Indian coal Imports shoot up by 50% in 2011

India’s coal imports have shot up by nearly 50 per cent in the past five months in the face of domestic shortages, forcing Coal India (CIL) to say ‘no’ to new customers in the current fiscal. “After accounting for the existing commitments and the quantity to be offered under e-auction, the net coal quantity available to…New consumers would be minus 11 million tonne [this fiscal],” a source quoting CIL Chairman NC Jha said.

Jha had made this observation at a recent meeting chaired by Coal Minister Sriprakash Jaiswal to review the coal distribution policy. Coal imports between January and May went up by nearly 50 per cent to 44.7 million tonne, according to data compiled by industry portal ‘mjunction Services’. Imports were 30 million tonne in the same period last year.

In his presentation before the meeting, also attended by senior officials of steel and power ministries, Jha had painted a dismal long-term outlook. “If all the LoAs (Letter of Assurances) which have been issued fructify, the negative coal balance would range from minus 157 million tonne to a level of minus 254 million tonne during 2020-21,” he had said. Demand supply gap for CIL would be 137 million tonne in this fiscal against 69 million tonne in 2010-11.

The coal firms, including CIL, had been unable to achieve their planned production targets due to various constraints like delay in obtaining environmental and forestry clearances, land acquisition and local law and order problems.

Coal India deal with Peaboy awaiting Govt response

Coal India Ltd's plan of picking up a 15% stake in US-based firm Peabody Energy's 600 million Australian dollar mining project in Australia may get delayed, as the coal major is awaiting the government's response on certain issues pertaining to the deal.

"It (the deal) will take some time as there are certain issues -- like the company should be listed -- related to the deal, which Coal India has referred to the government. After getting a response from the government, the decision would be taken," a top official in Coal India told PTI

Both the companies are mulling the formation of a joint venture company (JVC) to implement the project at the Wilkie Creek coal mine, in Queensland, Australia, owned by Peabody.

The US-based firm will have an 85% holding in the JVC, while the rest will be owned by Coal India Ltd (CIL).

The proposal had come up for discussion in a Coal India Board meeting held last month, wherein it was decided to refer the same to the Coal Ministry for certain clarifications.
    
"The Coal Ministry had earlier said that acquisition of the property in the overseas market will be confined to listed companies so that the there is not much problem during the valuation of the deal," an official in the Coal Ministry had earlier said.
    
However, since the proposed company would not be listed, "The board had said to refer the proposal to the government seeking clarifications whether Coal India can go ahead with the deal if the principal (Peabody) is listed," the official had added.
    
Earlier, CIL had said it was likely to buy up to a 15% stake in Peabody Energy Corp's Australian assets in early 2011-12 for an estimated $100 million (about Rs 450 crore).
    
Peabody Energy is the world's largest private sector coal company, with sales of 246 million tonne (MT) in 2010. The company claims to have 9 billion tonne of reserves and manages and owns an interest in 28 mining operations in the US and Australia.

Coal India to do away with compulsive Fuel Supply Agreements (FSA)

The widening demand-supply gap and depleting production of Coal India Limited has compelled the coal ministry to overhaul the national coal distribution policy. If the ministry has its way then soon a new distribution policy would be in place to serve the comprehensive coal linkage needs of core and non-core sectors by introducing adequate flexibility in coal supply to meet the growing demands of these sectors and promote energy security.

After a meeting with senior officials from coal, power and other ministries today, coal minister Sriprakash Jaiswal told The Indian Express that the distribution policy, which was over three years old needed to be re-shaped as due to ever-growing demand of the mineral from the power sector, it has virtually become impossible to provide additional coal to other sectors. Due to the negative balance of coal, the Standing Committee on Linkage for steel and cement could not be convened for the past three years, he said. This was also the reason why CIL’s policy for non-SLC (LT) category of consumers could also not be notified so far.

The existing policy mandates coal companies to meet 100 per cent requirement of defence and railway sectors at notified price, while meeting 75 per cent of the quantity of normative requirements of other linked consumers through Fuel Supply Agreements (FSAs). Under it Letters of Assurances are issued and all core and non-core sectors are required to enter into FSAs with the companies. The policy mandates the states to nominate their agencies to the Centre for transparent distribution of coal to small and medium consumers, whose annual requirement is less than 4,200 tonnes.

Coal India net profit up 42% : Statistics and news

Net profit is seen up 42% at Rs 3734 crore versus Rs 2626 crore.

-Dispatches may increase 5% QoQ

-realizations to increase 6.2%QoQ

EBITDA margin is seen at 33% vs 27%.

· Co increased coal prices of Grade A & Grade B coal by 30% on Feb 27, 2011

· Price increase is partly to offset cost increases (~10% YoY) given increased staff costs (Dearness allowance increased by 50%) and other costs.

· Employees Wages and Benefits in FY11Q3 at Rs.4500 cr, should come in much higher

· Global coal prices have increased 20%+ since 3QFY11, and could lead to improved realizations for e-auctions.

· Have 70 million tonne of coal stocks that we had at the end of previous fiscal.

· 70 million tonne of coal stock translates to nearly 1/6th of our production merely 2 months production which is undesirable.

· There is an issue of movement of coal from the pithead to the consuming centers.

· Have been able to liquidate 4.5 million tonne of coal from stocks recently

Production:

· Coal India reported flat production of 431mt for FY11(unchanged YoY)

· Down 6.5% from its target driven by project delays and infrastructure constraints.

· Production in FY11 was estimated at approx 440m tons

· Raised selling prices to selective customers in Q4 FY11 to offset lower production.

· The new pricing mechanism would offer more exposure to the spot coal market

· Expect spot-based sales volumes to rise to 23% in FY12 from 16% in FY11.

· Production target for FY12 at 454mt

Further Price Hike on cards:

· Co may raise price of coal from July 1, 2011

· To increase prices to offset wage hike

· To decide on price hike by end of June

· Co to decide on another price hike post wage increase which may Increase wages by 30% In FY12

· To accommodate the proposed proposed mining bill

· Total Wage Bill Increase At 32% In FY11

E-Auctions

Coal India fuming at the Planning Commission's move of curbing down the amount of coal offered for e-auctioning:

· Feels e-auctions of coal should continue as e-auction has approval of the Supreme Court.

· States that the PSU will continue its 10% e-auction unless there is a new directive.

· 81% premium in e-auction comes over fuel supply agreements (FSA) and it will facilitate clearance of huge inventories.

· Any change in the e-auction policy will call for changes in the new coal distribution policy.

· Planning Commission had said that 10% of coal, which is e-auctioned by Coal India, should be cut down.

· The commission feels that CIL should adopt pool pricing for thermal coal and should also plan for import of coal.

· E-auction accounts for 11-12% of CIL's volumes and CIL's FY12E earnings could be hit 26% if discontinued

· 80% of the offered coal to e-auction goes by road and only 20% goes by rail.

· Power sector is demanding some coal from the e-auction.

· Ended up last year with 70 million tonne of coal stock.

· The last fiscal had offered to the power sector something around 335 million tonne of coal.

· But what reached them or what they could lift was only 304 million tonne.

· Feel that the e-auction should continue because this provides for only 10% of our total produce to those needy consumers who have not been getting linkages

· Providing linkages to the non-coal sector consumers was stopped since 2001.

· But by and large the entire power sector has been untouched from an increase in prices so far.

· Feels the infrastructure in the Indian Railways needs to be increased.

· The target for volume off take is 454 million tonne for FY12 and 11% of that would go for e-auction

· Have earmarked 347 million tonne for the power sector.

· There is absolutely no chance of this 50 million tonne being sold at fuel supply agreement (FSA) prices

Logistics Problem

· Indian Railways have increased the availability of rakes.

· In April 2010 the average rakes availability was 158 per day and this year April it has been 180 per day, which is about 22 rakes per day availability increase.

· Hoping this trend continues as it will help in liquidating stock

Sources