Industry Updates 06th June 2012





Global coal prices cool, but weak rupee worries importers
Power companies that use imported coal have got a respite from skyrocketing fuel costs as international coal prices have softened considerably, and are projected to fall further, but the depreciation of the rupee has limited their gains. 

The coal price index for Australian coal, popularly called the NewCastle Index, and an Asian benchmark had jumped 92% between April 2009 and March 2011 to touch 127.87, but has cooled off to 98.24 last month, dropping 23% over the past year, including a 14% decline since May. API4, the index for South African coal, mirrored the trend.

Experts believe that the prices may decline further in the months ahead, making it easier for Indian power generation companies that are reeling under short supply of coal from Coal India. Power producers such as NTPC, DVC and the Adani group say that generation cost in the past few months has declined by up to 5 paise per unit as the rupee's depreciation limited the benefit of cheaper coal.

"Rough estimate shows that the cost of generation will go down by 2-3 paise for every unit of power generated," an Adani Power official said. A senior NTPC official said: "Although international coal prices have declined, a rise in rail freight and substantial depreciation of the rupee have negated some of the declines for Indian companies. Nevertheless, taking into consideration all the factors, cost of generation has declined by 4-5 paise per unit."

Debasish Mishra, senior director at Deloitte Touche Tohmatsu India, said: "We expect coal prices to soften further over the next year as demand from China continues to decline and Japan restart its nuclear reactors, thus reducing its dependence on coal."

A top executive from a private utility, which buys significant amount of coal from the spot market, said he expected price to fall further. "It is a big relief for Indian power utilities who are buying from the spot market. This would improve our margins, especially on merchant power sales," he said.

"During January 2012 thermal coal prices went out of bounds for a large number of users, including power and cement producers. Now price is softening due to gradual slowing of global economies. In fact, coal prices in Malaysia, South Africa, Ukraine has already come to stable levels from their unrealistic highs of December-January last. The coal from Malyasia and Indonesia is now ruling at $82-84 per tonne against $90-95 per tonne even six months ago," Gautam Kumar, director, Asian Minerals, told ET.

According to reports, thermal coal prices in Europe have dipped 15% this year to the lowest level since October 2009. Coal prices have eased 10% in South Africa and 13% in Australia, the lowest levels in at last 19 months.
(Economic Times)
Government looks at auctioning coal mines to new power plants
The government is looking at the possibility of allocating coal mines, which have been earmarked for the power sector in the upcoming auction of 54 mines, to new power plants only. "Coal blocks for power generation would be only for the new power plants," says an official document highlighting the details of a meeting of the Coal Ministry held with representatives of the state governments.

Of the 54 coal blocks identified by the government a couple of days back, a maximum of 16 have been earmarked for the power sector and 12 for PSUs, among others.

The Coal Ministry also said that the state government will have to apply for the blocks earmarked for the power sector for which tariff-based bidding will have to be carried out for award of the power project, the document said.

The meeting held to discuss the draft terms and conditions for allocation of coal blocks to PSUs was also attended by Additional secretary Zohra Chatterji, CMD of Central Mine Planning & Design Institute Limited (CMPDIL) A K Singh among others.

The government had earlier said coal mines earmarked for the power sector are meant for both tariff-based bidding and central government companies engaged in production of power. The further earmarking would be done in consultation with the Ministry of Power and CMPDIL, it had said.

The government had also earmarked 12 blocks for the steel sector, seven for the cement sector, five for sponge iron and two for surface gasification, in the forthcoming allocation of coal blocks.

Earlier, Coal Minister Sriprakash Jaiswal had said the government was ready with the list of coal blocks to be put on auction and the process will begin by June.

The gap in the demand and supply of coal widened to 161.5 MT last fiscal. In 2010-11, the shortfall of coal was about 132.8 MT, while in 2009-10 it was 90.5 MT, according to an official document.
(Economic Times)
Afghanistan and India to sign coal exploration pact

According to Indian government officials, a high level Indian delegation is due to visit Kabul to ink a pact with the Afghan mines ministry in a bid to further consolidate India growing economic interests in Afghanistan.

This comes as the Afghan mines minister Mr Wahidullah Shahrani earlier urged India to employ their expertise to help his country develop the untapped coal basins.

According to The Indian Express, the delegation would comprise Coal India Limited chairman Mr S Narsing Rao and his counterpart from Sinagreni Collieries Company Limited Sutirtha Bhattacharya.

A senior coal ministry official quoted by The Indian Express said “Following the high-level meetings both the sides would ink a Memorandum of Understanding aimed at propelling investments in the Afghanistan mineral sector especially coal.”

Seeking to promote Indian investments, the Hamid Karzai government has already signed a strategic agreement to further cooperation in areas of minerals and hydrocarbons. Shahrani ministry has also inked MoU with Indian ministries of commerce, mines, petroleum and steel.

President Mr Hamid Karzai’s government offered India a new strategic role in Afghanistan by awarding mining rights for the country’s biggest iron deposit to a group of Indian state-run and private companies.
(Steel Guru)
Bhushan power and steel, Essar Steel and others forced to import Iron ore due to falling domestic supply
An ore carrier at Paradip Port is not considered an uncommon sight. Odisha is, after all, one of the country's biggest producers and exporters of iron ore - the critical input for making steel. But 'Dimi', a supramax vessel berthed at Paradip till Sunday evening, was not like any other ore carrier. The ore it carried was from Vale in Brazil and meant for Bhushan Steel's plant in the eastern state, which accounts for a third of the country's iron-ore output.
"Selling iron to Odisha is akin to selling ice to Eskimos. Iron-ore imports on the eastern coast were unheard of yet," says the amused India head of one of the world's largest miners.

Faced with dwindling supplies and a country-wide clampdown on ore production due to illegal mining, steel companies are doing the unthinkable - importing iron ore to feed their plants. The imports, a trickle now, but which experts warn could easily turn into a torrent, threaten to increase India's dependence on overseas supplies of crucial mineral resources it owns in abundance.

Like coal, which is imported in vast quantities by power companies, the slow rise in imports of iron ore could erode the competitiveness of steel companies, and leave them at the mercy of wild swings in international prices and supply disruptions.

We are foreseeing a couple of years when India would be importing iron ore - it may not necessarily become a net importer though," said Prakash Duvvuri, senior analyst at Oreteam, a New Delhi-based mining consultancy firm.
Shipping industry and port officials in Paradip say another 150,000 tonnes of ore imports are expected soon to feed the state's ravenous steel mills. They, however, couldn't confirm the name of the buyer.

Bhushan Power & Steel, run by Sanjay Singhal, elder brother of Neeraj Singhal, who runs Bhushan Steel, has also been importing pellets from Bahrain and Ukraine. The unlisted firm is building a 2.3-million-tonne steel plant in Odisha. "The shortage of iron ore supplies in Odisha has forced us to import," rues Singhal.

Essar Steel, another steelmaker feeling the brunt of an acute shortage of the critical ferrous input, has been importing ore for the past few months, but on the western coast.

South African and Bahrain ores have been used to feed the company's facility at Hazira in Gujarat. "We have been importing iron ore for the past couple of months, but will be stopping now.

The depreciation of the rupee no longer makes it viable, although international iron ore prices are coming down," Essar Steel CEO Dilip Oomen said.

Essar's 8-million-tonne pellet plant in Visakhapatnam was fed by a slurry pipeline from NMDC's Chhattisgarh mine. That has run dry after being damaged in a Naxal attack last October, and some iron ore is now being supplied through rakes.
(Economic Times)
Indian iron ore mining mess - How mining has scarred Bellary beauty

That iron ore mining in Bellary district may have contributed to the meteoric rise of a few helicopter-hopping entrepreneurs. But the consequences of the rapacious plunder of natural resources is now being borne by the entire district.

A study commissioned by the Supreme Court on the consequences revealed that the district was stripped of a major part of its forest cover: almost 8.9 square kilometer of forest was lost between 2000 and 2011.

The Environment Impact Assessment report, prepared by the Indian Council of Forestry Research and Education Dehra Dun, pointed out that a large number of mines were inside the forest area and many located on encroached forest land.

Recognizing that extensive damage was done to the region, EIA recommended that production of iron ore in the district had to be cut by 40% to arrest further environmental degradation . The report pointed out that biodiversity too, was largely affected and the production of iron ore in the district must be capped at 25 million tonnes per annum.

The havoc wrought was first unravelled by the Karnataka Lokayukta probing the illegal mining in the state. His report observed that certain species of animals, like the sloth bear, seemed to have vanished from Bellary district.

Medicinal plants too had begun disappearing. Further , the entire system of rains was changing in the district. Besides, areas near the mines were no longer capable of supporting any agriculture and had become a no-green zone.

The government supports attempts to restart mining and ecotourism in the ecologically sensitive area of Kudremukh of the Western Ghats.

The Supreme Court observed that though carrying out the business of (mining) was a fundamental right under the Article 19 of the Constitution, the Right to Life under Article 21 superseded it. Further, it said that the ban on mining in these three districts would continue until the respective mining companies came out with a proper restoration plan for the environmental degradation their activities had caused in the region. The SC asked for an Environmental Impact Assessment study in Chitradurga and Tumkur districts.

Iron ore mining, as also granite quarrying which had been another thriving industry in the state for a long time, has taken a severe toll on key wildlife habitats. There has been extensive habitat fragmentation, especially of those species that require large home ranges and are sensitive to disturbances. Tigers, elephants, dholes, lion-tailed macaques and great pied hornbill are a few such affected species. These animals are fussy about where and how they live.

Mining brings with it all activities against the interests of protecting wildlife. Roads are cut, opening up fragile ecosystems for human intrusion. Large-scale human settlements are set up in forests for labour force and other staff, further fragmenting and degrading habitats. Other developmental essentials such as power lines that bring in electricity and pipelines that carry semi-finished products to nearest ports all have deleterious influence on wildlife. These linear structures break continuous tree canopies for several kilometres restricting tree dwelling species to smaller forest fragments. This limits their access to food sources in other areas of the forest. Another effect is inbreeding due to genetic separation resulting in weak or sterile offspring. Species such as the lion-tailed macaque, a highly endangered species endemic to Western Ghats of which fewer than 4,000 survive in the wild, are the ones severely affected by linear fragmentation. Sanjay Gubbi, scientist, Nature Conservation Foundation

Taking note of environmental degradation in the area, Supreme Court in 2011 banned mining in Bellary district and later Tumkur and Chitradurga districts too In April 2012, Supreme Court partially lifted the restrictions but said it would not relax the ban on mining in Karnataka unless recommended by its green panel, the Central Empowered Committee. The apex court also asked iron ore mining companies to complete the clean-up and land reclamation if they want the ban to be lifted.
(Steel Guru)
Fertlisers and chemicals travanacore invites EOI for proposed Rs. 6,000 crore joint venture
State-run Fertilisers and Chemicals Travancore (FACT) today invited expression of interests (EOI) from both public and private companies for its proposed Rs 6,000 crore joint venture. "FACT invites EOI from public sector and private undertakings, who are willing to invest in these proposed ventures for joint venture participation or through any other appropriate business model," the Kerala-based PSU said in a newspaper advertisement.

The company has sought partnership for setting up of new sulphuric acid plant, urea plant, NP complex fertiliser plant, SSP plant, ammonia-urea complex and gypsum park, it said. A senior Fertiliser Ministry official said the estimated cost of the expansion plan is around Rs 6,000 crore. They will be set up at Cochin and Udyogamandal divisions.

Last year, FACT had invited expression of interest seeking partnership from PSUs to set up five plants with an annual capacity of more than 38 lakh tonnes per annum. But none of them showed interest. At the Cochin division, the company proposes to set up an ammonia-urea complex with ammonia plant capacity of 2,000 tonnes per day (TPD) and a urea plant capacity of 3,500 TPD.

It plans to set up new urea plant of a single train of 1,500 TPD as an add on unit to the existing 900 TPD ammonia plant besides establishing a new sulphuric acid plant with a capacity of 2,000 TPD and installing an additional 1,000 TPD NP plant at Cochin. It also aims to set up a 500 TPD SSP (Single Super Phosphate) plant at Udyogamandal.

FACT manufactures urea and complex fertilisers and is one of the largest fertilisers and chemicals producers in Kerala. It also produces petrochemicals and provides engineering solutions for establishing petrochemicals, pharmaceuticals, refining plants.
(Economic Times)
Weak rupee negates benefit of falling global oil prices: Assocham
India is not able to get the benefit of drop in global crude oil prices due to depreciating rupee, industry body Assocham has said. "The benefits of lower international prices were offset by a faster depreciating rupee and thereby resulting in a higher import bill," Assocham said.

Global oil prices were hovering near USD 85 per barrel in global markets yesterday against nearly USD 125 a barrel in recent months. However, the rupee has depreciated to 55 levels against the dollar against the 49 level few months ago. India imports about 83 per cent of its oil requirement and this increase has widened the trade deficit to USD 185 billion in 2011-12, Assocham said.

"Both the international prices and exchange rate are difficult to regulate so therefore, given the runaway import bill the only policy option left is to curb the demand," it said. It said reduction in oil consumption "will address a plethora of problems such as rising trade deficit, a bulging fuel subsidy bill and other macro imbalances".

The chamber said the crude oil imports and its impact on government finances is dependent on the import quantity, the international price of crude oil and the exchange rate. It said, India's crude oil import bill in rupee terms shows a whopping 500 per cent increase in the last eight to nine years.

These imports have also been acting as a drag on the foreign exchange reserves, it said, adding in 2002-03, petroleum imports accounted for 23.18 per cent of the country's foreign exchange reserves. The proportion has gone up to 34.80 per cent in 2010-11, it said.

"This situation calls for drastic measures and the government has to bite the bullet of either asking states to cut taxes or deregulate the oil sector completely", Assocham said.
(Economic Times)
Gangavaram port expansion to commence soon

THE Gangavaram port expansion project, which will boost its capacity from the current 15 million tonnes (mt) to 45 mt, through the addition of three multipurpose berths and a coal handling terminal, is finally set to take off with the port operator completing the award of major contracts and achieving financial closure for the project.

"We expect to wrap up the expansion project by 2013, or the first quarter of 2014," Mr Pranav Choudhary, Chief Financial Officer of Gangavaram Port Ltd (GPL), said.

Spanish major Duro Felguera bagged the contract worth 62 million euros for supply of key equipment for the new coal berth. The company will provide two new grab ship unloaders of 62 tonnes each, install a 11-km conveyor belt system and also set up a new coal yard.

The contract for design and construction of the four new berths has been bagged by ITD Cementation India, part of the Italian Thai Development Public Co. Ltd (ITD), Thailand.

While the three multi-purpose berths have each been planned for 275 metres in length, the coal berth will be capable of handling ships up to 2,00,000 DWT.

The dredging contract, which involves the removal of about four million cubic metres of silt, rocks and sand, was bagged by the state-owned Dredging Corporation of India (DCI) and Chennai-based Sical Logistics.

These projects account for a major portion of the Rs 1,200 crore expansion.

After the expansion, the port will aim at handling more non-coal cargoes such as fertilisers, bauxite and foodgrains. At present, coal constitutes 70 per cent of its total traffic (about 14 mt).

(Exim India)

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