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Low-cost Indonesian coal in high demand in India

With Indonesian coal prices falling to $59 per tonne (free on board), there is a new trend in fuel consumption. A number of small traders have tied up with miners of Indonesia for high sea sales of coal to fulfil the demand coming up from unconventional corners — small sponge iron units, lime factories, smokeless fuel plants, coke oven units, tea gardens and even brick kilns.

Pritam Dutta, a Kolkata-based trader, said this time there is an opportunity for coal traders to do business in larger volumes because the demands have been coming up from very unconventional corners.

Generally small consumers, who have no FSA or linkage with Coal India (CIL) and consumes below 4,200 tonne per annum, try to source coal from state trading corporations, who are allotted a CIL quota. CIL earmarks around 8 million tonne per annum for supplies to small consumers through nominated state agencies. Besides consumers try to get CIL’s e-auction coal and also purchase coal from Nagaland and Meghalaya. Petty players sometimes resort to informal means to ensure supplies to their units.

While the informal means of getting coal, popularly known as DISCO coal, has been fully sealed, there has been no supplies from Meghalaya since rat hole mining has been absolutely banned. There are very little supplies from Nagaland, inadequate to meet the demand of small players.

“In such a situation, the only domestic option left for small consumers were sourcing from state- nominated agencies and procurement through e-auction. But with prices of Indonesian coal falling and government imposing zero duty on coal, Indonesian coal has become a cheaper option for small consumers,” Dutta said.

He further added that with big consumers already flushed with coal, miners in Indonesia are unable to strike any long-term contract. In such a scenario consignments are mainly coming for small traders, who instead of handling the bulk cargo at the ports, are making high sea purchases.

Debasish Dutta, chairman of the Federation of Freight Forwarders Association, said high sea purchase is absolutely legitimate with traders lifting coal paying a 2% CENVAT. Buyers tied up with traders, in whose name the consignment comes, make the purchase at a spot price on the high seas. Buyers generally lift the coal in small barges or vessels and directly carry to its consuming point. “In the newly emerged scenario many traders both from India and Bangladesh are trying to make an entry into the new space tying up with the miners of Indonesia,” Dutta said.

Assadullah Choudhury, a Dhaka-based trader, said there has been a lot of interest generated about Indonesian coal in North-East India and Bangladesh as well. Transporting coal to NE and Bangladesh, after high sea purchases, has become an easy affair because of increased navigability of Brahmaputra after the establishment of a new port and creation of national waterways-2 between Sadiya and Dhupri.

source: http://www.financialexpress.com