CCAI Newsletter May-19 by Sheikh Murad

May, 2019 Price: 40/w h e r e s e r v i c e a n d d e d i c at i o n j o i n h a n d s

Vol. XLVIII No. 02 Published on : 28.05.2019

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Power plants in the country are maintaining healthy coal stock at present due to increa sed coal supply by CIL inspit e of soaring power demand in sum mer. Faster rake movement has reduced the coal crisis for No n-power Sector as well. Though domestic coal scenar io has improved, coal impor t from overseas market has grown in April compared to last year. Power Ministry expects that power sector may cut coal impor ts by more than 10 mi llion tonnes coal this year, procuring more coal from ind igenous sources. Power generators sourcing their fue l from overseas market are bei ng urged by CIL to buy high gra de domestic coal from CIL ins tead of sourcing outside. The tariff sop provided by CE RC may bring breather to the IPPs affected by procuring exp ensive impor ted or auction coa l in lieu of shortfall from long-t erm contracted quantity. The allocation of coal by CIL under Spot e-Auction has declined by more than 30% in 2018-19. The miner may offer 60-70 million tonnes of coa l in Spot and For ward e-Auct ions in this financial year which is little lower than last year. As the international coal prices are decreasing and CIL is kee n to increase supplies of contra cted quantity, it is expected tha t premiums on auctions may rem ain soft in 2019-20. Non-power Sector may also be offered an additional 7080 mt of long term supply con tracts through auctions which would soften the demand in the auction market and reduce pressure on Spot Auctions.

Though market trend is pointi ng towards strong coal demand from Asian countries but as a key policy, coal is losing its shine globally in search of cleaner alternatives. Happy reading......

4 | CCAI Monthly Newsletter May 2019

Content Vol. XLVIII No. 02 May, 2019

Official Organ of the Coal Consumers’ Association of India. Disseminates News and Views on Coal and all other sources of Energy. 4, India Exchange Place - 7th Floor Kolkata - 700 001 Landline : +91 33 22304488 / 22621516 E-mail : sec.ccai@gmail.com Website : www.ccai.co.in

06 Consumers’ Page 08 Power

Editor : Subhasri Nandi Annual Subscription Rs. 400/(including postage)

12 Domestic

MO/DD to be made in favour of “Coal Consumers’ Association of India” CCAI do not necessarily share or support the views expressed in this Publication.

16 Global

20 |Monthly Summary Of Domestic Coal Monthly Summary Of Imported Coal & 22 | Petcoke

24 |Overall Domestic Coal Scenario 25 |Energy Generation Report And Offtake Performance 26 |Production Of Cil And Subsidiary Companies CCAI Monthly Newsletter May 2019

CONSUMERSâ&#x20AC;&#x2122; PAGE Present Coal Scenario CIL has produced 46.59 million tonnes of coal in May 2019 registering a decline of 1.1% compared to the same month last year. The miner produced 47.12 million tonnes coal in May 2018. Coal offtake during May 2019 fell about 1.4 percent to 52.09 million tonnes as compared to 52.81 million tonnes in the same month of 2018.

Consumersâ&#x20AC;&#x2122; Concern 1. Coal Stock Position Power plants in the country are maintaining healthy coal stock. Hardly any power plant in the country is in critical or supercritical coal stock situation of late. Increased coal supply has reduced the coal crisis for Non-power Sector as well though huge number of rakes are still pending.

2. Coal Quality issues Inspite of best effort and continuous monitoring done by CIL & Subsidiaries, coal consumers are still facing the problem of quality variance in the grades allocated to them from Subsidiary Coal Companies of CIL. Though the quality has improved compared to the previous condition, consumers have expressed discontent over the grade variance mainly from ECL, BCCL, Garjanbahal & Samleswari OCP of MCL, Chirimiri sidings & Mahan II OCM of SECL and Magadh & Amrapali mines of CCL. Therefore, coal consumers have requested the Coal

06 | CCAI Monthly Newsletter May 2019

Controller, CIL & its Subsidiaries to kindly intervene into the matter so that actual grade of coal may be received as per the contracts from the said sources.

3. Request to formulate suitable methodology and implement the approval of MoP regarding Nonlapsing of short supplies of coal to Power Plants in the lapsable category Power sector consumers have requested Coal Ministry, Railway Board and CIL for formulation of suitable methodology and implementation of the MoP approval (notice dated 08.03.2019) regarding Non-lapsing of short supplies of coal so that these consumers can maintain safe coal stock level at their plants and eventually be prepared for such difficult situation in future as well.

4. Non-receipt of Referee Analysis Report and reconciliation from CCL & NCL and request for formulation of a suitable policy for all Subsidiaries

Consumers procuring coal from CCL & NCL have not received Referee Analysis Reports since long. Though they have already deposited the required amount to the Referee Laboratory for analysing the samples they have challenged but due to non-receipt of analysed reports entire reconciliation procedure is held up at the Subsidiary Coal Companies. Therefore, they have requested CCL and NCL to clear the bottleneck at the earliest and also requested CIL for formulation of a suitable policy so that such situation does not arise in future.

5. Short receipt of coal from Pandaveswar Area of ECL Power Sector consumers have communicated their grievance regarding short receipt of coal from Pandaveswar Area of Eastern Coalfields Limited in the tune of 5 to 6 %.

6. Request for conducting Exclusive and Special Forward e-Auctions from WCL Due to shortfall in FSA coal, consumers are highly dependent on purchase of indigenous coal from different auctions. Though other subsidiaries are conducting auctions for their customers but WCL has not been able to commence the same.

Subsidiary Coal Companies to extend the exemption in advance payment of coal value from April 2019 onwards. Except SECL other Subsidiaries have not provided the said relief so far. Therefore, industries have requested Subsidiary Coal Companies for extension of exemption pertaining to advance payment from April, 2019.

9. Framing of policy for making coal available in case of non-availability of contracted grade of coal from both the primary and secondary sources Industries under Non-Regulated Sector are adversely affected due to non-availability of contracted grade of coal from both the primary and secondary sources. Therefore, they have urged CIL for making necessary amendments in the existing and future Fuel Supply Agreements (FSAs) so that coal can be made available from other available sources based on mutual consent in case of non-availability of contracted grade of coal from both primary and secondary sources.

Hence, consumers have urged WCL to conduct Exclusive and Special Forward e-Auctions for both Power and Non-power Sectors including CPPs so that they can fulfil their production target.

7. Non- availability of coal at Dipka mines of SECL Though consumers have already deposited coal value for their allotments from Dipka mines of SECL but they are unable to procure coal from the said mine at present as coal is not supplied to other consumers except one since long may be due to less production from this particular mines. Considering the situation, consumers have requested to deliver their allotted quantity or deposited amount may be refunded at the earliest possible.

8. Request for extension of exemption in advance payment of coal value Due to pendency of coal rakes, CIL has advised its CCAI Monthly Newsletter May 2019

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POWER India’s power production to grow Govt ready with scheme to auc5-6% in FY20 on new household tion PPAs linked with coal supdemand plies Power production in India is expected to grow by five to six per cent during FY 2019-20, riding on improved demand from newly connected households. Fresh demand from the new grid connected households will kick in during this fiscal. The country’s total power production grew by 5.1 per cent to 1,375 billion units in FY19 against 5.3 per cent rise in FY18. The power produced by renewable sources surged by 25 per cent in the last fiscal compared to 21 per cent growth in FY18. The key improvement in fundamentals for the sector has been achievement of 100 per cent electrification of households across India in FY19 under Pradhan Mantri Sahaj Bijli Har Ghar Yojana or Saubhagya scheme. For thermal power (both coal and gas) plants across India, PLF (plant load factor) improved from 59.9 per cent in FY18 to 61.1 per cent in FY19. The growth of power produced by thermal plants slowed down to 3.4 per cent in FY19 versus 4.3 per cent in FY18.

08 | CCAI Monthly Newsletter May 2019

The government has readied a scheme to auction power purchase agreements (PPAs) with attached coal supplies from Coal India. The auction of shortterm PPAs with coal supplies is expected to help some of the about 10GW power plants idling due to lack of fuel and power contracts. A senior government official said the auction framework has been prepared with likely allocation of about 12 million tonnes in annual commitment from Coal India Ltd (CIL). “In the proposed auction scheme, the bidders will be informed about the availability of coal supply from the various CIL subsidiaries and mines. Tariff-based competitive bids will be invited from companies based on these inputs,” he said. The official said bids will be invited for 2,500-MW power supply capacity for three years. The proposal is third in a row of such schemes auctioning power purchase agreements. However, the previous two rounds did not have attached coal supplies. The power ministry kicked off the scheme to salvage stressed assets idling due to lack of PPA opportunities.

‘Tariff relief is positive for power firms facing coal supply shortfall’ Power regulator CERC’s move to allow a tariff relief to independent power producers (IPP) affected by domestic coal shortfall is positive for the power generation segment, rating agency ICRA said. The Central Electricity Regulatory Commission (CERC), in its order on May 16, approved a tariff relief for coal-based power project of GMR Warora Energy arising from the use of imported / e-auction coal in lieu of shortfall in supply of domestic linkage coal under the fuel supply agreement (FSA) signed with Coal India. This is with respect to the power purchase agreements (PPAs) signed by the company with Maharashtra State Electricity Distribution Company Ltd and Electricity Department, Union Territory of Daman and Nagar Haveli. ICRA said the order will enable resolution for affected domestic coal-based IPPs aggregating to 14-15 GW having long-term PPAs with state distribution utilities and facing coal supply shortfall.

Centre looking to ‘insulate’ discoms from payment delays With state-run electricity distribution companies (discoms) missing key targets of the UDAY scheme, the government is looking at options to “insulate” these entities from the risk of delayed payments from bulk consumers such as local bodies and state government departments. Power ministry sources said that “these receivables of discoms are almost one and a half times their outstanding payables to generating companies”. Discoms’ dues to power producers stood at `38,023 crore at the end of FY19, up 59.8% from a year earlier, and 65% of these were “over-dues” with a payment default of 60 days or more. According to an internal power ministry note, the central government’s plan to reduce the exposure of discoms from irregular payments include “installation of solar panels, and installation of prepaid meters on government buildings progressively”. It is also banking on the Kusum scheme, which envisages

solarising agricultural feeders, to receive payments from state governments on time. “State government resources for subsidising agricultural electricity are likely to get freed up for electricity payments by the state government departments,” the note added.

Solar panel subsidy: Schemes and detailed process of getting loan from NABARD India is the world’s third largest electricity producer, yet some parts of the country still don’t receive ample electricity. There are a number of cities, towns and villages that experience power cuts on a daily basis which causes a lot of inconveniences. That is why people are starting to realize the importance of alternate sources of electricity. In this case, solar energy can be regarded as a trusted source. In fact, with a view to promote the generation of electricity using solar energy, the Government of India launched the Jawaharlal Nehru National Solar Mission in the year 2010. It also has the objective of supporting domestic production of critical raw materials and products to achieve grid parity by the year 2022. According to the priority list released by the government in January 2016, for processing subsidy claims, schools and public institutions are on the top while residential projects are on low priority. Thus, it gets very difficult to obtain a subsidy for residential projects. But there is a solution.

Falling module prices help solar developers absorb shock due to rupee depreciation The heavily import-dependent solar industry has warded off any adverse impact of the falling rupee as the steep reduction in global module prices offset the cost increase attributable to the currency depreciation. During the past one year, the rupee has fallen by about 5% against the US dollar while the module prices were down by 33% to around 21 cents per watt. So, while solar cell imports recorded an increase of 25.7% in the first eleven months of FY19, the value of imports fell 40% year-on-year (to `12,050 crore) in the same period. According to an analysis by Crisil, every 10% drop in the rupee, the cost of setting up a solar power plant CCAI Monthly Newsletter May 2019

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increases by `30 lakh per MW, assuming other factors remain unchanged. Yet, bidders continue to remain aggressive, with the weighted average solar bid tariff in calendar year 2018 remaining at `2.73/unit (vs `3.01/unit in 2017 and `5.01/unit in 2016). Falling module prices have also cushioned the impact of the 25% safeguard duty levied on the import of solar cells – the basic ingredient needed to manufacture solar panels. The duty would be 20% for the next six months till January 29, 2020 and 15% in the subsequent six months.

Tamil Nadu discom to halt wind and solar auctions One of India’s biggest renewable energy producing states, Tamil Nadu, will stop conducting auctions for wind and solar energy projects following poor response to its tenders which set limits on tariffs. Instead, it will buy clean power from the Solar Energy Corporation of India (SECI) to fulfil Renewable Purchase Obligation, a senior state government official told ET. SECI is the renewable energy ministry’s nodal agency through which it holds wind and solar auctions. However, the response to the last two auctions conducted by its agency, Tamil Nadu Generation and Distribution Co (Tangedco), has been disastrous. Earlier this year it issued a 500 mw solar tender, setting a ceiling tariff of Rs 3 per unit, for which no bids were received.

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How distributed renewable energy could ease discom distress, improve power supply Distributed renewable energy (DRE) is over a US $100 Billion business opportunity for India, as per a report by Clean Energy Access Network (CLEAN). But harnessing any such potential requires unambiguous understanding of its role in country’s development ambitions. The discussion on relevance of DRE in India often gets clogged between its competitive vs complementary nature with respect to traditional means of providing clean energy access. Grid based electricity access to low income consumers remains a costly affair in India. Discoms continue spending capital for the non-paying segments, with low hopes for recovery. State-owned Discoms are expected to amass a mammoth outstanding debt of INR 2.6 lakh crores, at the end of current fiscal year. Consequently, due to suboptimal investment, longstanding concerns of consumers regarding poor service quality and infrastructure remain unalleviated. Industrial and commercial consumers have been resorting to buy power through open access in search of cost-effective quality power. Therefore, with reducing cross-subsidizing consumer base, the financial position of discoms seems exacerbating in future. Elseways, domestic consumers, especially in rural areas, cannot enjoy quality power due to low income levels.

CCAI Monthly Newsletter February 2019

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DOMESTIC CIL to offer 60-70 million tonnes coal in spot & forward auctions Coal India will offer 60-70 million tonnes (MT) of coal in spot and forward auction markets this year. Despite being a little lower than last year’s offerings, premiums on auctions are expected to remain soft as the company has decided to increase contracted supplies and international coal prices have started to soften. The dry fuel supplier has also decided to offer an additional 70-80 MT of long-term supply contracts through auctions to the non-power sector. This may additionally help soften demand in the auction market and reduce pressure on spot auctions, bringing down premiums. Last year, the company auctioned 76.42 MT through the spot and forward auctions. It included 49.28 MT through spot auctions and another 27.14 MT through the forward auction market. During the year, premiums fetched by Coal India on spot auctions were as high as 92% on an average, while premiums fetched for forward e-auctions for the power sector were 72% on an average.

Imports to halve as Coal India increases supplies to power plants 12 | CCAI Monthly Newsletter May 2019

Increased fuel supplies to power plants by Coal India may halve imports to 11 million tonnes this year, the power ministry has estimated. Power utilities that blend high energy coal from overseas market with low grade domestic variety, are being urged to substitute the imported part with high quality coal supplied by Coal India. In a late evening statement, Coal India said it is urging power generators to buy high grade coal from it’s mines instead of sourcing it overseas. The dry fuel supplier is offering state gencos of Tamil Nadu, a major coal importers, around 4.5 million tonnes of high energy content fuel from Eastern Coalfields Ltd. Actions are also on way for granting more long term supply contact through auctions. CIL is also making efforts to boost supplies to the power sector to reduce their dependence on imports for meeting increased generation demand.

India’s coal import rises 13% to 21 million tonnes in April India’s coal import increased by 13.4 per cent to 20.72 million tonnes in April compared to 18.27 million tonnes (MT) in the same last year, according to a report. Of the total imports during April 2019, non-coking

coal or thermal coal shipments were at 15.08 MT, according to provisional data by mjunction services. Imports of coking coal, used in iron and steel making, were 3.52 MT in April while metallurgical coke imports during the month were at 0.22 MT. Coal and coke imports during 2018-19 increased by 9.66 per cent to 235.35 MT as compared to 214.61 MT imported in FY2017-18, latest mjunction data showed.

Coal allocation by CIL to power sector drops 6 per cent in FY19 State-owned CIL allocated 27.14 million tonne coal to the power sector under special forward e-auction mechanism last fiscal, registering a decline of six per cent from the previous year. According to the latest monthly report by the coal ministry prepared for the Cabinet, Coal India (CIL) allocated 28.93 MT of the dry fuel to the sector in 2017-18. In March 2019, the allocation stood at 1.12 MT in comparison to nil in the year-ago period. Recently, a World Bank report said India is still facing challenges to meet its growing demand for power and reliable supply remains low in the country. Last year, CIL said it would put on offer a little over 45 MT coal under the special forward e-auction mechanism in 2018-19. In an attempt to reach out to its consumers, CIL had earlier announced a special forward e-auction calendar for 2018-19 to facilitate power plants to systematically plan the lifting of coal. Coal India accounts for over 80 per cent of domestic coal output. The PSU produced 606.9 MT coal in 2018-19 against 567.4 MT in 2017-18.

RAILWAYS

a buffer. There is a backlog of nearly 25,000 wagons to be supplied by private manufacturers, according to a member of the Railway Board, who did not want to be named. “Private wagon manufacturers are unable to supply the orders that we placed with them in the past. We are now in the process of issuing further orders. We have increased our manufacturing capacity in Indian Railways, which will produce over 4,000 wagons this year,” said the official. In 2018-19, Indian Railways loaded 1,216 million tonnes (mt) of goods, 55 mt more than the freight loaded in the previous year. Coal and coke contribute nearly 60 per cent of freight traffic, followed by cement and foodgrains. “The Railways is always at the receiving end. In this case, private manufacturers are unable to clear the backlog but the Railways is pulled up for not supplying adequate wagons. They should clear the backlog. There is no shortage of demand to move cargo, as Indian Railways estimate originating loading for freight business to increase to 2,165 mt by 2020,” he said. Indian Railways’ freight business is supported by five major bulk commodities - coal, steel, foodgrains, fertilisers and petroleum products, and moving containers handled by the Container Corporation of India.

Hit by rising costs, steel companies may go for price hike in June A cost push might lead to a rise in prices of flat steel products next month, say companies in the sector. “Iron ore prices are up by Rs 450 a tonne and coking coal by about 5 per cent over the last couple of months. There will be some impact on pricing,” said a primary steel producer. Mining companies raised ore prices by Rs 400-600 a tonne in February. Seaborne prices have been rallying due to a supply disruption in Brazil, a major producer. In the past two months, global iron ore prices have moved up by around $20 a tonne to $108 a tonne.

Indian Railways hobbled by delay in rolling stock supply by private firms

Coking coal cost for domestic blast furnaces in the fourth quarter of 2018-19 had seen increases of Rs 800 a tonne, compared to the earlier quarter, ratings agency Icra said in its April report. This had increased steel making cost by around Rs 630 a tonne.

Indian Railways has been adversely affected by the delay in supply of freight wagons by private manufacturers to replace old rolling stock and also create

If an increase does happen, it would be the second one in this calendar year. In February, there was a rise of around Rs 500 a tonne. Though small, the hike had stemmed the downtrend in prices since since November. CCAI Monthly Newsletter May 2019

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14 | CCAI Monthly Newsletter May 2019

STEEL

Steel industry stares at production disruption in 2020: India Ratings Domestic steel production would be significantly affected if there is delay in auction of mines which would complete 50 years of operations by March 2020, according to ratings agency India Ratings and Research (Ind-Ra). With around 60 million tonnes of actual production of iron ore from these mines likely to be disrupted, this would impact the credit profile of non-integrated steel players like JSW Steel, Rashtriya Ispat Nigam Limited and merchant miners. This could also trigger an increase in imports though given the high cost of importing ore, Ind-Ra said it does not expect import volumes to go up substantially. The license of about 288 merchant mines will expire by March 2020, out of which 59 mines are under operations, according to Ind-Ra’s assessment. A majority of these –some 59 mines -- are iron ore mines situated in Odisha and Karnataka with around 85 million tonnes of approved annual capacity. Ind-Ra said it estimates that around 60 million tonnes of the actual production of iron ore from these mines could be disrupted. “Considering that the auction process on an average takes three to six months to complete, a delay in initiating them until the latter half of 2019 due to the Lok Sabha elections in the country could affect the timely auction of mining lease,” the report said. Steel players such as JSW Steel, Rashtriya Ispat Nigam Limited and other steel companies, which are either under stress or referred to National Company Law Tribunal are expected to increase their production in 2020, Ind-Ra said. However, absence of domestic iron ore supply may make force them to increase import of iron ore mix, leading to a potential hike cost of production.

The domestic cement demand is likely to grow by eight percent this fiscal which may push the capacity utilisation to 71 percent from 65 percent in FY18, the report said. The growth in demand will be driven by a likely 18-20 million tonnes per annum (MTPA) of additional production capacity during the fiscal. The domestic cement production rose by around 13 percent between April 2018 and February 2019 as compared to six percent year-on-year growth in FY18, the rating agency Icra said in its report. “For FY20, we expect a demand growth of eight per cent and given the limited capacity addition, this is likely to result in an improvement in the industry’s utilisation to 71 percent in FY20 from 65 percent in FY18. Improved capacity utilization is likely to support the price uptick which has been seen since March 2019,” Icra senior vice president Sabyasachi Majumdar said. He further said around 18-20 MTPA of capacity is likely to get added in FY20.

Cement industry hopes to cut carbon footprint by 45% by 2050 Continuing its efforts towards sustainable development goals, the cement industry is keen on reducing its carbon footprint by 45 per cent by 2050. Adopting clean technologies and adhering to strict environmental standards, the sector is bracing for new challenges. Mahendra Singhi, President, Cement Manufacturers Association and MD and CEO, Dalmia Cement (Bharat) Ltd, said that under its Corporate Social Responsibility initiatives, the industry has adopted over 700 villages to support education, healthcare, sanitation and water supply needs. It has created green belts around cement plants, financed 25 colleges and established 225 primary and secondary schools. Speaking at the 15th Green Cementech 2019 summit, an annual conference organised by the Confederation of Indian Industry (CII) in partnership with the Cement Manufacturers Association (CMA), he said, “Many still think the cement sector is unfriendly to the environment, whereas, the reality is that it is the most energy-efficient sector in the world.

CEMENT

Cement demand likely to grow 8% in FY20: Report CCAI Monthly Newsletter May 2019

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GLOBAL China expects to hit 2020 coal cap targets; demand overshadows China expects to achieve its national coal consumption cap targets in 2020, but the country’s aggressive goals could be tempered due to solid demand from power, steel and petrochemical industries, a government-backed study showed. China is the world’s biggest source of greenhouse gases, and has pledged to bring emissions to a peak by “around 2030” as part of its commitments to the 2015 Paris accord. This would require coal consumption to be cut or replaced by renewable energy, but the growth of coal usage in the past four years has raised concerns over China’s ability to fulfill its commitment. China, also world’s biggest coal consumer, has aimed to reduce the proportion of coal in its energy mix to below 58% by 2020. Coal accounted for only 59% of China’s overall energy consumption last year, down 1.4 percentage points from 2017, while gas, nuclear power and renewable energy combined accounted for 22.1%, up 1.3 per-

16 | CCAI Monthly Newsletter May 2019

centage points. Last year, coal consumption in China grew by 34 million tonnes from a year earlier to 3.83 billion tonnes. Beijing has kept a target for coal usage at 4.1 billion tonnes by 2020..

China’s Power Producers Demands Coal Price Cuts Six major power producers in China called for aid from the Chinese government to lower the price of raw materials, including coal, to support China’s proposal to lower electricity prices for industrial and commercial users by 10% this year. China plans to lower the coal prices to answer the call and encouraged miners to lower the benchmark grade to below 600 yuan ($87) a ton. According to China Coal Resource, the spot price at Qinhuangdao port reached 634 yuan in March and it remained at its price despite an off-season for demand. The price is at 613 yuan on May 20. Market data showed that there is a decline in mainland-listed coal producers. Yanzhou is down 1.8% in Shanghai and the Shenhua dropped by 1 percent. Shaanxi Coal Industry Co. declined as much as 2 per-

cent. The benchmark Shanghai Composite Index is also down by 0.7%. China’s National Development & Reform Commission proposed to coal producers to reduce the costs of the raw materials in order for the power plants to deliver a cut to power prices. According to a source, the top economic planning agency wants to bring monthly contract prices down to a so-called “yellow zone” and is targeting benchmark coal with an energy value of 5,500 kcal/kg coal at less than 600 yuan.

50 US coal power plants shut under Trump Fifty coal-fired power plants have shut in the United States since President Donald Trump came to office two years ago, an environmental organization said. The Sierra Club counted 50 closures, along with 51 announcements of closure, since Trump was sworn into office in January 2017. The numbers are distinct because it sometimes takes years between an announcement and the actual shuttering. This week, the operators of two coal plants, one in Florida and the other in Utah, announced they would shut their doors within the next few years. In total, 289 have closed since 2010, comprising 40 percent of the US’s coal power capacity, while an additional 241 plants remain open.

Trump coal moves hasten but don’t increase emissions, say U.S. officials The Trump administration’s decision to lift a moratorium on coal sales from public lands could hasten the release of more than 5 billion tons of greenhouse gases, but officials concluded it would make little difference in overall U.S. climate emissions. That conclusion from the Bureau of Land Management comes after a judge ruled last month the administration had failed to consider the environmental

effects of resuming coal sales from public lands. Sales were largely halted in 2016 under President Barack Obama over worries about climate change. But the moratorium was rescinded by then-Interior Secretary Ryan Zinke soon after President Donald Trump took office, fulfilling a campaign pledge from the Republican. Critics said the Trump administration’s contention that resuming sales would have negligible effects on the environment was absurd given the scope of the federal coal program. About 40 percent of coal burned in the U.S. comes from federal leases, primarily in Western states including Wyoming, Colorado, Utah, Montana and New Mexico. Companies have mined about 4 billion tons of coal from federal reserves in the past decade, contributing $10 billion to federal and state coffers through royalties and other payments. In a report, the Bureau of Land Management analyzed applications from companies for coal leases totaling more than 2.5 billion tons of the fuel. Just over 5 billion tons of greenhouse gases would be produced by burning the fuel for electricity over the next 20 years, the agency said.

South Africa not ready to just ditch coal says energy minister Minister of energy Jeff Radebe assured delegates at the opening of the African Utility Week and POWERGEN Africa in Cape Town of South Africa’s commitment to safe and clean energy but reminded all that the country’s coal reserves cannot just be ignored. Radebe also told delegates South Africa’s long-awaited Integrated Resource Plan that is supposed to give the necessary clarity on the direction of SA’s energy future will be finalised “shortly”. Asked later in an interview what shortly means, he sidestepped the timeframe issue. The minister said the plan is still under discussion by Nedlac. Meanwhile Radebe’s comments regarding the future of coal was labelled typical ‘double speak’ by energy expert Ted Blom. In his keynote address Radebe told

CCAI Monthly Newsletter May 2019

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delegates although coal prices remain low, the high carbon content of coal has its own costs especially to the environment. Said Radebe: “The energy sector alone, contributes close to 80% towards total emissions of which 50% are from electricity generation and liquid fuel production alone.” The minister acknowledged a paradigm shift is needed to reach the emission reduction targets but argued this should not be to the detriment of communities.

Rising coal and gas costs push Australia electricity prices to record highs

18 | CCAI Monthly Newsletter May 2019

Electricity prices across much of Australia’s main grid rose to record highs in the first quarter of 2019, the Australian Energy Market Operator notes in its latest quarterly report, and it puts the blame on the record heatwave, rising coal and gas costs, and the rising cost of hydro power because of the drought. AEMO, in its latest Quarterly Energy Dynamics report, notes that the March quarter was the hottest ever – for temperatures across much of the country (see Figure 1 below), as well as for demand, and for wholesale electricity prices. In South Australia and Victoria, the average wholesale prices over the quarter were the highest ever, driven by high prices at demand peaks, but also the rising cost of “underlying energy”. In both Victoria and New South Wales, these “underlying costs” were the highest ever and the second highest ever in Queensland, Tasmania and South Australia.

With Best Compliments From:

Sharda Ma

( )

COAL MERCHANTS, IMPORTERS & HANDLING AGENTS INDIA SOUTH AFRICA INDONESIA SINGAPORE HONG KONG NIGERIA

UGF 1& 2, Kanchenjunga Building, 18 Barakhamba Road, New Delhi-110001, India P : +91 11 23354046/47 F : +91-11-23354047 E : corporate@shardamaa.com W : www.shardamaa.com

MONTHLY SUMMARY OF DOMESTIC COAL Comparative Price of Domestic Coal: Power/Non-power. *The price shown in the Chart below is without: (a) Surface Transportation Charges. (b) State specific taxes. (c) Coal company or area wise charges if any. (d) Evacuation Facility Charges INR 50 per tonne w.e.f. 00:00 of 20.12.2017 GCV (Kcal/kg) (Mid-value)

G3-6400-6700

G5-5800-6100

G7-5200-5500

G10-4300-4600

G11-4000-4300

G12-3700-4000

Basic ROM price (Rs./te)

3144/ 3144

2737/2737

1926/2311

1024/1228

955/1145

886/1063

Tentative Ex-Mine Price*

4447/4447

3941/3941

2932/3411

1809/2063

1724/1959

1638/1858

coal Coal India (CIL) plans to ramp up auction offerings by 14% during the current fiscal against the previous year when similar supplies declined 5%. It is expected to bring down premiums in the auctions market and offer respite to independent power, cement, sponge iron companies among others that depend on coal available through auction. Coal allocation under spot e-auction scheme declined by 37.7 % to 34.34 million tonnes in the last fiscal (2018-19). Fitch Solutions said India’s thermal coal output is projected to grow at an average annual rate of 4.3 percent by 2028. “In absolute volume terms, China and India will have the largest impact on the global coal market balance,” Fitch Solutions Macro Research said in a report. It further said the surge in Chinese imports that occurred over 2015-2017 as a result of dramatic domestic production curbs was a temporary phenomenon.

RAIL State-run Indian Railways transported 52.75 million mt of coal in April the first month of fiscal year 20192020 (April-March) registering an increase of 4.8% year on year, latest data released by the Directorate of Statistics and Economics showed. Of the total coal transported, 43.23 million mt comprised domestic coal, up 2.6% on year, while 9.52 million mt was imported coal, up 16% on year. Indian Railways has been adversely affected by the delay in supply of freight wagons by private manufacturers to replace old rolling stock and also create a buffer. There is a backlog of nearly 25,000 wagons to be supplied by private manufacturers, according to a member of the Railway Board, who did not want to be named.

20 | CCAI Monthly Newsletter May 2019

power Saddled with surplus power generation and lower demand from the utilities, the government is looking – Poor demand, fall in energy intensity choking coal. If the annual addition of thermal power capacity over the last few years is any indication, coal seems to be losing its mojo. In 2018-19, the country added only a fourth of the capacity it did in 2015-16. Capacity addition for the year fell short of the target (of 7,266 MW) by a good 20 per cent. And, by all counts, this trend is likely to continue in the near future. Average spot power price is unlikely to breach the Rs 3.50 per unit level in May on account of sufficient coal stock for thermal plants and enhanced supplies from clean energy sources, according to experts. “Despite higher peak demand of 178 GW, average spot power prices at exchanges would not be more than Rs 3.5 per unit during May because of better supplies particularly from clean energy sources like wind, solar and hydro. Besides, there is no shortage of coal this month for thermal power generation,” an industry expert told PTI. The power transmission system to evacuate electricity from 25,000 MW of solar and wind plants in western India will cost Rs 12,682 crore and will have annual tariff impact of Rs 2,156 crore in the first five years. The infrastructure would be built for 8.9 giga-watt (GW) solar generation capacity in Rajasthan, 1.5 GW wind and 2 GW solar plants in Gujarat and 2 GW wind and 1 GW solar units in Maharashtra.

CEMENT

Cement demand is expected to remain strong over the next two-three years. With strong improvement of 7% growth in demand during FY18 and sustained demand growth of 10% in FY19, it is strongly believed that all tailwinds are in place to give boost to the commodity’s demand in coming years. Further, sharp pricing recovery since February 2019 is likely to aid cement firms to report healthier operational performance in the current quarter as well as ensuing quarters

steel The Indian Steel Association (ISA) has raised concerns regarding import of steel from Iran with the Indian Banks Association (IBA). Surging steel imports from Iran routed via UAE were at predatory prices and a cause of concern for the industry, the association pointed out in a recent letter to the IBA. The price difference was around Rs 5,000 a tonne when compared to China, said sources. Apart from the IBA, the association has also raised it with the steel ministry and custom authorities. Domestic steel production would be significantly affected if there is delay in auction of mines which would complete 50 years of operations by March 2020, according to ratings agency India Ratings and Research (Ind-Ra). With around 60 million tonnes of actual production of iron ore from these mines likely to be disrupted, this would impact the credit profile of non-integrated steel players like JSW Steel, Rashtriya Ispat Nigam Limited and merchant miners. This could also trigger an increase in imports though given the high cost of importing ore, Ind-Ra said it does not expect import volumes to go up substantially.

CCAI Monthly Newsletter May 2019

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MONTHLY SUMMARY OF IMPORTED COAL & PETCOKE Coal Price Index COAL

(kcal/kg)

Monthly Price - FOB

Monthly Change (USD)

South Africa South Africa Australia Indonesia Indonesia USA

6000 NAR 5500 NAR 5500 NAR 5000 GAR 4200 GAR 6900 NAR

USD 66.07 USD 56.03 USD 61.10 USD 52.63 USD 38.63 USD 58.27

INR 4612 INR 3911 INR 4265 INR 3674 INR 2696 INR 4067

-3.44 -0.40 1.01 0.29 0.44 -1.20

PET COKE

Sulphur

India-RIL(Ex-Ref.) Saudi Arabia (CIF) USA (CIF)

-5% + 8.5% - 6.5%

Price INR 7800 INR 6227 ($89) INR 6506 ($93)

Exchange Rate

Change (Monthly)

USD/INR 69.806

0.43

Coking Coal Price: Semi Soft

Low Vol PCI

Mid Tier PCI

FOB Aus

Premium Low Vol CFR China

FOB Aus

HCC 64 MID Vol CFR China

FOB Aus

CFR India

FOB N China

217.16

209.80

184.03

195.43

94.90

125.08

124.03

324.80

310.40

South Africa: Minister of energy Jeff Radebe assured delegates at the opening of the African Utility Week and POWERGEN Africa in Cape Town of South Africa’s commitment to safe and clean energy but reminded all that the country’s coal reserves cannot just be ignored.

Australia: A crash in Australian thermal coal prices is raising fresh questions about the viability of a controversial $4 billion coal mine just a week ahead of a national election in which climate change is a key issue. Final approval of the Carmichael coal mine in Queensland, owned by India’s Adani Enterprises, should come in “a matter of weeks, not months” following nearly a decade on the drawing board, the company’s mining chief executive, Lucas Dow, told Reuters last month. But a 40 percent slump in benchmark Australian thermal coal prices since mid-2018 to a two-year low last month, points to tight profit margins and

22 | CCAI Monthly Newsletter May 2019

MET COKE 62% CSR

questions as to whether the economics will support the launch of the mine as soon as next year. Privately held Pembroke Resources won approval from Australia’s Queensland state to develop a $700 million coking coal mine, as it pushes to tap strong demand for the steelmaking ingredient in Asia.

Indonesia: Indonesia’s Ministry of Energy and Mineral Resources set its May thermal coal reference price also known as Harga Batubara Acuan, or HBA -- at $81.86/mt, down 7.87% on month and 8.6% on year, sources familiar with the matter said. Indonesia’s exports were dented as Russian cargoes made inroads into several coal-consuming Asian countries, according to Indonesia’s government officials. The ministry had set the price for April at $88.85/mt, and for May 2018 at $89.53/mt. Indonesian coal miners are finding it more difficult to attract lenders as prices fall and banks cut

their exposure to carbon-producing industries. Infrastructure and logistics company Titan Infra Energy and coal-mining contractor Bukit Makmur Mandiri Utama (Buma) has struggled to syndicate recent loans despite juicy pricing and rarity value.

USA: US coal production in 2019 will total 699.8 million st, the US Energy Information Administration forecast, increasing its projection 2.3% from April. EIA’s May Short-Term Energy Outlook shows 2019 production at agency’s highest forecast level since February, the last time it predicted US output above 700 million st. US coal production in 2019 would still be down 7.2% from last year’s output, according to the May STEO. US export coking coal prices are holding broadly steady, with supply ample but robust Asia-Pacific fundamentals making it challenging for buyers to push for discounts. The Argus daily fob Hampton Roads assessment for low-volatile coking coal is unchanged at $184/t. The daily fob Hampton Roads assessment for high-volatile type A (HVA) coking coal is also flat at $199/t, while the high-volatile type B (HVB) index edged down by $1/t to $162/t fob.

Pet Coke: Global seaborne petcoke prices were under pressure this week on weak demand, low coal prices and

increased domestic supply in India. In India, seaborne petcoke prices dropped this week as demand for Indian domestic petcoke gained traction, according to market sources. The global production of petroleum coke has been increasing in the last few years, this is due to the rising supply of heavy crude oils in the global market. The market for the petroleum coke is classified between the green coke and the calcined coke. Green petcoke is used as a fuel whereas calcined petcoke used as a feedstock for wide range of the products such as aluminum, paints, coatings and colorings, etc.

Shipping: Australia’s exports of coal to China from the Port of Gladstone jumped in April, and helped lift the port’s total volumes to a three-month high, data from the Gladstone Ports Corp. showed. The Queenslandbased port exported 1.44 million mt of coal to China during the month, the highest monthly total in 10 months. It was more than five times the 261,000 mt seen in April last year, and almost triple the 527,000 mt seen in March. This helped propel Gladstone’s total coal exports to a three-month high of 6.20 million mt, up 36% on year and 2% on month, GPC figures show ed. New Mangalore Port Trust (NMPT) has added a new facility for mechanised handling of coal at the port. Chettinad Mangalore Coal Terminal Pvt Ltd has executed the mechanised common user coal terminal project at a cost of Rs. 469.46 crore at New Mangalore Port.

CCAI Monthly Newsletter May 2019

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Overall Domestic Coal Scenario Coal Production (in MT) Company

April, 2019

April, 2018

% Growth

CIL

45.3

44.9

1.0%

SCCL

5.5

4.5

22.4%

Company

April, 2019

April, 2018

% Growth

CIL

52.4

51.0

2.6%

SCCL

5.6

5.8

-3.0%

% Growth

Overall Offtake (in MT)

Coal Despatch to Power (Coal and Coal Products) (in MT) Company

April, 2019

April, 2018

CIL

40.7

40.3

1.0%

SCCL

4.7

4.8

-2.3%

Company

Coal Qty. Allocated April, 2019

Coal Qty. Allocated April, 2018

Increase over notified price

CIL

2.95

3.39

69%

Coal Qty. Allocated April, 2019

Coal Qty. Allocated April, 2018

Increase over notified price

3.05

7.41

23%

Spot E-auction of Coal (in MT)

Special Forward E-auction for Power (in MT) Company CIL

Exclusive E-auction for Non- Power (in MT) Company

Coal Qty. Allocated April, 2019

Coal Qty. Allocated April, 2018

Increase over notified price

CIL

1.20

0.95

43%

Company

Coal Qty. Allocated April, 2019

Coal Qty. Allocated April, 2018

Increase over notified price

CIL

Special Spot E-auction (in MT)

24 | CCAI Monthly Newsletter May 2019

CCAI Monthly Newsletter May 2019

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6780

71.13

Source CEA

TOTAL

BHUTAN IMP

HYDRO

64.87

72.45

63.24

NUCLEAR

ACTUAL*

MAY-2019

1330000

6218

136932

44720

1142130

PROGRAM

278392.07

THERMAL