Coal India to produce 71.7 mt coking coal by FY20

NEW DELHI: Coal India Limited has targeted to produce 71.77 million tonnes of coking coal of the total production of 1,000 million tonnes by 2019-20. Coking coal production stood at 53.8 million tonnes in 2015-16, power, coal, renewable energy and mines minister Piyush Goyal said on Thursday. 

The initiative aims at reducing imports of coking coal.

The enhancement in domestic production of coking coal is envisaged to reduce coking coal imports. However reduction of coking coal imports totally would not be possible due to the constraint of availability of metallurgical grade coal from domestic sources", he said in a written reply to a question in Lok Sabha. australia will remain major source of import for Coking coal in India. Coal India ltd is also working on aquring mines in S.africa.

Thermal coal market analysts pinpoint Southeast Asia region for standout growth

-29 Aug 2016 349 am EDT/749 GMT

Southeast Asian countries including Malaysia, Thailand and Vietnam are seen as growth markets for the consumption of imported thermal coal in the years out to 2020, as coal-fired electricity is used to fuel their fast-growing economies, said analysts at the 11th Coaltrans Australia conference in Sydney last week.

In a 10-year outlook for the Asia seaborne thermal coal market, Mark Gresswell, chief analyst at Australian mining consultancy group HDR Salva said three-and-a-half billion people are living on electricity consumption below the level in Japan.

"Eight of the most populous countries are in Asia, and 54% of the world's population live in Asia," he said.

To move these people to Japanese levels of power consumption will require an extra 4,300 TW of electricity generation.

This step change in levels of power generation in Asia will require an 80% increase in global coal production.

Coal-fired power generation is a relatively cheap source of energy at $30/MWh, and is less than half the cost of generating electricity from gas at $65/MWh, said Gresswell.

"This is why coal will have a big role to play in Asia," he said.

Nuclear electricity generation has come under scrutiny in Asia following the tragic accident at Japan's Fukushima-Daiichi plant in 2011, and some Asian nations have lowered their projected share of this fuel in their future generation mix.

Japan's long-range plan is to draw 20%-22% of its electricity production from nuclear plants, and South Korea has a target for nuclear power generation of 30% by 2030, down from 41% previously.

"Local communities are very concerned about having nuclear plants in their backyards," he said.

And, the only real alternative fuel to nuclear is coal, he stated.

MARKET IN TRANSITION

Gresswell characterized 2016 as a year as a year of "transition" for the seaborne market for thermal coal, as it moves from a supply surplus to a supply deficit that will likely lead to a recovery in prices.

"We are seeing large tonnages of Colombian coal moving to Asia," said Gresswell, adding this new trade was emblematic of demand growth in Asia drawing tons to the region.

In China, imported thermal coal is competing strongly with Chinese coal, and Beijing's tough stance on capping domestic production is being backed up by mine inspections that could result in some closures of local mines, he said.

Southeast Asia holds the promise of becoming the next India, in Gresswell's eyes, as countries in this region seek to diversify their fuel supply arrangements for electricity generation which is growing at a current rate of 12% per year.

For example, Vietnam's imports of thermal coal could grow to 147 million mt by 2030 from 63 million mt in 2020, he said.

The country is aiming to build 46 new coal-fired power stations ranging in size from 40 MW to 600 MW in capacity.

Fully, 50 GW of new coal-fired power capacity is set to come online in Southeast Asia in the next few years to 2020, and will require an additional requirement for the region of 100 million mt of imported thermal coal, said Gresswell.

Indonesia alone will need to consume an extra 80 million mt of thermal coal for its additional 20 GW of coal-fired power plants by 2020, and most of this supply could come from the country's domestic market.

Given this additional demand growth for thermal coal in Southeast Asia in the coming years, it is difficult to see where the region's additional requirement for 100 million mt will be sourced from.

"There may be some latent tons from the US. Australia is almost tapped out," he said.

Speaking later in a panel discussion, Gresswell expanded on the theme of supply relating to Australia.

"There are no new mines being developed [in Australia]. There are some small expansions, but they are offset by closures," he said.

"Higher prices will incentivize a few additional tons onto the market, but it won't reach 150 million mt," he said.

MORE INQUIRIES FROM SE ASIA

Also during the panel discussion, Sam Fisher, general manager for marketing at Australian coal producer New Hope Coal said: "As a coal producer in the last 12 months we have seen a lot more inquiries coming from Vietnam, and also some inquiries from the Philippines and Malaysia."

India was an arbitrage market for Australian thermal coal that greatly depended on freight differentials, he added.

Gary Vernon, global head of coal trading for Australian bank Macquarie said: "With a low freight environment, Australian coal competes everywhere."

There has been a significant increase in South American demand for Australian thermal coal because of lower vessel freight rates, he said.

Matthew Boyle, principal consultant at commodities analysis and consultancy firm CRU said Australian coal exports had stayed relatively flat, possibly as a result of take-or-pay contracts for rail and port infrastructure used by Australian coal producers.

In China, the central government's policy to restrict domestic coal mines to operating for only 276 days in a calendar year had been a "significant driver" in the recent improvement in prices in the Chinese coal market.

"Not only is it being implemented, but at rates we did not expect," he said of the production restriction.

But, in driving domestic thermal coal prices higher, Beijing's production policy could have an unintended side effect.

"Now, with [domestic] prices getting close to Yuan 500/mt [FOB Qinhuangdao for 5,500 kcal/kg NAR thermal coal] there is the potential for some cut production to come back online," he said.

China's domestic coal industry is "massively fragmented" with 10,800 individual mines spread over the country, and 7,000 of these have a capacity of under 300,000 mt/year.

"The smallest mines only make up 10% of production," he said.

Beijing is aiming to eliminate 500 million mt of production capacity in China's domestic coal industry over a three-to-five year period, but even if it was to achieve this outcome, it would not be enough to improve the sector's overall profitability, he said.

For Japan, which restarted its fifth nuclear power reactor a couple of weeks ago, its coal demand is forecast to be 130 million mt by 2020 and focused mostly on imported fuel with an energy content of more than 5,700 kcal/kg NAR, said Boyle.

South Korean import demand for thermal coal was seen by Boyle as staying relatively steady at around 85 million to 90 million mt/year.

Southeast Asia is also viewed by Boyle as a bright spot for thermal coal demand and the region is expected to require an additional 65 million mt of higher-grade bituminous thermal coal by 2020.

"We are extremely positive on thermal coal demand in Southeast Asian countries," he said.

"Most of the demand for thermal coal will come from Malaysia and Thailand and will continue out to 2020," he stated.

China is starting to retire some older coal-fired power stations and for environmental reasons, leading to 137 GW of generating capacity for this fuel being taken offline by 2020, although the country will add 23 GW of coal-fired electricity generation in 2016 alone, he added.

India's imports of thermal coal were projected to be 65 million to 70 million mt by the year 2020 by Amit Kumar, head of coal sourcing and power trading at Jindal Steel & Power.

Though he said he believed there would be a shift to higher calorific value thermal coal in the years ahead, that would offset declining trade volumes.

"Sponge iron and cement plants will continue to import coal from South Africa and Australia," he said.

Coastal power plants in India with a combined generating capacity of 10 GW to 12 GW will remain dependent on imported cargoes too, he added.

source:(Platts)

Indian utilities’ April-July thermal coal imports fall 17.5% on year: CEA

Indian power utilities imported around 22.6 million mt of thermal coal in April-July, down 17.5% from the corresponding period last year, according to the most recent data from the Central Electricity Authority.

Of the total, around 7.6 million mt of steam coal was imported by 27 utilities for blending with domestic coal, while around 15 million mt was imported by 10 utilities for plants based on imported coal.

While 16 utilities didn’t import any coal during the first four months of the current 2016-17 fiscal year, data was not available for two utilities.

Adani Power imported the highest volume at around 5.4 million mt, followed by Tata’s Mundra ultra mega power plant at almost 3 million mt and JSW Energy at around 1.4 million mt and state-run Tamil Nadu Generation and Distribution Corp or TANGEDCO at 1.2 million mt, data showed.

CEA has not assigned any targets for power utilities for the current fiscal year because of an increased supply of domestic coal from state-run miner Coal India Limited (CIL).

However, they can import coal if they find imported material to be more economical than using domestic coal, especially for coastal power plants, even though the government aims to eliminate coal imports within a couple of years.

Utilities imported around 80.47 million mt of steam coal in fiscal year 2015-16, down 11.8% year on year, and below the target of 84 million mt. While 36.98 million mt was imported for blending, 43.49 million mt was imported for plants based on imported coal.
Source: platts

China’s Thermal Coal Imports behind the latest Baltic Dry Index Surges

August 25, 2016 22:21 GMT

The Baltic Dry Index has surged this week, rallying above 700 points with a large 12-point gain on Thursday to hit 718 points, just a day earlier, the index climbed 14 points, the largest single day gain that the BDI had seen in months.

The BDI continued its advance on Thursday as recent coal import data from China supported the sentiment that 2016 could offer a strong finish for the BDI. Data released on Wednesday from the General Administration of Customs showed that China imported 9.31 million mt of thermal coal in July, rising 30.7% year on year and up 23.5% from June to the highest level since December 2014.

Thermal coal buyers have been increasing their purchases since April when the Chinese government implemented a policy to restrict domestic coal production. Now, with winter approaching, the demand to import coal to China could skyrocket as the country prepares to meet its peak demand coal burning season, and most of this imported coal is coming from Australia, resulting in an increased demand for BDI component ships to transport coal between the two nations. In July, coal shipments from Australia to China rose 16% year-over-year, and 43% from June.

After a bit of a lull in the summer, there is confidence that demand to ship goods ahead of winter will take off. The main commodities that could be stockpiled ahead of winter include iron ore and coal, and these two commodities are primarily transported via capesize ships. Right now, smaller BDI ships are also seeing strength to ship soft commodities but this demand could taper later in the year. While overall, iron ore and coal demand should support the BDI through this year, once winter hits there will likely be a lull and the BDI will see a correction. Last winter, the lull period sent BDI down to a record low of 290 points in February.

source: economiccalendar

Global steel industry eyes India lifeline 29/12/2015

It is tough to find a bright spot in the global steel sector, as prices plunge and struggling Chinese producers flood world markets with their surplus stock. But if pressed, gloomy industry-watchers see at least some reason for optimism in Asia’s second-largest emerging market, India.

“There is really only one location that has the long-term potential to pull the global steel market out of its current slump, and that is India,” says Edwin Basson, director-general of the World Steel Association, a trade group. “But, and this is the big question, while India has huge unfilled demand and a big economy, when will all this be felt?”

India is already the world’s fourth-largest steel producer and is expected to overtake the US for third place in the next year or two. And while its steel consumption is barely a tenth that of the world’s largest user, China, it is at least expanding. Growth will be 8 per cent next year, according to Fitch, the ratings agency.

India is adding capacity too, led by its big three producers: Tata Steel, JSW Steel, and state-backed Steel Authority of India. Last month, Tata Steel inaugurated a huge new plant in the eastern state of Orissa, which eventually will nearly double its output.

Tata Steel in many way exemplifies India’s unusual place in world steel markets. The company’s loss-making European arm has been hammered by cheap imports and flat demand over recent years. It is now moving toward selling off part of its ailing UK division, having announced 1,200 job losses in October. The group’s Indian arm is much smaller, producing just a third of its output, but performs far better, last year contributing 80 per cent of group underlying profits.

Nevertheless, India’s steel producers are downbeat for two main reasons, the first being China. In common with their global counterparts, most have been hit badly as Chinese competitors send excess capacity abroad. Indian steel imports soared 72 per cent in the financial year to March 2015, and have risen further still this year.

Local production

Steelmakers are livid. Chinese exports have “caused havoc”, says billionaire tycoon Sajjan Jindal of JSW, India’s second-largest private sector steelmaker by revenue. Domestic steel appetite might be growing, he says, but local production is stagnant because imports mop up any increases in demand.

India’s government responded in August by increasing taxes and import duties on a range of steel products, curbing inflows somewhat. But Jindal and his fellow industrialists have been pushing for more, and this month policymakers in New Delhi introduced a series of further minor anti-dumping duties.

The second problem is poor finances. Indian steelmakers borrowed heavily to add capacity during the country’s mid-2000s boom years. Industry-wide net debt soared 10-fold over the last decade as a result, hitting roughly $50bn this year, according to Credit Suisse.

All that borrowing pushed capacity up by a third, with an extra 15 million tonnes added during this financial year alone, according to Fitch analyst Muralidharan Ramakrishnan. But it also came amid a plunge in global iron ore prices, undercutting the cost advantage that Indian producers often enjoyed by mining cheap domestic ore, a key component in steelmaking, and hitting profitability.

Many Indian steel projects also ran into regulatory difficulties, leaving once fast-growing groups like Mumbai-based Essar Steel struggling to pay down debts. A host of smaller companies are effectively bankrupt. Bureaucratic problems hit foreign producers too, notably South Korea’s Posco, which has mothballed a $12 billion (Dh44 billion) facility in the country. ArcelorMittal, the world’s largest steel group by revenue, scrapped a big plant two years back.

Cost competitive

JSW’s Jindal thinks a shakeout is needed. “There will be a correction,” he says, predicting that many minor groups will be swallowed up by larger ones. “These small steel producers will find it hard to operate; they are not environmentally friendly or cost competitive.”

Others are more optimistic, pointing both to India’s low per capita steel use and an upturn in the economy under Prime Minister Narendra Modi. Growth rates are set to stay above 7 per cent over the next two years, boosting carmakers and steel-consuming sectors. Fiscal stimulus will help too, pumping money into new roads and railways.

India is not going to be able to replace China as global steel’s locomotive any time soon, says Kaushik Chatterjee, finance director of Tata Steel, but a mix of protection against unfair imports and fresh government spending can at least spark a new period of growth.

“The biggest trend which can come is more public spending on infrastructure,” he says. “If we get that, the future will look much better.”
Source: Gulf News

2016 year could mark the rebound of the dry bulk market to more sustainable levels

Mixed fortunes is what best describes the course of the shipping markets over the course of the year we’re about to part with. On one hand we have those involved in the dry bulk sector, which saw the market reach all-time lows, while on the other hand we have those involved in the tanker market, where freight rates rallied and seem poised to do so again in the future, although, as shipbroker Intermodal pointed out in its latest market report, the increasing orderbook might be the source of concerns in the future.

According to Intermodal’s SnP Broker, Mr. Panos Makrinos, “this year leaves us wondering who exactly the winners in the Dry Bulk sector were, if any. On the one side stand those who despite the market’s poor conditions went on acquiring vessels in the second hand market at heavily discounted rates compared to previous years’ levels, knowing that what lied ahead was a bad freight market that recently bottomed to its all-time low. On the other side stand those who decided to sell, for different reasons but most having to do with pressures exerted by the poor market. Those now have a certain cash flow and the possibility to either wait for a better market or even wait to purchase in the future at even lower levels, bearing of course the cost of losing current opportunities if these lower levels do not materialize. So in regards to the aforementioned question, of who the winner is the answer is fairly hard to give right now. It really depends on the strategy that each company and investor has set, baring always in mind that this is one of the most difficult and uncertain eras not only in regards to the dry bulk shipping market but pretty much in all those sectors that are affected by a dropping demand for commodities and consumption of goods”, Makrinos said.

Nevertheless, there are some market participants out there still being optimistic that during 2016 we might witness at least a slight improvement in dry bulk freight rates when compared to the unprecedented lows of this year. According to Mr. Makrinos, “they support that a few factors can help with that. Oil prices should remain close to $40/bbl. or if increase they will do so to levels still “comfortable” for ship operators. Activity in the demolition market will also reach even higher levels (currently even mid to late ‘90s built bulkers are offered for demo). Fleet growth will also side with owners, as the remaining orderbook is smaller than the one in the previous years. These are not “hard” and favor the argument for acquiring a vessel now, as dwt supply and costs of operating a vessel seem to be well “in control” at least for next year”.

On the other hand, as Intermodal’s analyst pointed out, “there are those, the majority actually, who argues that the Dry Bulk market will continue to hover around its current low levels. They support that we need to see a number of things happening before the market improves, things not expected to take place in 2016 according to them. The average demolition age should decrease further and faster; they support that even vessels of just 15yrs old should start coming up more often as demo candidates, something that we haven’t seen so far. In addition, a recovery in the steel industry accompanied by improvement in coal consumption should also take place. Their argument against the possibility of that happening is obviously the fact that coal imports mostly by China have slowed down and a rebound is not expected any time soon and that in regards to the steel industry almost every single analysis points to declining consumption next year as well”.

The analyst went on to note that “accurate forecasts are as rare as white Christmas here in Greece. Dry Bulk market participants will almost definitely have to show more patience in the months to come and try to remember that this is a market of big excitements and as most markets cyclical as well. You have bad times, followed by less bad times, followed by good times, followed by great times. So let’s ask ourselves, where are we now and where are we most probably heading next?”, Makrinos concluded.
Hellenic Shipping News Worldwide

Survival of fittest for dry bulk shipping firms in 2016

Shipping companies that transport commodities such as coal, iron ore and grain face a painful year ahead, with only the strongest expected to weather a deepening crisis caused by tepid demand and a surplus of vessels for hire.

The predicament facing firms that ship commodities in large unpackaged amounts – known as dry bulk – is partly the result of slower coal and iron ore demand from leading global importer China in the second half of 2015.

The Baltic Exchange’s main sea freight index – which tracks rates for ships carrying dry bulk commodities – plunged to an all-time low this month.

In stark contrast, however, tankers that transport oil have in recent months enjoyed their best earnings in years. As crude prices have plummeted, bargain-buying has driven up demand, while owners have moved more aggressively to scrap vessels to head off the kind of surplus seen in the dry bulk market.

Symeon Pariaros, chief administrative officer of Athens-run and New York-listed shipping firm Euroseas, said the outlook for the dry bulk market was “very challenging”.

“Demand fundamentals are so weak. The Chinese economy, which is the main driver of dry bulk, is way below expectations,” he added. “Only companies with very strong balance sheets will get through this storm.”

The dry bulk shipping downturn began in 2008, after the onset of the financial crisis, and has worsened significantly this year as the Chinese economy has slowed. The Baltic Exchange’s main BDI index – which gauges the cost of shipping such commodities, also including cement and fertilizer – is more than 95 percent down from a record high hit in 2008.

The index is often regarded as a forward-looking economic indicator. With about 90 percent of the world’s traded goods by volume transported by sea, global investors look to the BDI for any signs of changes in sentiment for industrial demand.

“The state of the dry bulk market especially indicates that economies worldwide are likely to stay weak, much to the disappointment of central banks … FX traders, miners, steel makers, trading houses, and commodity economies,” said Basil Karatzas, head of New York consultancy and brokerage Karatzas Marine Advisors & Co.

Ratings agency Fitch downgraded the shipping sector to negative, from stable, this month due to slowing global trade and an economic slowdown in emerging markets, adding that dry bulk would remain under pressure.

COMMODITY PRESSURE

Slowing demand and concerns over the health of the Chinese and global economies have pushed the 19-commodity Thomson Reuters/Core Commodity CRB Index, which tracks the prices of 19 commodities including oil and grains, to its lowest level since 2002.

“There is no doubt that the overall macro situation is one that does not engender a lot of confidence for increased trade flows in 2016 and beyond,” said Khalid Hashim, managing director of Precious Shipping, one of Thailand’s largest dry cargo ship owners.

Worsening conditions have already claimed casualties.

In September, Japanese bulk carrier Daiichi Chuo Kisen Kaisha filed for protection from creditors, and private equity backed Global Maritime Investment Cyprus Ltd filed for Chapter 11 bankruptcy protection in the United States.

Smaller dry bulk ship owners are expected to struggle in coming months.

“There are clearly big problems for almost all dry bulk owners, certainly those who cannot subsidize dry bulk through ownership in tankers. Debt can only be serviced through reserves of capital and not from cash-flow,” said Tony Foster, chief executive of British shipping asset manager Marine Capital.

“Public companies will issue discounted shares. Small private companies without obvious external support will be at the most risk.”

Ship owners are also contending with more vessel orders, which are expected to increase oversupply further.

While the dry bulk market has been in a downturn since 2008, there have been brief rebound periods of relatively good earnings in that time that emboldened ship owners to order more vessels, which normally take up to three years to deliver.

“Too many factors are against ship owners at present, and January sees a disproportionate delivery of vessels from the shipyards,” said Karatzas.

Analysis from Axia Capital Markets showed the cumulative loss of revenues for 13 shipping companies publicly listed in New York reached over $3.36 billion in the first nine months of 2015.

“Given the current oversupply of vessels in the marketplace that has built up over the past five years, we expect rates to remain at depressed levels for at least two more years as the market struggles to find a new equilibrium,” said Robert Perri of Axia Capital Markets.

DIVERGING FORTUNES

By contrast, demand for oil tankers and the rates they command have surged to their highest levels since 2008 in the past three months.

Dry bulk shipping markets have been hit hard by a slide in demand for coal by China, which is also trying to ease its dependence on the polluting fuel and meet environmental pledges.

But the country has been looking to boost strategic reserves of crude, taking advantage of multi-year lows in prices, which has helped the oil tanker market rally. Earlier this month China said it more than doubled the size of its strategic crude oil reserves between November 2014 and the middle of this year, a rate exceeding analysts’ estimates.

Oil tanker players have been more conservative since 2008 in ordering ships as they experienced rock-bottom rates that saw earnings falling below zero as recently as last year, meaning owners clocked up losses every day. The scrapping of tankers, which picked up in 2011, has also shrunk the fleet.

Average earnings for supertankers hauling 2 million barrels of oil on the benchmark Middle East Gulf to Japan route have surged to over $110,000 a day.

In contrast, average earnings for capesize ships, among the largest vessels used to haul coal and iron ore, have slumped to under $5,000 a day in recent weeks – below the basic operating cost level a ship needs to break even, which is around $8,000.

“The (tanker) market is on fire,” said Deutsche Bank analyst Amit Mehrotra, but added: “Owners of dry bulk ships are likely to spend the holiday break quietly reflecting on how they will further endure the worst market many have seen in their lifetimes.”

Source: Reuters (Editing by Veronica Brown and Pravin Char) via Hellenic shipping news