Prices Of Imported Coal May Go Up

Consumers of imported coal, who had benefited from soft international prices during 1997-98, fear a five to 10 per cent increase in prices.

Cement manufacturers in Tamil Nadu and Gujarat, who had recently started using imported coal, expect the Indonesian crisis to trigger an increase in coal prices. Indonesia is a preferred source of coal compared to other sources including Africa and Australia.

International coal prices had fallen to $28-$30.5 from $34-$37 per tonne during 1997-98. But prices are now expected to increase by about $1 to $1.5," an India Cements official said.

"The Indonesian crisis could trigger a 10 per cent ($2.8) increase in international coal prices," L Muthukrishanan, vice-president, finance, in the Chennai-based Chettinad Cements said. Chettinad, which has traditionally used lignite and coal in a 70:30 ratio had changed its fuel ratio last year _thanks to imports becoming more attractive.

"We used 70 per cent of imported coal and only 30 per cent of lignite last year," he said. But with international coal prices tipped to go up, the pressure on margins could build up.

International coal prices are now hovering around $28 per tonne. The landed cost at this rate works out to Rs 1,650 per tonne. Though domestic coal is available at Rs 1,200 (ex-mines), cement manufacturers with access to ports prefer international coal because of their high calorific value. "Imported coal yields 6,500 kilo calories per kg, while the domestic variety gives only 4,400 kilo calories," Muthukrishnan said. The ash content in the imported coal is much lower and it also burns faster increasing efficiency of operations.

"Most cement plants in Tamil Nadu and Gujarat have almost completely shifted to imported coal," industry sources said. Besides the fall in international coal prices, the proximity to ports has also cut down frieght costs for plants located in these two states. Many cement plants, without access to ports have however continued with domestic coal.

The private sector had turned to imported coal in a big way after duties were progressively reduced from a peak rate of about 35 per cent. Besides cement, power and steel are the other major sectors which are large consumers of coal.