06-07-2016

World’s Biggest Coal Producer Exploring Exports to Trim Glut

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Coal India Ltd., the world’s largest producer, is exploring options to export the fuel amid rising production and mounting stockpiles.

The state-run miner, which produces the bulk of the country’s coal, is “exploring avenues to export” amid record production, Coal Secretary Anil Swarup wrote on Twitter on Tuesday. Demand from power producers, the company’s biggest customers, has lagged output, leading to rising stockpiles at plants and the company’s own mines. The country has exported the equivalent of 0.2 percent of total production, according to the latest available data.

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“We don’t want inventories to build up,” said S.N. Prasad, director of marketing at Coal India. “That is why we are looking at all possible opportunities to sell coal.”

Coal producers from Australia to the U.S. have been punished by a growing glut of the fuel as countries seek cleaner forms of energy and as ample supplies of natural gas make it a cost-competitive alternative. Thermal coal at Australia’s port of Newcastle, a benchmark in Asia, has rebounded since hitting the lowest since 2006 in January and prices are on pace to halt five years of declines.

Coal India rose as much as 0.8 percent to 320.50 rupees, headed for the highest level since March, and traded 0.4 percent higher as of 12:33 p.m. in Mumbai. The benchmark S&P BSE Sensex fell 0.3 percent.

Record Production

Coal India boosted output 8.5 percent to 536 million metric tons in the year ended March 31, a record annual haul. Production in June was 10 percent higher from the same month last year, though it still missed output and off-take targets.

The company increased prices of lower-grade coal, a staple for Indian power plants, by as much as 19 percent in May, at a time when cash-strapped regional power retailers are curtailing purchases because they can’t afford the cost of electricity.

Tepid demand from cash-strapped regional power retailers has left Coal India with 45 million to 50 million tons stockpiled at its mines, said Abhishek Jain, an analyst at India Nivesh Securities Ltd.

“The company might be looking at exports to nearby countries like Nepal and Bangladesh,” he said. “But it won’t be more than 5 million to 10 million in a year.”

Coal India is in talks to supply fuel to NTPC Ltd.’s 1,320 megawatt power plant being built in Bangladesh, Prasad said.

India’s total coal imports reached 212.1 million tons in the year to March 2015, up 27 percent from the previous year and dwarfing exports of 1.24 million tons, according to government statistics. Total production of coal, from private and public companies, rose to 612.4 million tons, according to the data.

Source: Bloomberg

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