Indian power plants are gearing up to increase coal imports significantly following the passage of the pass-through mechanism by the Cabinet.
But whether they gain from a further softening of global prices will depend on developments in China and the US, as the two economies take steps towards their stated goal of protecting the environment by restricting coal usage.
China plans to ban imports of lower calorific value thermal coal, which is being widely seen as an effort to support struggling local miners.
Though there are early reports that this plan might eventually be dropped following protests by Chinese power producers, the ban, if it indeed comes, will impact sale of low-grade coal from Indonesia, and also some high-sulphur coal from the US.
These coals may get replaced by imports from Australia and South Africa.
And if that happens, it’s good news for Indian users of low-grade Indonesian coal, whose prices have remained stable despite weakening global prices as Indian importers have flocked to Indonesia following a recent hike in low-grade prices by Coal India.
Consider this: OPG Power Ventures Plc, which is operating and developing power projects in India has just extended its arrangement with its current principal Indonesian coal supplier for another year at prices below spot rates but around 4% higher than its previous contract.
However, if Indonesian coal fails to enter the Chinese market, prices are expected to come down.
“Post the correction in June, thermal coal prices are expected to remain range-bound in the second half of calendar 2013 with production cuts to provide support into any further weakness. Any movement will depend on how exchange rates play out. Further, the final decision over the ban on low-grade coal imports by China would be the key trigger for low-grade Indonesian coal prices,” Religare said in a report.
Even as China mulls banning low-grade imports, the US, the biggest energy player, has already announced plans to cut down coal burning at power plants under a programme, which is being variously described by the media as President Obama’s war on coal and his blow to job creation.
The proposal to cut down carbon dioxide emissions from new and existing power plants may threaten the existence of many coal mines, as alleged by Obama’s political opponents.
This development in the US comes when low-cost natural gas has widely replaced coal in power plants.
As per a US Energy Information Administration report, 80% of new power capacities would go for natural gas in 2013, doubling from last year.
While the US and China try to move away from coal, India has been embracing the polluting fuel like never before even as it doubles the price of natural gas next year.
As Coal India, the country’s primary supplier, falters in raising supplies – dispatches in the first quarter are up just 2%, against the target of 5% – the plans of the world’s two biggest economies, if and when they fruition, will bring some good news for the domestic power plants clamouring for coal.
Till now, the depreciating rupee has nullified the benefit of easing global prices.
“Rupee has depreciated to 60 a dollar, but coal prices at Richard Bay index, too, have declined to $74/tonne, a three-year low, nullifying the possible impact on landed cost of imported coal. Adjusting for rupee, coal prices declined in the first quarter by 2.2% on-quarter and 11.2% on-year,” Motilal Oswal said in a report.
Not only coal, even coking coal, used by steel makers, is under pressure.
Yanzhou Coal Mining, a major mining company in eastern China, has just cut coke prices by 10%, for the fourth time this year, resulting in prices dropping from about 1,090 yuan per tonne in April to about 800 yuan now.
But as more and more global miners, like Glencore Xstrata, cut production,
a further fall in prices might get arrested. Until then, Indian importers can keep smiling.
Found Origina post here : http://www.dnaindia.com/money/1858458/report-china-us-curbs-can-help-local-coal-importers
-----------------------------------------------------------But whether they gain from a further softening of global prices will depend on developments in China and the US, as the two economies take steps towards their stated goal of protecting the environment by restricting coal usage.
China plans to ban imports of lower calorific value thermal coal, which is being widely seen as an effort to support struggling local miners.
Though there are early reports that this plan might eventually be dropped following protests by Chinese power producers, the ban, if it indeed comes, will impact sale of low-grade coal from Indonesia, and also some high-sulphur coal from the US.
These coals may get replaced by imports from Australia and South Africa.
And if that happens, it’s good news for Indian users of low-grade Indonesian coal, whose prices have remained stable despite weakening global prices as Indian importers have flocked to Indonesia following a recent hike in low-grade prices by Coal India.
Consider this: OPG Power Ventures Plc, which is operating and developing power projects in India has just extended its arrangement with its current principal Indonesian coal supplier for another year at prices below spot rates but around 4% higher than its previous contract.
However, if Indonesian coal fails to enter the Chinese market, prices are expected to come down.
“Post the correction in June, thermal coal prices are expected to remain range-bound in the second half of calendar 2013 with production cuts to provide support into any further weakness. Any movement will depend on how exchange rates play out. Further, the final decision over the ban on low-grade coal imports by China would be the key trigger for low-grade Indonesian coal prices,” Religare said in a report.
Even as China mulls banning low-grade imports, the US, the biggest energy player, has already announced plans to cut down coal burning at power plants under a programme, which is being variously described by the media as President Obama’s war on coal and his blow to job creation.
The proposal to cut down carbon dioxide emissions from new and existing power plants may threaten the existence of many coal mines, as alleged by Obama’s political opponents.
This development in the US comes when low-cost natural gas has widely replaced coal in power plants.
As per a US Energy Information Administration report, 80% of new power capacities would go for natural gas in 2013, doubling from last year.
While the US and China try to move away from coal, India has been embracing the polluting fuel like never before even as it doubles the price of natural gas next year.
As Coal India, the country’s primary supplier, falters in raising supplies – dispatches in the first quarter are up just 2%, against the target of 5% – the plans of the world’s two biggest economies, if and when they fruition, will bring some good news for the domestic power plants clamouring for coal.
Till now, the depreciating rupee has nullified the benefit of easing global prices.
“Rupee has depreciated to 60 a dollar, but coal prices at Richard Bay index, too, have declined to $74/tonne, a three-year low, nullifying the possible impact on landed cost of imported coal. Adjusting for rupee, coal prices declined in the first quarter by 2.2% on-quarter and 11.2% on-year,” Motilal Oswal said in a report.
Not only coal, even coking coal, used by steel makers, is under pressure.
Yanzhou Coal Mining, a major mining company in eastern China, has just cut coke prices by 10%, for the fourth time this year, resulting in prices dropping from about 1,090 yuan per tonne in April to about 800 yuan now.
But as more and more global miners, like Glencore Xstrata, cut production,
a further fall in prices might get arrested. Until then, Indian importers can keep smiling.
Found Origina post here : http://www.dnaindia.com/money/1858458/report-china-us-curbs-can-help-local-coal-importers
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