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Domestic
COAL
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Rating agency Icra has said it expects prices of domestic coal to remain high in the ongoing quarter as well given the supply challenges of the dry fuel during monsoon. The domestic e-auction premium on coal increased by over 400 per cent in May, thereby adversely impacting the cost structure of the base metal companies and margins. “Going forward, given the coal supply challenges during the ongoing monsoon season, the rating agency expects domestic coal prices to remain elevated in the current quarter as well,” Icra said in a statement. Power cost, it said, has risen substantially for domestic base metal companies, owing to lower availability of linkage coal to non-power sectors and elevated coal prices in both international and domestic markets.
Coal output grows 32 pc to 67.59 MT in June; despatches rise 20%
Domestic coal production rose sharply by 32 per cent to 67.59 million tonnes (MT) in June 2022 compared to 50.98 MT in the same month last year. Coal India Ltd (CIL), Singareni Collieries Company Ltd (SCCL) and captive mines/others registered a growth of 28.87 per cent, 5.50 per cent and 83.53 per cent by producing 51.56 MT, 5.56 MT and 10.47 MT, respectively, the ministry said citing its provisional data. Of the top 37 coal mines, as many as 22 mines produced more than 100 per cent, and production at
another nine mines stood between 80 per cent and 100 per cent. At the same time, coal despatch also increased by 20.69 per cent to 75.46 MT from 62.53 MT as compared to June 2021. During June 2022, CIL and captives/others registered a growth of 15.20 per cent and 88.23 per cent by despatching 58.98 MT and 11.05 MT, respectively. The despatch to power utilities has grown by 30.77 per cent to 64.89 MT during June this year as compared to 49.62 MT in June last year due to increase in power demand. The overall power generation in June 2022 has been 17.73 per cent higher than in June 2021.
Gearing up for monsoon, Coal PSUs and Railways ramp up supply in Q1 of FY 22-23
Coal mining PSUs and Indian Railways have ramped up supply of the crucial commodity during the AprilJune quarter, a key period for stocking the dry fuel before monsoon disrupts movement. According to the latest provisional numbers from the Coal Ministry, mining PSUs such as Coal India (CIL) and Singareni Collieries Company (SCCL) ramped up coal despatch to the power sector by 22.42 per cent on a Y-o-Y basis in Q1FY23. For Power and non-Power Sector (NPC), despatches were up cumulatively. Supplies to key non-Power Sector (NPS) industries like Steel and Cement too were higher in Q1FY23 on an annual basis by 35.23 per cent and 6.64 per cent, respectively. However, the despatch to another key consuming industry, Sponge Iron was down marginally by 0.8 per cent during the same period.
India’s coal imports hit record high in June
India’s coal imports hit a record high in June despite high global prices, data from three trade sources and Refinitiv ship tracking showed, as economic activity picked up and amid a domestic shortage of the fuel. India imported over 25 million tonnes of thermal coal and coking coal in June, rising by over a third compared with the same period last year. Imports of thermal coal - used mainly in electricity generation - jumped to 19.6 million tonnes, while shipments of coking coal - used in steelmaking - rose to about 5.4 million tonnes. Thermal coal imports jumped 40%, while imports of coking coal surged 23%. Coal shipments from top supplier Indonesia more than tripled to a record 14.5 million tonnes, while imports of coal from Russia nearly doubled to 1.2 million tonnes. The imports included thermal, coking, PCI coal and anthracite Shipments from other top suppliers Australia and South Africa were lower compared with the same period last year but higher compared with imports in May, Imports from the United States fell to the lowest in four months. However, overall coal shipments this year are yet to exceed pre-COVID levels. Total imports in the Jan-June period were 119.5 million tonnes, 0.6% lower than 2019.
India may increase coal imports from Russia to 40 MT by 2035: Russian official
India is ready to raise thermal and coking coal imports from Russia to 40 million tonnes tonnes by 2035, provided logistics issues are fixed, a Russian official said. The statement assumes significance as several parts of India had witnessed power outrages in the wake of coal shortages in the summer months of April and May. As per data provided by the Central Dispatching Department of Fuel Energy Complex, Russia exported 214.37 MT of coal last year. Around 85 per cent of India's coking coal demand is met through imports. The cooperation with Russia will help India reduce its dependence on far-located countries like Australia, South Africa, Canada and the US for sourcing of coking coal. It will also reduce per-tonne cost of steel production, as Russia is geographically closer compared to the said countries. The objective of the MoU is to strengthen cooperation between India and Russia in the steel sector. The activities involved in the cooperation are aimed at diversifying the source of coking coal, it had said.
Coal India says enough supplies, advises power plants to stock up
National miner Coal India Limited (CIL) said the country has enough supplies, but power plants must stock up before monsoon shapes production at mines.
CIL has a stockpile of around 43 million tonne (MT). Besides that, the inventory at power plants is 26.2 MT and coal awaiting transportation at private washeries, goods sheds and ports is 4.6 MTs, CIL told 'Business Standard'. CIL recently issued a tender for purchasing imported coal for power-generating companies (gencos) after the central government directed it to meet the shortfall in the domestic supply chain. CIL has called for bids to supply 2.4 mt of coal to be delivered for the July to September 2022 period. Additionally, it has also issued two more medium-term tenders for sourcing 3 mt each at the western and eastern ports of the country for future stocks. The company said along with CIL's import tenders, several power units have already placed import orders for 26.7 MTs and another 10 MT tenders are under process
Coal India plans to take all eight subsidiaries public
Coal India Ltd is looking at taking all its eight subsidiaries public as prices of the fossil fuel soared after power demand rebounded from the pandemic, a government official aware of the development said. The coal ministry has approved a draft Cabinet note to sell 25% of state-run Coal India’s consulting unit, Central Mine Planning & Design Institute, and Bharat Coking Coal Ltd to the public. The other subsidiaries that may go public are Central Coalfields Ltd, Eastern Coalfields Ltd, Mahanadi Coalfields Ltd, Northern Coalfields Ltd, South Eastern Coalfields Ltd and Western Coalfields Ltd. Analysts said coal companies may garner investor interest in the near term because of red-hot prices. However, the fuel’s long-term future appears bleak as environmental compulsions and strict climate targets may force investors to shun them. “Coal and other fossil fuels seem to be in favour now amid the geopolitical tensions and the supply constraints. But, in the years ahead, investors are unlikely to buy these shares. Both foreign institutional investors and domestic corporates are slowly moving away from investment in fossil fuel-based companies
Coal India to source more from medium-term tender, scraps short-term import bid
Coal India Ltd has cancelled its short-term tender for which Adani Enterprises Ltd emerged as the lowest bidder and plans to source more coal through a medium-term tender which is offering the fuel at a lower price. The state-run Coal India issued a short-term tender that aimed at supplies for July-September in the current fiscal year and a medium-term bid for securing coal till mid-2023. This is the first time that India’s largest coal producer will import the fuel, as demand for electricity spikes. In June, the company floated international competitive bids to source coal for the short and medium terms. This included two international competitive bidding e-tenders for 3 million tonnes (MTs) each to source coal from abroad in the medium term, which had the option of increasing the bid quantity by 100 percent to 12 MTs. The last date for receiving the bids was July 5. Subsequently, PT Bara Daya Energy emerged as the winner of the two bids to supply a total of 6 MT by 2023.
Green clearances to 83 projects of Coal India: Government
Green clearances have been accorded to 83 mining projects of state-owned Coal India Ltd in the last two years, Parliament was informed. Environmental clearance granted for 60 proposals with an incremental capacity of 104.86 Mty (million tonnes per year). Stage-I forest clearance granted for nine proposals involving 934.96 Ha of forest land. StageII forest clearance granted for 14 proposals involving 2580.68 Ha of forest land, Coal Minister Pralhad Joshi said. The minister further said that 53 project reports, including expansion projects, have been approved by Coal India and its arm for building additional production capacity of dry fuel. "These projects will add additional capacity of about 278 Mty…and projected to contribute additional production of about 102 Mt by FY 24-25," Joshi explained. Work awarded for six Mine Developer and Operator (MDO) Projects with aggregate capacity of 96.74 million tonnes per year. Six first mile connectivity projects of coal handling plant (CHP), silos have been commissioned with an aggregate capacity of 82 million tonnes per year
With 36% Q1 sales growth,
Singareni aims for 74 MT coal production
TBuoyed by the record growth of 36% in the coal and energy sales during the first quarter of the current fiscal, Singareni Collieries Company Ltd (SCCL) is eyeing a record production beyond the target of 70 million tonnes with the management aiming for 74 million tonnes. In terms of production, the public sector coal company has mined 16.92 million tonnes of coal during the April-June quarter of 2022-23 against the target of 17.02 million tonnes. Last year, the production was 15.57 million tonnes in the first quarter. The dispatches of coal, however, crossed the target as they were at 17.3 million tonnes against the target of 17.02 million tonnes. Last year, they were at 16.7 million tonnes. the company has posted 8,670 crore sales during the April-June quarter this fiscal against 5,374 crore sales achieved during the same period in 2021-22. The growth rate was highest among all other public sector coal companies in the country during the first quarter, they claimed.
STEEL
India to double steel production in eight years to 240 MT: Union Steel Minister Jyotiraditya Scindia
Stating that steel plays a major role in the country's economy, newly-appointed Union Steel Minister Jyotiraditya said India's steel production will double from the current 120 million tonnes to 240 million tonnes in the next eight years. The middle and small scale industries also play a major role in the steel sector, accounting for nearly 50-52 per cent production through their nearly 3,000 units. I will ensure that the production of steel in the country will enhance by taking medium and small industries along with the large units”, he said. Scindia said steel plays a major role in industries like construction and automobiles.
Steel, sponge iron players scramble for coal supplies
India’s secondary steel-makers, including sponge iron mills, are scrambling to secure coal supplies after Coal India, the country’s largest coal miner, refused to give them assurance on renewal of supply contracts or provide a timeline for mine linkage auctions. Linkages and contracts for many are set to expire in July-August in the backdrop of the monsoons, a lean period for mining. Coal India has told some mills that it will not be renewing supplying contracts “for an indefinite period”. Mills can opt for single window auction for obtaining coal. Most mills are dependent on imports. Industry representatives say, the average stock available with them is to the tune of 15-odd days versus a normal 2-months of stock. CareEdge said share of coal despatch to sectors like cement, steel, sponge iron, fertilisers, textiles, chemicals, paper and pulp, etc declined, while volumes de-grew by around 8.7 per cent on a base of 17.8 million tonnes in FY22 to 16.3 mt during FY23 ( April to May).
Export duties on steel likely to go; levy on iron ore may be increased
The government is likely to cut or abolish the recentlyimposed export taxes on key steel products soon, while also raising the import on iron ore dispatches, sources told FE. The move comes amid concerns expressed by steelmakers that while domestic demand has remained muted in recent months, companies are losing out overseas customers due to the export taxes. Moving in to rein in input prices and control runaway inflation, the government on May 22 imposed an export duty of 15% on select pig iron, flat-rolled products of iron or non-alloyed steel, bars and rods and various flat-rolled products of stainless steel and another 45% on iron ore pellet. Similarly, the export duty on iron ores and concentrates was raised to 50% from 30%. According to an Icra report, the 15% duty covers products that accounted for 95% of the country’s finished steel exports in the last two fiscals and would render exports significantly less attractive going forward. Responding to the move, the average monthly price of hot-rolled coil (HRC) – a benchmark for flat steel – eased in May to Rs 69,800 per tonne from Rs 76,000 in April. The average price dropped further in June (when the first full-month impact of the export curb was felt) to Rs 62,000 and to Rs 59,800.
.Steel exporters’ tax burden may decline
The depreciation of rupee to 80 a dollar has lessened domestic steel firms’ export tax burden by a little over three percentage points and provided them with the leeway to increase capacity utilisation as imports will no longer remain lucrative for traders. However, since domestic steelmakers mainly use imported coking coal in the absence of local availability to fire their blast furnaces, imports of the raw material will become expensive. Industry officials said the costlier raw material will not have any significant impact on production cost immediately as the impact comes with a lag. One industry source said steel price, falling continuously since the first week of April, is unlikely to go up soon even as imports of both finished steel and coking coal will be getting more expensive. At best, this will help the industry to boost capacity utlisation level which currently stands at 80-85% and reduce their inventory level. Struggling to rein in inflation, the government had with effect from May 22 imposed 15% tax that covered around 95% of the steel export basket
CEMENT
Cement companies are girding for tougher times as rising fuel costs bite
The recent increases in cement prices are unlikely to translate into gains for the cement companies. Investors should be prepared for lower operating margins for cement companies like UltraTech Cement, Shree Cement, JK Cement and others in the July-September quarter. According to the latest report by ICICI Securities, cement prices in the northern and central regions of India are likely to be 9-10% higher in the second quarter of fiscal year 2023 compared to last year. East and west India may witness 6-7% increase in July-September, compared to last year, while the prices in south India may remain flat. Cement prices recorded an increase of 15-17 per bag in January-February across India, peaking at 390 per bag. The prices marginally reduced by 3 per bag in March. In the April-June quarter, all-India average cement prices were up by 25 per bag. The major cause for this price increase is the rise in fuel prices, which enhances the cost of cement production
Cement maker ACC's profit tumbles 60% in April-June, revenue rises 15%
Cement maker ACC, which was recently acquired by the Adani group along with Ambuja Cement in a $10.5-billion deal, reported a 60 per cent year-onyear decline in consolidated profit after tax (PAT) to Rs 227 crore for the quarter ended June 30, 2022. In the corresponding period last year, consolidated PAT stood at Rs 569 crore, its financial results show. Bloomberg consensus estimates had pegged net profit at Rs 296 crore and revenue at Rs 4,390 crore for the period under review. Consolidated revenue for the quarter grew 15 per cent year-on-year to Rs 4,468 crore, up from Rs 3,885 crore in the year-ago period. On a QoQ basis, the revenue grew marginally by 0.9 per cent from Rs 4,427 crore in the previous quarter. While profit declined by 42.6 percent from Rs 396 crore in the previous quarter. The company follows a JanuaryDecember financial year. The June quarter was impacted by a moderation in demand and prices as well as elevated costs of power and pet coke, sector analysts said.
. Betolar customers to produce 250,000t/yr of Geoprime concrete by 2023
Three new Indian concrete companies have separately secured agreements for the use of Finland-based Betolar’s Geoprime alkali-activated slag and fly ash additive. Reuters News has reported that the companies are Balaiji Cement Products, Shiv Tiles and SNEH Precast. Engineering company Godrej & Boyce has also signed a letter of intent with the supplier for pilot production of concrete blocks, paving slabs and other elements. Betolar expects producers to achieve global concrete production volumes of 250,000t/yr of concrete containing Geoprime by 2023
RAILWAYS & SHIPPING
Rlys freight grows 11% on year in June at 125 MT, gains from loading coal
Amid rising coal demand and efforts to diversify its freight basket, loading by the Indian Railways grew 11.3 per cent on year in June to reach 125.5 million tonnes (MT). With this, the national transporter has ferried 379 MT of goods and raw materials in the April-June quarter, witnessing a growth of 40 MT against the same period last fiscal year. “This growth has been fuelled by incremental loading of 13.19 MT in coal, followed by 1.68 MT in cement and clinker, 1.57 MT in balance and other goods and 0.64 MT in foodgrains,” the Ministry of Railways said. There has also been an increase of 7 per cent in freight leads, or the distance travelled for transportation of goods, which is a source of higher revenue for the railways. The net tonne kilometres (ntkm) for the month stood at 75.8 billion, growing by over 12 billion. Miscellaneous items (balance and other goods) also saw an increase of 17 per cent on year at 10.2 MT in June. These items mostly consist of finished goods, and railways has been vying to increase its share in this department. Currently, its freight basket remains dominated by raw materials.
. Oversized coal impacts freight costs, wagon turnaround time: Draft National Coal Logistics Plan
The draft national coal logistics plan has pointed out that oversized coal is leading to higher wagon turnaround, a scenario which analysts say is not just adding to freight costs but also exacerbating the coal supply crisis. “Oversized coal increases wagon turnaround, resulting in higher freight costs via demurrage. So, coal sizing is crucial and must be done properly. Additionally, on tipplers, such oversized lumps constitute a significant challenge when handling coal at power plants,” the draft plan recommended. The draft plan pointed out that the process of manually unloading one rake (58-60 wagons) takes about five hours. A rake typically has around 58 wagons and carries about 3,800-3,900 tonnes of freight. To make matters more complex, the wagons must be re-joined into a rake and freed from the wagon tippling area in a limited time scale with zero damage to them after being emptied one at a time. Furthermore, keeping the wagons longer than the time limit or causing damage due to inefficient operations results in a significant financial penalty for the corporation in the form of railway demurrages. Indian Railways suggested the Coal Ministry to focus on efficiencies by reducing the loading time at colliery sidings and to avoid loading over-sized boulders on rakes. Railways has already improved the WTR by 16 per cent during September 2021 to February 2022 and more efforts are underway to further improve the situation.
Shipping Ministry proposes coastal routes to move coal produced in eastern India
Shipping ministry officials said coastal shipping routes have been proposed to ease the congestion on railway lines and rake shortages during peak demand seasons. According to shipping ministry officials, the movement of coal from Paradip to other ports along the eastern coast is feasible considering the vacant capacity at ports in the region and proximity to power plants in southern India. A longer route of moving coal from eastern India to Gujarat is also being considered. This route was proposed by an Asian Development Bank (ADB) study commissioned by the Centre. According to ADB's estimates, certain thermal power plants have existing linkages with SECL, which is about 600 km from Paradip port. Shifting the linkage from SECL to MCL will reduce the first mile distance by 200 km from mine to load port. It will also reduce the total cost of coastal shipping, which will be lower than current rail cost from SECL. These changes can lower the cost of moving coal from east India to Gujarat Urja Vikas Nigam Ltd's Wanakbori power plant by Rs 200 per tonne. Similarly, other Gujarat/Maharashtra-based power plants in Gandhinagar, Ukai, Dhanau that have SECL linkages, can be evaluated for shift to MCL by adopting railsea-rail route.
