Domestic

COAL

Investment in global coal supply chain to hit $115 bn in 2022, led by China and India

At over $80 billion, China and India are anticipated to make up the bulk of global coal investment in 2022, says IEA. The investment quantum globally on coal supply chains is expected to grow by 10 per cent year-on-year to around $115.5 billion in the current calendar year, with China and India accounting for a major share. Coal shortages and power rationing in China in 2021 made energy security the main priority in near-term Chinese policy, and more than 350 million tonnes (MT) per year of new coal mining capacity was brought on stream in the second half of the year. India is also looking to increase domestic coal supply in the face of a squeeze in 2022 that increased the use of more expensive imported coal. IEA said that India, the world’s second-largest consumer and coal producer, is seeking to increase coal production as its energy needs grow and the government looks to decrease imports. Under the Indian government’s Coal Mines (Special Provisions) Act, merchant producers can sell coal at free-market prices outside CIL’s monopoly. The first auction for commercial mining blocks was awarded in November 2020, with 19 mines allocated, representing over 3 billion tonnes of coal reserves and a peak capacity of over 50 MTPA Centre receives 38 bids for auction of coal mines for commercial mining

The governmentWedsn said 31 companies, including JSW Steel, Vedanta Ltd, NLC India Ltd, Jindal Power and Bharat Aluminium Company Ltd, have submitted bids for 24 mines under commercial coal mines auctions. As many as 38 online and offline bids were submitted during the three rounds of auctions. The auction process for 122 coal/lignite mines was launched in March. The last date of submission of technical bids was June 27, 2022, except for 10 mines. Those 10 mines comprise Parbatpur Central coal mine and 9 lignite mines. The bids will be evaluated by a multi-disciplinary technical evaluation committee and the technically qualified bidders would be shortlisted for participation in the electronic auction. Post opening of the technical bids, the forum was opened for discussion and suggestions were invited from the bidders to make the commercial coal mine auctions more attractive for the industry. India’s Domestic Coal Production Up By 28% in May-end

India's domestic coal production continues to witness an increasing trend in the current financial year as well, following a record-breaking coal production of 777 Million Ton (MT) in 2021-22. The total domestic coal production in 2022-23, as on 31st May, 2022 is 137.85 MT, which is 28.6% more as compared to the production of 104.83 MT in the same period of last year. This trend is being maintained in June, 2022 also. The coal production by Coal India Ltd (CIL) is 28% more than the production in the same period of the previous year (as on16th June, 2022). Domestic coal production target for the current financial year is 911 MT which is 17.2% more than the previous year. Coal India Braced To Meet Power Sector's Demand, Says Chairman

Coal India Limited (CIL) Chairman Pramod Agrawal said that the company is ready to meet its part of committed dry fuel supplies to the power sector. His comments came as the monsoon season has already hit many parts of the country and he said that the company will also not spare any effort in pushing coal output. He stressed that building up dry fuel stock timely by electricity generating plants will be crucial. "Timely stock build-up by the power plants when coal is available will be crucial. We are gearing up to meet our part of committed supplies to power sector in the ensuing months. CIL is targeting to close the first quarter with 35 million tonnes incremental production compared to same quarter of last year," Mr Agrawal said. He said Coal India's pitheads are stocked with around 46 million tonnes of coal, whereas coal stock at power plants stands at around 24 million tonnes. CIL has registered nearly 29 per cent production growth during the first two months of current fiscal at 108 million tonnes over same period last year, the highest ever for this period. Concurrently, supply to power sector at 102 million tonnes grew by 16.7 per cent. Coal India to explore green mining technologies

The state-run coal major announced that it is exploring green mining options to minimize adverse environmental impact by leveraging a slew of ecofriendly technologies in its underground (UG) and open-cast (OC) mines. With land turning out to be a major pain point for expansion of coal mining operations these technologies bypass land acquisition and avoid its degradation. The locked up coal assets left out earlier due to techno-commercial and safety concerns can now be unearthed through these technologies, Coal India (CIL) said. CIL is aiming to mine coal through punch entry in those OC mines which have reached their ultimate pit level and is planning to deploy 10 high wall machines in its OC mines during the ongoing. Among mass production technologies, CIL will introduce 50 continuous miners by FY 2025 with peak production potential of 25 million tonne per year. 21 such machines are already deployed in ECL, CCL and SECL producing 9 million tonne per year. UG output is environmentally clean, minimally invasive on land degradation, society friendly. Around 70% of the country's coal reserves are conducive for UG mining. The aim is to make UG production sizably supplement the OC output. At current rate, mineable coal reserves at existing OC will slowly start lowering. Coal shortage hurting non-power sectors still year after supply shift

Since the coal demand-supply mismatch started in August last year, the major casualty has been the non-power sectors of steel, aluminium, iron, paper, cement, etc. as the Centre prioritised power units for coal supply. In spite of a significant increase in country’c coal production figures, in the past one year, the non-power sector has seen coal dispatch fall by 33 per cent. “The situation has just deteriorated and we are scrambling for options. Bigger players are importing coal which is costlier, but smaller ones do not even have that capital. The rate of coal in e-auction by CIL has also gone up due to increased demand,” said an executive of a steel company. While they are not being supplied coal under the allocated quantity as per the FSA, the coal companies are conducting spot e-auctions where the spot prices have scaled up to record high levels since March ’22, NRS consumers have pointed out. Along with the decline in coal supply, the share of non-power sectors in the coal transportation by the railways has also been reducing, the latest data suggests. Cumulatively, the demand for non-power units requires 500,000 tonne of coal every day. Executives said they were getting 350,000 tonne till March, but it’s not above 250,000 tonne now. Amid worst power crisis in 6 years,

India buys more Russian coal

Russia, which is under harsh Western sanctions as a result of its invasion of Ukraine, has significantly increased coal export to India in recent weeks as brokers offer discounts of up to 30%, according to Reuters. As per the international news agency, India’s purchases of coal and related items increased by more than sixfold in the 20 days in June compared to the same time a year ago, reaching $331.17 million. India bought an average $16.55 million of Russian coal a day in the three weeks, more than double the $7.71 million it bought in the three months after Russia's Feb. 24 invasion, according to Reuters calculations. Indian bulk buying of Russian coal is set to continue, with June imports expected to be the most in at least seven and a half years, Refinitiv Eikon ship tracking data showed. Bulk shipments of Russian thermal coal started reaching India in the third week of May, with orders mainly from cement and steel firms and traders, according to shipping data compiled by an Indian coal trader..

RAILWAYS & SHIPPING

Coal transport on KothagudemSathupally railway line to begin soon

Newly laid railway line from Kothagudem to Sathupalli would be made operational from May 20 for coal transportation from SCCL’s coal mines at Sathupalli, informed the company Director (Finance) N Balram. Speaking to media here on Tuesday he said the 55 kilometre long railway was laid at a cost of Rs 650 crore. Singareni Collieries Company Limited (SCCL) provided 70 per cent of the project funding and remaining by the railways. The first coal load from Sathupalli was expected on May 20. The railway line would stop coal transportation by road and around 600 trips of lorries that were transporting coal every day would be off road. It would reduce pollution, traffic and accidents. It was expected to produce 10 million tonnes of coal from Sathupalli. Public hearing for VK-7 OC was over and the coal production might commence in Sept or Oct. Environmental and forest clearance for the Naini project was given and production would begin in Oct. Public hearing for the Rompedu project at Yellandu was yet to be conducted, Balram said.

Centre waives import duty on some raw materials for steel industry

The government has waived customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry, a move which will lower the cost for the domestic industry and reduce the prices. Also, to increase domestic availability, the duty on exports of iron ore has been hiked up to 50 per cent, and a few steel intermediaries to 15 per cent, according to a notification. The import duty on ferronickel, coking coal, PCI coal has been cut from 2.5 per cent, while the duty on coke and semi-coke has been slashed from 5 per cent to 'nil'. The tax on the export of iron ores and concentrates has been hiked to 50 per cent, from 30 per cent, while that on iron pellets a 45 per cent duty has been imposed. Duty on pig iron and spiegeleisen in pigs, blocks, or other primary formats; flat-rolled products of iron or non- alloy steel, of a width of 600 mm or more, hot- rolled, not clad, plated or coated; Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold- rolled (cold-reduced), not clad, plated or coated, Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, clad, plated or coated have been hiked to 15 per cent from 'Nil' currently. Steel ministry in regular talks with railways, coal ministries for smooth fuel supply: Kulaste

The steel ministry is in regular talks with other ministries, including the railways and coal, to ensure smooth supply of coal to steel manufacturers, Union minister Faggan Singh Kulaste said. “We are regularly speaking to various states and ministries especially railways and coal,” he said, replying to a question related to coal supplies being impacted to steel plants. Integrated steel players use coal to run their power units which supply electricity for captive use, while secondary players make steel using Directly Reduced Iron (DRI). About 70 per cent of the DRI is made

using thermal coal, supply of which is in constraint in the country. On the rising prices of steel, the minister said the rates are market-driven and will calm down accordingly. As per industry estimates, rates of hot rolled coil are trading in the range of Rs 73,000-Rs 75,000 per tonne.

STEEL

Need to develop right ecosystem for secondary steel sector: Steel Minister

There is a need to provide the right ecosystem for the secondary steel sector and consumers, in a bid to achieve 300 million tonnes capacity by 2030, Steel Minister Ram Chandra Prasad Singh said. The Minister made the remarks while addressing a meeting of the manufacturers and consumers held in Surat, according to an official statement issued here. "The Steel Minister has emphasized the need of supporting and providing the right ecosystem for the secondary steel sector and and consumers to meet 300 million tonnes of steel capacity by the year 2030," the Ministry of Steel said. During the meeting, the Minister stressed that all these targets can be achieved only with the active participation of secondary steel producers and steel consumers. Besides other Ministry officials, representatives of South Gujarat Chamber of Commerce, stakeholders of secondary steel sector and steel consumers association of Gujarat attended the meeting. CIL to Supply 3.45 MT Washed Coking Coal to Steel Sector in FY 23

India has produced 51.7 Million Ton (MT) raw coking coal during financial 2021-22 which is 15 % more as compared to 44.8 MT during FY21. Domestic raw coking coal production continues to witness increasing trend in the current fiscal as well with production of 8.3 MT, as per the figures up to May 2022, which is 20% more compared to 6.9 MT during the same period of the previous year. Coal India Ltd (CIL) is planning to set up and operationalize nine more new washeries with a capacity of 30 MTPA. With setting up of new washeries, it is estimated that CIL will be able to supply about 15 MT of washed coking coal to the steel sector, thereby reducing the import of coking coal. CIL has planned to increase raw coking coal production from existing mines up to 26 MT and identified nine new mines with PRC of about 20 MT by FY 2025. Also, CIL has offered six discontinued coking coal mines, out of the total 20 discontinued mines, on an innovative model of revenue sharing to the private sector with expected PRC of about 2 MT.

Icra revises outlook on steel sector to stable from positive

Ratings agency Icra said it has revised its outlook on the domestic steel to stable from positive, mainly on the account mounting input cost amid low steel rates. After two back-to-back years of earnings surge, the steel companies are now staring at a significant decline in earnings over the next 12 months as the industry faces multiple headwinds emanating from trade barriers from export duty on finished steel, unprecedented coal/energy cost pressures, and muted domestic demand growth so far, Icra said in a report. The industry could therefore be on the way to an accelerated mean reversion as the operating environment becomes far less attractive in the coming months. In the current FY23, the operating profits of steel companies is likely to be lower by 40-50 per cent over FY22 levels. The consolidated operating profits per metric tonne for the four leading domestic steelmakers come down by around USD 110/MT in Q4 FY22 compared to USD 326/MT recorded in Q1 FY22, ICRA said. Adani Enterprises, 10 others show interest in coal import tenders of Coal India

Adani Enterprises, Mohit Minerals, Chettinad Logistics, two coal importing agencies from abroad including one form Indonesia are among the eleven coal importers to have shown interest in the bidding for coal import tenders led by Coal India (CIL). During the pre-bid meeting, the interest bidders requested amendments in narrowing the time window of the bid price validity from 90 days to 60 days. Among other requested amendments was fixing the time period for the supply of the first tranche of shipment, from the date of the letter of award, between 4 and 6 weeks. for the coal that lands on Indian shores, coal quantity assessment, and quality testing will have to be done through Coal India's empaneled third-party sampling agencies. CIL held a three-day pre-mid meeting from June

14 to June 17 with prospective coal importing agencies evincing interest in pitching in, in the three international competitive bidding e-tenders that the company had floated earlier in the month for import of coal. The overseas sourcing of coal by Coal India was as directed by the government. ‘Fleet operators may see 10-12% revenue growth this fiscal’

Fleet operators may see a 10-12 per cent revenue growth this fiscal as they are expected to continue adding to their fleets steered by higher demand from road-freight sectors and higher repayment due to elevated borrowing cost among others, credit ratings agency Crisil said. With strong freight demand, fleet utilisation will ramp up quickly on increased capacities. While interest rates have risen after the RBI hiked the repo rate, underlying demand will ensure fleet operators go for fleet additions, Crisil said. According to the ratings agency, even as fleet additions would increase debt and leverage, credit profiles will remain stable. An analysis of 45 large fleet operators rated by Crisil Ratings, representing a fifth of the industry by size, indicates the 10-12 per cent growth. Among these, large operators are likely to increase their fleet size by 12-15 per cent year-on-year this fiscal, which will be funded by a mix of external debt and accruals though higher debt will reflect in increasing leverage and toning down of debt protection indicators, they will remain adequate. Continued demand from freight-intensive sectors and higher fleet utilisation have reflected in 3-4 per cent higher freight rates on year. Railways looks at upgrading tracks near coal mines

The Indian Railways is eyeing a significant upgrade of track infrastructure near mines that will be focused on coal bearing regions for expeditious. The plan will also include setting up requisite infrastructure at mines before they are auctioned. The focus is on creating requisite infrastructure in coal and iron ore bearing regions of Bihar, Odisha and Jharkhand, officials say. The Railway Ministry has begun initial discussions with the coal and power ministries for upgrade of the existing infrastructure to address any possible increase in demand for coal. There is a view that a rail line should be provided wherever the output is estimated to more than one million tonnes per annum. In line with this approach, the South East Central Railway (SECR) zone has been tasked with developing 14 projects that are at sanctioning stage. These new lines will cover a distance of over 2985 track kms. Other key projects include the commissioning the first phase of the Angul-Balarampur link. The inner corridor of 14 kilometres (km) at Augul in the first phase followed by 54 km rail link of Balaram - Jarapada - Putagadia in the second phase. In a bid address a key issue of rake shortage, the Indian Railways recently awarded contracts for manufacturing 63,116 wagons against a demand of 90,000 wagons.

Why medium-term steel demand will continue to be robust? Care Edge Research explains with 5 important factors

The medium-term steel demand will continue to be robust due to the government’s infrastructure push and increased investments amid an overall rebound in the Indian economy, a credit rating agency CareEdge Research pointed out in its June report. The steel industry’s production and consumption grew by 18.1 and 11.4 per cent, respectively, on a year-on-year (YoY) basis in FY22, the report stated. Besides, steel exports remained robust for the third straight year and increased by 25.1 per cent during FY22 against 29.1 per cent growth in FY21. “International factors such as environmental concerns surrounding China’s steel industry, an uptrend in global steel prices and higher demand from European nations led to the increased shipments from India,” CareEdge said. An increase in allocation of capex by 36 per cent YoY at Rs. 7.5 lakh crore in Union Budget 2022-23, infrastructure push towards seven engines (roads, railways, airports, ports, mass transport, waterways and logistic infra), approval of Production Linked Incentive (PLI) Scheme for specialty steel, Pradhan Mantri Awas Yojana (PMAY) scheme, Jal Jeevan Mission may turn out to be 5 driving factors for India’s Steel production. India’s rush to avoid blackouts leaving iron firms without coal

Sponge iron producers in India are raising concern as fuel supply contracts won’t be renewed as the nation’s state-run coal miner continues to prioritise power plants in an effort to avoid blackouts. Supplies from

Coal India Ltd for some producers are scheduled to end from August, which means the companies will be forced to rely on vastly more expensive imported fuel. The producers in Chhattisgarh have appealed to the state miner to renew their pacts and are seeking talks with Coal Minister Pralhad Joshi. Coal India plans to follow the policy to auction supply contracts, it said in a response to requests for comment. The company did not specify when any new auctions will take place. The state miner is under pressure to boost stockpiles at power plants during the current monsoon season, which typically disrupts coal production and transport. Coal accounts for 70 per cent of India’s electricity production and efforts to prevent any disruptions are coming at the cost of industrial users. Govt to reduce tax burden on investors in non-coal blocks: Cascading of royalty to be removed

The Union mines ministry is considering a proposal to exclude royalty and other levies from the average sale price (ASP) of non-coal minerals such as iron ore, limestone and bauxite to encourage investments in the sector. The idea is to avoid cascading of taxes, that is levy of tax on tax. Royalty is currently being paid on ASP, which already includes royalty in a range of 2-20% and a clutch of other levies including payments towards the district mineral fund (DMF) and national mineral exploration trust (NMET). According to the proposal, royalty and other levies will not be part of the ASP, but will apply on it. Bidding for non-coal minerals take place on the basis of the revenue to be shared with the government by the investors/miners as a percentage of ASP. Whoever offers the highest revenue share gets the block.

CEMENT

Aggressive capacity expansion by large cement makers to impact smaller players, lead to consolidation

Aggressive capacity addition by large cement makers at a rate outpacing demand may lower industry-wide utilisation, possibly squeezing smaller players and further pushing consolidation in a freight-intensive sector where regional distribution reach is crucial for market dominance. Large manufacturers, such as UltraTech Cement, Ambuja Cements and ACC, have better bargaining power given their scale which helps them achieve lower cost of production compared with smaller rivals. Experts believe that a rapid expansion in manufacturing capacity by large cement makers will further tip the scales in their favour. The top five cement players have added 81.5 MTPA by way of capacity between FY18 and FY22, according to data from CRISIL. Their market share has increased from 50% to 55% during this period while their average capacity utilisations levels have also improved. Experts believe new capacity addition by leading cement makers will accelerate further over the medium termThe growth in new capacity is expected to outstrip growth in demand.This (capacity addition) will outpace demand growth, causing industry-wide utilisation to drop towards 65% from close to 70% we estimated in FY22. The decline in utilisation levels and subsequent margin erosion is expected to be steeper for smaller players. India's top cement maker paying for Russian coal in Chinese yuan

India's biggest cement producer, UltraTech Cement, is importing a cargo of Russian coal and paying using Chinese yuan, according to an Indian customs document reviewed by Reuters, a rare payment method that traders say could become more common. UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million). Two trade sources familiar with the matter said the cargo's sale was arranged by SUEK's Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments