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Imported coal gets cheaper, brings cheer to thermal plants

A steep fall in imported coal prices has brought cheer to India's portbased thermal plants. Industry executives say imported coal is now cheaper by at least Rs 200 a tonne at ports against similar grade fuel produced by state-run Coal India

However, power plants located far away from ports are not likely to benefit much, considering the freight costs they will have to bear for transportation of imported coal. "This is for the first time that the price difference between imported and CIL's coal has touched Rs 200, making it very competitive to import for power plants that are not too far off from ports," Gautam Kumar, director at Asian Minerals, told ET.

"If China continues to buy less, prices are expected to remain at lower levels." Demand for coal has slumped in the international market with both China and the US cutting their imports.

While demand from China has fallen, as it has high stocks at ports and utilities do not have a purchase plan for coming months, the US is reducing its dependence on the fuel as it is shifting focus to shale gas. Indonesia, one of the word's largest coal exporters, has begun cutting production to align supply with demand.

Coal with 5000 kilo calorie of energy content has been ruling around $55.5 per tonne, while that of 4,200 kilo calorie is around $37.5 per tonne. Nevertheless, according to reports, Indonesian miners are cutting output to combat low prices," a coal trader said.

n fact, traders are finding it difficult to strike deals for 4,200 kcal Indonesian coal. Reports also suggest that cargoes of 3,800 kcal/kg coal have been offered at $30.50/mt freight on board. CILBSE 0.81 %, meanwhile, is planning to raise the price of its produce and, if that happens, the price difference between imported and locally-produced coal will rise further.

This will provide an added incentive to portbased thermal plants to import more coal. Until recently, most of these plants were having a difficult time since coal prices had reached levels that made generating power with imported coal nearly unviable.

Source: The Economic Times