable future. And what factors make you comfortable that coal will play a major role in the global energy mix? One global mega trend, which is affecting India too, is urbanisation. In fact, in the next 15 years, there will be a huge shift
in population in China, India, Africa and South East Asia. Urbanisation is a good thing, but in order to urbanise, economies need to build infrastructure, and for this to happen, steel, cement and aluminium is needed. 70 percent of steel that is produced today uses coal; 85 percent of the world’s cement is produced by coal; and 60 percent of aluminium smelting power comes from coal.
Interview
Bio fuel a key alternative to bio-diesel
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afety and environmental care are core values for Volvo Trucks. Lars Mårtensson, Director, Environment and Innovation, Volvo Trucks, talks to Amit Surana about pioneering technologies Volvo is developing for more energy efficient, productive and safe trucks.
How is Volvo Trucks promoting Green energy? Volvo Trucks’ long-term objective is to have zero emissions from its trucks. Within Volvo Trucks, we are convinced that we have an important role to play in the development of sustainable transport solutions. We secure the best available technologies and fuels for different applications, in order to minimise environmental impact and decrease the dependence on fossil fuels. Volvo Trucks offers competitive trucks with excellent fuel efficiency. Besides our diesel driven trucks, we have technologies for gas-powered trucks. Our gas powered Volvo FH and FM will be launched later this year and the Volvo FE CNG, has been available since 2014.
In addition, all our Euro 6 engines are certified for HVO. Technologies for alternative fuels have been in our scope for a long time. The first steps in engine development for DME, an alternative fuel which can be made from renewable resources, were taken in the 1990s. In 2007 we presented 7 prototypes of carbon dioxide-neutral trucks running on different engines and fuels. Can you elaborate further on bio-fuel possibilities? Today, bio fuel is a big alternative to bio-diesel. We believe that bio-diesel will remain for years to come since you don’t need to adapt the engines. Which makes it
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86 Coal Insights, October 2017
Tear along the dotted line
Tear along the dotted line