Steam (thermal) coal imports are projected to climb to 80-85 million tonnes (mt) this financial year, a jump of 60 per cent over the 50 mt in 2011-12 as power producers, chiefly NTPC, seek to overcome domestic supply woes.
NTPC, the largest power generation utility, is set to account for a fifth of the total projected steam coal import for 2012-13. The Maharatna company plans to import 16 mt, which is 33 per cent higher than the 12 mt imported in 2011-12.
“We have set a target to import 16 mt this year and placed orders for four mt. A couple of tenders are in the pipeline,” said an NTPC executive.
The company is increasingly banking on imports amid an uncertain domestic supply climate. It has been at loggerheads with Coal India Ltd (CIL) over contentious provisions in the fuel supply agreement (FSA), yet to be signed.
Coal availability for the domestic power sector has been pegged at 347 mt for the current year of which three-fourths is expected to be consumed by NTPC.
“The deficit in thermal coal is widening as indigenous supplies are uncertain. CIL is tweaking FSA rules and no power company in the country is having adequate coal inventory. In this situation, steam coal imports are only going to spike. In my opinion, steam or thermal coal imports by India will be in the range of 80-85 mt in 2012-13 compared to 48-50 mt in the year-ago fiscal,” said Ganesan Natarajan, president and chief executive officer of Ennore Coke, a maker of metallurgical coke.
On its part, CIL has agreed to provide 80 per cent of the annual contracted quantity to power consumers.
“Of the 80 per cent supplies, 65 per cent will be met by CIL through its own production, while the remaining 15 per cent has to be imported. But import modalities haven’t been fixed yet,” said a CIL source.
To fulfil its coal supply obligation to power firms, CIL has to import 18-20 mt.
Observers, however, feel, imports by CIL might not be viable for large consumers.
“Given the growing gap between demand and supply of thermal coal, import is expected to increase. But import of coal through CIL may not be economic for the large consumers who can import directly at cheaper rates and CIL is not experienced in coal imports,” said Pukhraj Sethiya, manager, energy (coal & mining) of global accounting and consultancy firm PricewaterhouseCoopers.
Analysts have also hinted at diversion of thermal coal shipments from South Africa to emerging economies like India and China amid subdued demand in Europe precipitated by the debt crisis in the Euro zone.
“Major imports of coal to Europe are from South Africa and Russia with some quantities from the USA. Thus, slowdown in the Euro zone may reduce demand of South African coal, which may be diverted to China and India though the impact on prices shall depend on the overall demand-supply situation,” said Sethiya.
Prices of thermal coal, however, are unlikely to be influenced even if India steps up its imports.
“Currently, the price level for steam coal in the international markets is in the range of $88-90 a tonne for standard traded quality. India accounts for less than 10 per cent of sea borne thermal coal trade and any additional imports may not impact prices significantly,” said Sethiya.
CIL’s targeted production this year is estimated at 464 mt, leaving a deficit of 137 mt.