Industry Updates 31.07.2012

31st July, 2012
Chinese thermal coal price slumps to lowest since 2009

China’s benchmark price for thermal coal fell for a 12th week to the lowest level since 2009 as electricity demand slowed and hydropower output increased.

According to the China Coal Transport and Distribution Association “Coal with an energy value of 5,500 kilocalories per kilogram at the Chinese port of Qinhuangdao dropped to a range of CNY 620 per tonne to CNY 635 per tonne”

Data compiled by Bloomberg shows that the midpoint was 0.8% less than a week earlier and the lowest price since October 19th 2009.

Electricity output in June stalled from a year earlier as China’s economy expanded in the second quarter at the slowest pace in more than three years. Demand for coal-fired power, accounting for 80 percent of the country’s needs, also fell as dams supplied more electricity amid increased rainfall.

Stockpiles at Qinhuangdao, which delivers half the nation’s seaborne domestic coal supplies, fell 0.9 percent from a week earlier to 8.47 million tonnes

Inventories were above 8 million tons for the ninth week, declining 1.2 percent this month, compared with 11 percent in July 2011, data compiled by Bloomberg show. Port stockpiles typically fluctuate during this time of the year as utilities draw down local supplies and replenish fuel from delivery harbors to meet peak summer power demand.
(Steel Guru)
Chinese coal demand to continue to fall in H2 2012 - CNCA
According to the China National Coal Association, China's coal industry will remain in the doldrums in the second half of 2012, with a further fall back in the demand for the fuel and protracted rapid growth in market supply.

Mr Jiang Zhimin VP of CNCA said that China's coal demand continued to fall in the first half of 2012 and coal consumption in the country rose 2.8% YoY to 1.97 billion tonnes, but the growth rate was 6.6 percentage points lower than the same period of 2011. Contrary to weakened demand, China's coal supply increased sharply in the interim.

The fixed asset investment in the coal sector grew 23.1% YoY in the first half to CNY 210.3 billion. The figure is 2.7 percentage points higher than the investment growth among all industries.

Moreover, China's coal production in the January to June 2012 period gained 5.6% to 1.91 billion tonnes on an annual basis. However, it saw a decline in coal deliveries during the period. The railroad carried a total 1.166 billion tonnes of coal in the first half, up 4.5% from the prior year.

In June 2012 alone, the figure was 176 million tonnes, down by 5.5% YoY and 11% MoM lower than in May 2012. The main ports handled 312 million tonnes of coal in the first half, down by 4.1% YoY. Coal shipment in June 2012 fell by almost 20% to 45.23 million tonnes.

Besides, China soaked up more coal from other countries in the first half when net imports surged by 77.5% YoY to 134.08 million tonnes. The supply glut of coal has led to mounting stockpiles in the country. Up to the end of June 2012, total coal stocks in China came to 278 million tonnes. The stocks at coal mines and key power plants posted a YoY rise of over 30% and that at ports up 67.3%.

Mr Jiang also pointed out that it remains unpredictable that how long the downturn will last and to what extent it would affect the coal industry, but seems not pessimistic about the prospect of the industry.
(Steel Guru)
Coal India board to meet tomorrow to discuss fuel supply pacts
The Coal India Board is going to meet tomorrow to deliberate on the issues related to signing of the fuel supply agreements (FSAs) with power firms, including coal imports and changes in the penalty clause of new FSAs.

The Board meeting, scheduled to be held in Kolkata, may also discuss pooling of coal prices in case the state-owned coal producer goes for imports of the dry fuel to meet the demand, sources said.

The two issues, supply of minimum assured coal supply to power firms and penalty to be paid by the Coal India for not supplying the minimum stipulated quantity, have held up signing of FSAs for many months nows. Even the intervention of the Prime Minister's Office (PMO) has failed to resolve the deadlock so far.

While Coal India says it can not guarantee more than 65 per cent of required coal as minimum assured supply, power producers have been pitching for keeping it at 80 per cent levels.

In a meeting held on July 6, the PMO is believed to have directed power companies and Coal India to sign the pact at 65 per cent of the total coal contracted for the current financial year. Besides, it had also suggested increasing the minimum supply level to 80 per cent, gradually in about four years.

However, the state-owned coal producer had postponed its Board meeting twice this month on the pretext of not receiving the written communication from the PMO on the decisions taken in that meeting.

The Power Ministry, on behalf of the firms in the sector, has suggested that Coal India should go for imports to meet the shortages in domestic supplies. It had also asked for pooling of the price of imported and domestic coal to neutralise the impact of higher prices of imported coal.

According to the official data, only 27 power plants, of 48 in all, have so far signed the supply agreements with the state-owned coal giant. These include Adani's Mundra Power plant, Lanco's Anpara Power, Reliance Power's Rosa Power Project and CESC.
(Economic Times)
Competition commission of India imposes Rs 397 crore penalty on Shree cement
Competition watchdog CCI today imposed a penalty of Rs 397.51 crore on Shree Cement for indulging in restrictive trade practices.

The Competition Commission of India (CCI) has imposed the penalty on Shree Cement while issuing final order in the case against cement manufacturers and their trade body Cement Manufacturers Association (CMA).

"The Commission has also imposed a penalty on Shree Cement Ltd at the rate of 0.5 times of its profits for the years 2009-10 and 2010-11 aggregating to Rs 397.51 crores," CCI said in a statement.

The CCI, it added, "found eleven cement manufacturers, including Shree Cement Limited and CMA in contravention of the provisions of the Competition Act, 2002, which deal with anti-competitive agreements including cartels".

It also asked the company to refrain from such anti-competitive activities in the future. With regard to other companies, the CCI said as they were fined earlier, it was not imposing any penalty on them again for the same period of contravention.

CCI last month had imposed a whopping Rs 6,307 crore fine on 11 leading cement makers, including ACC, Ambuja Cements, UltraTech, India Cements, Binani Cement, JK Cement, Madras Cement, LaFarge and Jaypee Cement. Industry body CMA was also fined with Rs 73 lakh.

The inquiry, the CCI statement said, was based on a case which was transfered from the Office of the Director General (Investigation & Registration) of the erstwhile Monopolies and Restrictive Trade Practices Commission to the CCI.

The MRTP Commission had initiated the investigations on the basis of press reports published in a business daily as well as on a letter of Builders Association of India.
(Economic Times)
Government to adopt corporate model for two new major ports
Ports to be built through a special purpose vehicle with 26% equity from the respective states, and 74% from the Centre
Two ports India intends to build in Andhra Pradesh and West Bengal will function as companies and not trusts as 12 of the 13 federal government-controlled ports operate.
The two proposed ports will be established through a special purpose vehicle (SPV) with 26% equity from the respective state governments and 74% from the Union government, a shipping ministry spokesman said. This is a new development because until now all such ports are fully owned by the Union government. The SPV will invite bids to set up cargo-handling facilities at these ports that would be partnerships with private companies.
An agreement for a major port at Sagar Island in West Bengal will be finalized by 1 August, while the location for the new port in Andhra Pradesh, from among the three sites suggested by the state government, will be decided by 31 August.
The shipping ministry will seek approval for the new ports from the cabinet by 30 September, the ministry spokesman said. Building a new port will cost as much as Rs. 2,000 crore.
Currently, 12 of the 13 major ports function as trusts under a law framed about four decades ago called the Major Port Trusts Act, 1963. Ennore Port Ltd located in Tamil Nadu is the only exception. Ennore Port was formed as a company under the Companies Act, 1956, when it was opened in 2001. The 13 ports together account for about 63% of India’s external trade shipped by sea. For over a decade beginning 1998, the Union government tried converting the 12 ports into corporate entities. A draft law to amend the Major Port Trusts (MPT) Act fell through because lawmakers were divided on the issue.
“The government is of the view that under the restrictive ambit of MPT Act, major ports have little flexibility of commercial operations and are ill-equipped to operate in a market-oriented situation. After corporatization, the ports will get converted into companies and have a professional management, which will have greater financial and operational autonomy,” the spokesman said. The earlier plan to convert the ports into companies also failed because about 65,000 employees opposed the move.
“The trade unions feel that major ports do not require corporatization, but modernization to make them perform efficiently. The unions are seeking amendment to the MPT Act to give them full operational and financial autonomy,” the spokesman said. Workers’ union said their opposition to the plan will continue. “We are against corporatization; it is not necessary,” said M.L. Bellani, secretary of the All India Port and Dock Workers Federation, the largest union.
“Corporatization would make ports much more efficient, more economically-oriented and financially-oriented,” the Port of Rotterdam Authority said in its 2010 report on the business plans of the 13 ports. “The purpose is to distance the enterprise from direct government control.”
(Steel Guru)

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