Coal news and updates

Shree Cement looks to enter into offtake deals with US miners

September 6: Shree Cement Ltd, northern India's leading cement maker, is in talks with US-based miners to enter into offtake agreement to procure around 0.5 million tons of high sulphur and high calorific value steam coal, a company source told ICMW.

"We are in talks to enter into offtake agreements with some US miners. There will be no buying of stakes. We will pay advance and enter into offtake agreements and this advance would be adjusted in the future delivery of cargos," the source said.

The source further said that talks are on with 4-5 miners of Kentucky in the Central Appalachian region, which is likely to be finalised by end-September or early-October.

"The talks are moving in such a way that we will pay the miner an advance to procure about 0.5 million tons of high sulphur coal. The advance would be adjusted at the rate of 25% in each cargo as we plan to take the entire material in 4 shipments – one in each quarter," the source added.

Explaining the deal, the source said: "It is very simple. We will pay advance to them and, in return, will take a discount on the coal price. And the entire amount of advance would be adjusted in four cargos."

Asked whether they have been encouraged to enter into such deals because of softness in US coal prices due to increased use of shale gas, he said, "It is not related to shale gas price or its availability."

"There are right now many mines in the US which are not producing because they are unable to sell. We will basically provide them an opportunity to mine the coal and take that coal at a discount. If we provide advances to them, their cost of production will come down. It will also help them to keep the mine running because whether this happens or not, they have to incur a fixed cost and this deal will help them recover this."