Coal news and updates

Indian coal consumers may resume buying from September

August 29: Indian coal consumers, particularly from the cement and sponge iron sectors, are expected to re-start buying from the middle of September as their monsoon stocks fall, traders believe.

"Not only their stocks, the build-up before the beginning of the monsoon season in the country, are likely to exhaust in the coming days, but the uncertainty over continued depreciation in the rupee against the dollar is also expected to stabilise by then," they said.

The rupee started its downward march against the dollar since June this year and has fallen nearly 20% during the period to a low of Rs 68 to a dollar, with an almost 10% fall witnessed in August alone.

Despite the depreciation in the rupee, coal imports into the country have not been affected much, till now, as imports by power utilities have risen sharply.

In fact, total coal imports by power utilities in the country during the first four months (April-July) of 2013-14 stood at 29.67 mt compared to 16.99 mt during the corresponding period of 2012-13.

The import of steam coal by Indian power utilities, including imported coal-based plants, in July 2013 rose 0.40% to 7.47 million tons (mt) from 7.44 mt in June 2013, according to provisional data of the Central Electricity Authority (CEA) available with ICMW.

The imports in July 2013 were, however, up by 86.28% or by 3.46 mt from 4.01 mt imported in July 2012.

"So, in a way, an expected sharp decline in imports by cement and sponge iron makers was offset, to a great extent, by higher imports by power utilities," an official with a leading trading company said.

"It is expected that the sponge iron sector, which is currently operating at around 50% capacity utilisation, and cement companies, which are operating at about 70% capacity utilisation, will witness improvement in capacity utilisation post monsoon as demand for steel and cement will pick up from October," said a second trader.

In anticipation of higher demand for their products post-monsoon, i.e. from October onwards, these industries would start purchasing coal from September, they feel.

"It is not only the demand factor, but the sharp swing in the rupee, which is also likely to stabilise in the next few days, as pressure in mounting on the government to act fast and initiatives are likely to bear fruit from the middle of September," said a third trader.

"There is a strong possibility of the rupee stabilising at around Rs 64-65 against one dollar and, once that happens, Indian coal buyers are likely to get activated," he added.