Thermal coal imports may rise 9 per cent

The country’s thermal coal imports are likely to shoot up by 9 per cent this year on huge demand from planned mega power projects.

According to the latest findings by the Citigroup, thermal coal imports into the country may rise to 36.7 million tonnes in 2009 as against 33.7 million tonnes during last year.

The development assumes significance as coal shortage in India has affected output of many companies including the public sector aluminium major National Aluminium Company (Nalco).
 

Thermal coal imports
Year	Quantity (million tonnes)
2007	27.70
2008*	33.7
2009*	36.7
2010*	39.7
2011*	45.7
2012*	60.0
* Forecast

Meanwhile, government and private companies have proposed to add huge captive power generation capacity that requires coal as fuel. The power from burning coal is rated at 6,150 kilowatt hours per tonne which means, a tonne of coal will produce 6150 kilowatts for one hour.

The report estimates the current status of 31.5 giga watt (GW) total projects stands at 12-15 per cent of the capacity completed (operational), another 10 per cent in construction stage, and the remaining at financing and pre-financing stages.

In contrast to this slow progress, the government recently announced plans for the second-phase of the electricity crash programme, with another 11,000MW capacity planned (of which 7,000 MW coal-fired). This project may face similar issues as existing projects and therefore, a delay in completion (from the original target of 2018) is likely.

There is approximately 250 billion tonnes of coal reserve in the country of which 150 million tonne is extractible and 300 million tonnes is produced per annum. If the coal production is increased to 600 mtpa (million tonnes per annum) then it will be possible to meet the country’s coal requirement for some years.

The report estimates 17 per cent decline in coal prices this year to average at $70 per tonne from the current spot market at $80 per tonne.

Citigroup expects Indonesian coal producers to maintain their low production cost at the bottom-end of the cost curve. Indonesian miners delivered profitability even when coal prices were below $70/t in 2006-2007, and the current outlook should continue to translate into positive return potentials.

In the absence of price rises, non-price drivers such as volume delivery, evidence of cost reduction, and growth from acquisitions, could also drive price upside, albeit more limited.