Indian coal imports from Indonesia fall to below 6 million tons in August, and this is keep on falling from last few months. However, Chinese coal imports have increased last month from Indonesia and also expected to improve this month to anticipate winter season.
Indian counter parties like traders/end users to know the reason behind this. According to market information, due to the Un-viability of generation and realization cost, many of the co-generation and private power plants have shut their plants. Hence Indian coal imports kept low from the normal import level.
According to another importer, “Good monsoon, the Hydel power and wind power has come to the rescue of the utilities. Hence utilities reduce their imported coal usage”. India's Hydropower accounts for around 22% of India's installed generating capacity, while coal-fired power plants represent over 50%, according to a data released end of last year.
“Due to bad financial condition from some plants, which are procuring power from a private sector also the part of reasons why Indian power producers are reducing coal imports. Payments also have been delayed for the power. Due to this reason, all units are facing liquidity crunch and unable to meet their import bills”, an International coal trader based in Chennai said.
The increase in the international prices of imported coal also one of the reasons why the cost of generation has become unviable. The (per) unit rate offered by utilities is lesser than the cost of generation, a power producer commented. Hence power producers are forced to reduce their production.
According to an Indonesian coal producer, the market was dull for last few weeks and there is no demand for coal. The Coal prices also stand flat for past few weeks. An Indian state owned utility recently concluded a contract with a trader to buy 160,000 MT of non-coking coal at US$ 90.40/ MT for GCV 6000 kcal/kg on adb basis and 15% TM on a delivered basis. The cargo is expected to be supplied from Indonesia.
Indian Supreme Court restrictions on iron ore mining, many of the sponge iron units were closed down in south India also contributed for lack of demand for imported coal.
Due to the ill effects of all the above reasons, stocks were piled up in Indian ports. As per one estimate, currently around 7 to 8 MT imported coal is being held up in various ports.
Multiple reasons together drive Indian coal imports slow.
“Bankers have become very cautious in extending further facilities, and the units are crippled with a squeeze in their cash cycles. One source mentioned that power industry is no more darling of financial institutions and unless this situation is not corrected it may lead to disaster”, said a trader.
However, Indian traders are optimize that, they will return back to market soon, as heavy weight coal consumers are expected to be in the market soon. India's Maharashtra State Electricity Board (MSEB) has received offers for 3.35 million tons of coal at around $125.00 a tonne CIF from MMTC backed by traders Coal & Oil and traders Gupta Coal, Reuters reported last week. Mahagenco is expected to issue LoI any time this week.
NTPC is expected to be in the market for coal soon either directly or through MMTC and NALCO was already in market for coal.
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