Domestic

India's coal stocks breach 100 mt as demand weakens in coronavirus crisis India's coal stocks breached 100 million tonne (mt) as power demand weakened, leading to lower coal sales since the outbreak of the novel coronavirus.

Coal India officials said the company continues to produce around 2.5 mt of coal daily, but less than 2 mt was dispatched to the power sector in the past 15 days which led stocks to pile up drastically in its pitheads. While the coal stocks in the Maharatna company peaked to around 60 mt, coal stocks in power plants rose to 41.41 mt – the highest ever inventory level in the country till date. Despite the overstock situation, coal output had peaked to a new high of 3.17 mt on 20 March 2020 - the highest ever single day production so far - overtaking the 3.14 mt production recorded on 25 March 2020. Before the Covid-19 outbreak in the country, around 4.5 mt of stocks was getting added every month on the average, however, in March 2020, the net stock addition is expected to be around 11-12 mt. In fact, during the first 15 days of this month, when the scare around Covid-19 surfaced, electricity consumption stood at 51 billion units (BU) which is 3.6 per cent lower than the demand in the same period in 2019.

According to data from Central Electricity Authority, the coal stock is enough for plants to produce power for 24 days without any supply from Coal India.

Coal India postpones year-end coal stock measurement amid COVID-19 spread

Coal India has postponed its annual stock measurement from April 1 to April 15, following advisory issued by the government and cancellation of train movement due to threat posed by outbreak of pandemic COVID-19. Every year, the company engages an external agency to take stock of inventory at some 360- odd mines operated by its seven coal producing subsidiaries. The exercise is related to ascertaining annual accounts of the company. This time, following spread of Coronavirus, the exercise will be completed on April 27. According to a notice issued by the company, physical stock measurement is to be completed within seven days, by April 22.

Reports will have to be submitted to subsidiaries by April 25 and final report has to be submitted to Coal India by April 27. Coal India is also working on the possibility of using drone to measure its inventory to accumulate data faster. The project was postponed as an initiative to stop leakages and strengthen the company’s balance-sheet. Over-reporting in production has an inflationary effect on the company’s earnings.

Centre Moves To Exempt Coal, Mining & Packaging Units & Their Transport Amid Lockdown

The home ministry issued fresh guidelines covering additional people and services which will be exempted from the 21-day lockdown. In the new guidelines, those people handling coal mining activities, inter-state movement of goods/cargo, cross-land border movement of essential goods including petroleum products, LPG and medical supplies are exempted. Along with these and customs clearance at ports, airports and land borders are also exempted. Earlier, in line with Prime Minister Narendra Modi's assurance to provide essential services and commodities amid lockdown, Union Minister Dharmendra Pradhan took stock of the supplies of liquefied petroleum gas (LPG), petrol and diesel to ensure their uninterrupted service. The Petroleum Minister's assurance is crucial amid the coronavirus outbreak as petrol and diesel are crucial for the transportation of essential goods and services across the country, while more importantly, LPG is extremely essential for cooking purpose.

The lockdown was announced by the prime minister in a bid to combat the coronavirus pandemic. As of date, India has reported over 650 confirmed positive cases of COVID-19. Meanwhile, twelve people have died so far due to the deadly virus.

Govt is asking states to stop thermal coal imports: Pralhad Joshi Asking states to stop thermal coal imports, the government in Rajya Sabha said that a lobby was active in some states that was behind dryfuel imports despite sufficient domestic stock. Replying to a query in the Upper House during Question Hour, Coal Minister Pralhad Joshi said India houses the fourth largest resources in the world yet thermal coals were being imported which should be stopped.

"There is no hesitation in saying that in many states some import lobby is also working. Though in last three-four months we have enough stock some of the Gencos are importing. This is the major problem," Joshi said. Making it clear that he was not politicising the issue, the minister said many states are importing thermal coal which is substitutable. "I have written to all chief ministers including of Madhya Pradesh, Uttar Pradesh, Chattisgarh, Punjab, Rajasthan, Maharashtra, West Bengal, Telangana, Jharkhand and Tamil Nadu requesting them to direct all Gencos to maximise the coal lifting and stop coal imports," he said.

imports. All thermal power plants have a stock of 23 days which is the highest ever in recent history, he added.

The minister cautioned states to utilise domestic coal on a priority basis as the present stock has a maximum life of 30 years.

Parliament passes law to open coal sector for commercial mining Parliament passed a bill that will remove enduse restrictions for participating in coal mine auctions and open up the coal sector fully for commercial mining for all domestic and global companies.

The Mineral laws (Amendment) Bill was passed in Rajya Sabha with 83 MPs voting in its favour and 12 against. The Lok Sabha has passed the bill. Replying after a brief discussion on the bill, Coal Minister Pralhad Joshi said the legislation will help in bring more FDI in the coal and mining sector, and boost economy. The minister said the bill was important as India should be using its own natural reserves, instead of importing coal worth Rs 2.7 lakh crore.

"We have to produce coal and reduce imports," he said adding more domestic output would lead to more electricity generation and also cut oil import bill. The minister also assured the MPs that the government will strengthen the state-owned Coal India Limited. "CIL will be strengthened. I have already given it a target to produce 1 billion tonne by 2023-24...There will be no problem in CIL,", Joshi said. According to the minister, the legislation will bring a "sea change" in the sector. Joshi said the stress should be on exploiting reserves without harming the environment.

India lockdown: Ports declare force majeure, ship operations go awry

India's three-week nationwide lockdown to contain the deadly coronavirus pandemic will delay both imports and exports of commodities such as crude, coal, iron ore, vegetable oils and refined energy products as several ports have declared force majeure, while shipping operations across its sprawling coastline are going awry. India was amid a two-week quarantine on all ships when the lockdown was imposed, and it comes at a time when the country was stepping up import of cheaper crude oil, whose prices are at multi-year lows, as well as coal and vegetable oil, in addition to exports of gasoil and jet fuel. Close to half a dozen ports inlcuding Krishnapatnam, Dhamra, Mundra, Tuna, Gopalpur, Karaikal and Gangavaram have declared force majeure, according to letters issued by the respective port authorities, copies of which were seen by S&P Global Platts.

While India's federal government has issued an order declaring the transportation of goods by water -- including loading and unloading -- an essential service, it has also permitted port authorities to declare force majeure. As a result, operations at several ports are badly hit, according to shipping sources.

RAILWAYS

Indian Railways set for big change! Cost of carrying freight to come down with Dedicated Freight Corridors Dedicated Freight Corridors Project boon for Indian Railways! The cost of carrying freight is likely to come down with the implementation of two Dedicated Freight Corridors! Recently, Railway Minister Piyush Goyal in a written reply

told the parliament that the Railway Ministry is implementing two Dedicated Freight Corridor (DFC) projects – 1,856 Km long Eastern Dedicated Freight Corridor (EDFC) from Ludhiana to Dankuni and 1,504 km long Western Dedicated Freight Corridor (WDFC) from Dadri to Jawaharlal Nehru Port Trust. Both the DFCs are targeted to be completed in phases by December 2021. Goyal said the overall physical, as well as the financial progress of these two corridor projects at present, is 70 per cent and 68 per cent, respectively, according to a PTI report.

On February 28, 2014, a concession agreement was signed between the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) and Railway Ministry, stipulating the modalities to operate the freight trains of Indian Railways on DFC network. According to the Railway Minister, the DFCs have been designed to run freight trains up to a maximum speed of 100 Km per hour with an axle load of 25 tonnes.

STEEL

Coronavirus: Steel ministry asks PSUs not to cut production The steel ministry held a meeting with management of PSUs under its control to take stock of the situation amid the coronavirus outbreak, and asked them not to reduce production. Steel Secretary Binoy Kumar chaired the meeting, via video-conferencing, in which senior officials of SAIL, RINL, NMDC, MOIL and KIOCL, among others, participated, sources said.

"They were asked about their preparedness at their plants and units in the wake of outbreak of coronavirus. They (PSUs) have been asked to produce as usual and not reduce production," one of the sources said. SAIL has implemented various preventive measures across its plants, units and offices to contain spread of the virus. Quarantine facilities and isolation wards have been prepared at SAIL hospitals. The company has restricted travel of its employees and the majority of the meetings are being conducted through video-conferencing.

At RINL, biometric attendance has been suspended. An isolation ward has been arranged with a quarantine facility at the Vizag plant. NMDC has asked its staff to work from home and the company's offices and buildings across the country are being sanitised. Besides special arrangements are also being made at its healthcare centres to deal with the virus. Large gatherings have been prohibited, entry of non-company staff is being scanned using thermal scanners.

Steel ministry wants states to ensure free movement of the alloy, inputs Even as the Centre and states battle Covid-19 with lockdowns and other steps to ensure social distancing, the Union steel ministry has urged state governments to issue suitable instructions to allow un-restricted inter-state movement of trucks carrying raw materials and finished steel in order to maintain an efficient supply chain. Steel secretary Binoy Kumar wrote to state chief secretaries arguing against imposition of any restrictions on the operation of steel plants, entry-exit of workers engaged in these plants, movement of raw materials like iron ore, coal, limestone, dolomite, ferro-alloys, scrap, sponge iron, and intermediate or finished products to and from such plants.

The steel industry is facing difficulties in terms of shortage of labour and raw material supply owing to social distancing norms being enforced in view of the Covid-19 epidemic. Industry sources said around 20 people are required both for loading and unloading a truck.

Steel companies might face tough competition as China raises steel export rebate to 13%

Indian steel mills are likely to face more competition from rivals across the border in China after Beijing sought to raise export incentives on the primary infrastructure alloy by a third to help cushion the impact of demand destruction at home and overseas. The Chinese move to raise export rebates to 13% from 10% for a large number of steel products might also prompt some Indian steelmakers to seek higher border tariffs if imports were to surge now. “Increase the export tax rebate rate of 1,084 products to 13%…includes steel products such as hot-rolled coil, wire rod, cold-rolled strip, hot-dipped galvanized strip and stainless steel strip,” showed an official letter from China’s ministry of finance and state administration of taxation, dated March 17. The extent of competition and impact on pricing depends on the inventory pile-up in China, while the import percentage of steel from China has been reducing, said Indian Steel Association’s assistant general secretary, Arnab Kumar Hazra. “Thus, we need to wait and see if the imports surge,” he said. Indian companies are more worried about Chinese prices getting even more competitive, affecting India’s exports.

“This move by the Chinese government will not just impact imports into India, but will have more impact on the international markets that Indians target, Many countries where we export might find China’s price cheaper. We need to focus on that,” said a spokesperson from ArcelorMittal Nippon Steel.

Govt spending pushes cement demand in Q4; manufacturers likely to earn this much on price hike The demand for cement – a major product used in infrastructure building – is expected to increase in the ongoing quarter. There has been an improvement in demand conditions from November 2019 in most parts of India. “Cement stockists believe that demand improvement has been led by improved government spending after a decline in the first half of the current fiscal,” said a report by Emkay. As per core industries data, cement production grew by 5 per cent on-year in January 2020 and we expect the same production growth in February, too, the report added. However, a high base of the last year and some impact on construction activities due to Covid-19 may restrict March 20 volume growth, which may lead to a 4-5 per cent on-year decline in the month, it further added.

The Rs 100 lakh crore spending to give infrastructure push has also played an important role to provide cushion to the weak cement consumption. Finance Minister Nirmala Sitharaman had unveiled Rs 102 lakh crore of infrastructure projects that will be implemented in the next five years as part of the government’s spending push in the infrastructure sector. The increase in demand has also brought an uptick in cement prices. It is expected that average trade prices pan India are set to improve 1.5 percent on-quarter in Q4. Meanwhile, the demand for cement in India had been benign in recent months due to weak economic activity. Also, the industry is producing far less than its installed capacity. In the last fiscal the overall cement production was 337 million tonnes, compared to the full capacity installation of 537 million tonnes, according to the data provided by Commerce Minister Piyush Goyal, in reply to a question in Lok Sabha.

CEMENT

Cement makers’ profitability to remain healthy next fiscal at 20%: Crisil

next fiscal on an expected recovery in demand driven by infrastructure and affordable housing, stable realisations, and benign input prices. This fiscal, operating profitability is expected to touch a 7-year high of about 21 per cent, which translates to a 350-400 basis points (bps) onyear surge, according to a Crisil report.

Hetal Gandhi, Director, Crisil Research said: “Next fiscal, we anticipate volume growth recovering to 5-6 per cent from 0.5-1 per cent estimated for this fiscal. Demand growth in the infrastructure and affordable housing sectors on a lower base should support volume growth”. “These two sectors together contribute almost 35-40 per cent of cement demand in India,” Gandhi added. Cement prices are expected to remain stable in fiscal 2021 after high volatility seen this fiscal. The expected recovery in demand and high utilisation of clinker capacities at 78 per cent — because new capacity additions are skewed towards split grinding units – would restrict any steep decline in cement realisations, it said.

Crisil foresees input prices also remaining range-bound over the medium term, amid stable coal prices and downward pressure on crude oil and petcoke prices, though there could be short-term volatility. The high profitability this fiscal has been driven by an estimated 5 per cent growth in cement prices and softer input prices (lower petcoke and coal prices resulted in a 6-7 per cent decline in power and fuel costs. This has largely offset adverse movements and fluctuations in the prices of other inputs). This was despite slower demand growth during the fiscal, owing to lower spending by government departments and overall economic slowdown. weakness in demand due to the spread of the coronavirus is likely to reduce the power and fuel bill of cement manufacturers dependent on imported coal. The majority of Indian cement companies including Ultratech Cement, ACC, Ambuja Cement, Sree Cement and Prism Cement source around 70% of their coal requirement from abroad, while close to 30% is met from domestic coal.

As there are two components to usage of coal in cement manufacturing — power and fuel — industry experts and company officials are of the view that the drop in coal prices by 13% since mid-February and around 20% from its peak of $85 per tonne in May 2019 to $65 per tonne as of now will bring down the cost of electricity for cement companies dependent on coal-fired captive power plants, as well as the fuel cost for companies dependent on imported coal. This will positively impact the profitability of the firms as well. Ravi Soda, senior vice-president at Elara Capital, told FE, “Those cement companies that are 100% dependent on captive power plants fired with thermal coal for their power requirements, are likely to see their electricity cost drop by Rs43 per tonne in Q4FY20, while the fuel cost for companies dependent on imported coal, is expected to drop by Rs’95 per tonne of cement sold.”

Power, fuel bill of cement companies to fall 13% as coal prices decline The over 13% drop in coal prices in the last one month over worries stemming from an overall