Is it possible to get domestic coal to end-users with reasonable cost compared to imported coal? Are only rail/truck used, or also coastal shipping for domestic coal? 

Logistics is key to ensuring availability of raw materials at the end user’s facility at competitive cost. In India, logistics infrastructure is a challenge, particularly as far as first and last mile connectivity is concerned. Moreover, with Indian Railways, which carries substantial chunk of the bulk cargo, relying on freight to subsidies passenger tariffs, the scenario becomes lopsided and at times the cost competitiveness is compromised. Hence the Centre’s thrust on import substitution will only be effective when multi-modal infrastructure is ensured to facilitate seamless movement of cargo for bulk material like coal at competitive cost, obviously factoring in coastal shipping and movements through inland waterways in addition to the traditional routes of rail and road. For this to happen, India will need at least 4- 5 years and hence the Centre is talking about a target of reaching zero imports by FY24.

How coking coal and coke imports to India will change in Q2 and Q3 2020?

Imported Coking Coal and Coke is utilised primarily by the integrated steel producing sector, which is currently producing at around 50-60% of capacity in Q2 and to my expectation would be ramping up to 80-85% capacity in Q3. Hence this reduction in requirement needs to be factored in the normal average figures for coke and coking coal imports and to my expectation, while Q2 may see a dip of 30-40 % in imports the situation in Q3 will improve and the dip will be only to the tune of 15-20%.

Government is trying to take away the mandatory ash content of 34 per cent, do you think this move can have a significant impact? If so, what kind?

I don’t think that this move will impact significantly as this was one mandate for which implementation was a big challenge primarily because of practicality and lack of washing facilities. Moreover, where washing facilities are present, the leaner fraction was also finding use in plants near pit heads. So the overall coal supply remains same, whether with or without this mandate. While lifting the embargo will not unlock any additional quantity over the current scenario, the only positive is that this will enable free movement of coal without the statutory roadblocks.

What is the impact of gas prices on power generation, considering that gas based power has become cheaper than coal based power?

With the world moving towards cleaner and greener fuels, there is a high possibility of gas based power plants coming up in the future. But again the shift from coal to gas can only be catalysed if gas is able to come down and meet the cost efficiency offered by coal. But on a hypothetical note, when the world considers moving to green hydrogen fuel by say 2050-60, gas option can become viable as people will migrate to gas as a transition fuel and build capacities for gas based power which can transit to hydrogen later.

How would domestic coal production be increased this year compared to last year? Wouldn't the domestic mines be affected by the COVID-19 and lock down?

While the domestic coal mines have been allowed to operate during the lockdown as they are supplying to the power sector which classified under essential services, there may be dip of 10-12 % only primarily on account of restrictions in operating full throttle due to norms of social distancing which can impact maintenance and upkeep of machinery and also cut down effective working hours die to the additional mandates of sanitizing work places.

Please can you advise your overview for retail market? How much will it be reduced, for import coal especially?

With respect to coking coal, we can see the impact lasting upto Q3 for sure and hence the annual dip in imports can be between 8-10 Million Tns from this year’s figure of 61 Million Tns.

How much do you estimate Indian coking coal imports to fall in 2020 compared with last year? How will this impact prices and producers in Australia?

As mentioned above, I would anticipate a dip to a max of 10 Million Tn as Indian Steel Production may stabilise beyond Q3 CY 20 with the Govt pushing infrastructure projects in a bigger way.

South Africa exports around 50 MT per annum to India, of which the majority goes into the steel sector, although not coking coal. What is the view of these volumes in the next few years?

These volumes goes into the sponge iron sector, which makes up roughly 45% of the Indian steel production by volume. As the quality requirement of this sector is unlikely to be met by domestic production, this sector may continue to rely on imports just like the integrated steel sector with blast furnaces.

China is possibly stock piling iron ore while prices are low to stable, is it possible that India may increase its iron ore imports in the short term?

1. It is highly unlikely that India would adopt such a strategy in view of availability of good quality iron ore at competitive prices in India.

2. We have seen Chinese port stocks of Indian-origin rise in the past two months, but it still represents a small share of total Chinese imports. India has been able to export more to China despite the imposed duty. India exports iron ore which has about/less than 58% Fe content as this category is exempted from duty while higher grade ores are imposed a 30% export duty. Despite the duty, India remains an important swing supplier to China and has been able to fill some of the gap caused by the reduced seaborne volumes available from Brazil after the dam disaster. As restrictions in India ease and demand rises, they are first likely to consume domestic iron ore. Iron ore demand in India has recently been very low amid the restrictions in April and miners have been unable to meet even the shrinking domestic demand as they struggled with logistical problems (lack of trucks and labour shortages etc.) Mining leases in India expired in Q1 this year and the process of auctioning new leases ended in February. Twenty-two out of the twenty-five non-captive iron ore mines were successfully auctioned. There were numerous bidders and several winners paid more than twice the floor price. This means there is quite some pressure for them to sell the iron ore and many expect to start production in June. Some anticipate the high prices paid for the leases may lead to some miners to be priced out in a near future. Conscious of the high bidding price paid for the mine leases, and also aware of the opportunity China represents with activity there recovering after the coronavirus, the mining industry in India has asked its government an exemption from paying 30% export duty. They claimed it will help to monetise “the non-moving stock”, estimating the available stockpile across the country to be 162 million tonnes.

How much of the 100 million tonnes of stock in India are at the postal power plants and can they therefore potentially reduce imports?

As mentioned earlier, logistics is the key to domestic supplies. In view of the first and last mile connectivity issues, Coastal power plants may always find it viable to operate using imported coal as value in use for domestic coal with higher ash and high transportation cost may not be viable economically for them.

How do you see the effect of lockdown extension from the Indian government on the sponge iron and cement industry and the related coal import?

While the lockdown has been extended, the mandate for industrial units to remain closed has been diluted and units are now permitted to resume operations with due safeguards. Hence, things will return back to normalcy over the next quarter. Since sponge iron sector is a large customer base for Import of non coking coal, this may witness a dip of 15-20% this year owing to the 40 days lockdown in March – May 2020 and the hiccups associated with resumption and demand pick up in a gradual manner.

Can UMPP based on imported coal be shifted to domestic coal? They have PPA based on imported coal. Will it be possible for the UMPP to pass the coal cost to the consumer?

The viability of things will only determine the extent of use of domestic coal. While aspirational targets of zero imports can spur import substitution to a large extent, it cannot mandate a unit like UMPPs to adopt domestic coal at the cost becoming unviable. Hence a considered approach may be taken factoring in feasibility, practicability and of course viability.

Indian Government is to remove the need for mandatory washing of coal for thermal power plants - what impact will it have on coal markets?

As elaborated in Q3 above, to my understanding this will not have a significant impact on the market because this was one mandate for which implementation was a big challenge primarily because of practicality and lack of washing facilities. Moreover, where washing facilities are present, the leaner fraction was also finding use in plants near pit heads. So the overall coal supply remains same, whether with or without this mandate. While lifting the embargo will not unlock any additional quantity over the current scenario, the only positive is that this will enable free movement of coal without the statutory roadblocks.

What's the forecasts for India's thermal coal demand and supply this year?

India’s thermal coal demand would be suffering primarily on account of closure of industries during the lockdown and the resultant dip in energy demands. Moreover, with the new normal of social distancing and restrictions in activities, demands for goods and services utilising energy may also be lower. In view of the same, we may witness a dip in thermal coal demand to the tune of 10-15%.

What special infrastructure projects are in place and are they enough to offset other postponement of demand; especially the private projects and housing?

The Govt of India had constituted a taskforce to identify a National Infrastructure Pipeline for Infrastructure Projects and this taskforce has submitted a report recently to the Finance Minister listing out both Govt and Pvt Sector projects worth Rs 102 Lakh Crores which would certainly be fast tracked by the Govt in order to spur economic growth post COVID 19.

How much is the price differential between imported coal and the prices in the domestic market?

This depends on the grade and other quality specs of different varieties of coal. Like for coking coal, there is no apple to apple comparison as India Coal is high ash medium coking coal whereas the import is generally Prime Hard Coking Coal or the Semi Soft version both of which are low in ash content and hence not comparable to the Indian coal.

What is the coal consumption in power sector for financial year 2020? 

My estimate is that the current year coal consumption for power shall be around 600 MMT including imports.

Generally, what is the inventory level at CIL and what was it for the month of April? 

Generally the inventory level at CIL is around 40-50 MMT. However, in April 2020, because of reduced offtake on account of power, inventory went up to 75 MMT.