Indian power and steel company Essar expects to import close to 5.5 mt of thermal coal during the current Indian financial year, which runs 31 March 2016 -1 April 2017, an increase of around 15% year on year basis, KVB Reddy, chief executive of Essar Power said.
The company expects to import a similar amount of thermal coal in the next financial year, but warned future imports could be lower if Essar increases its domestic coal purchases and can take advantage of planned improvements in rail links on the east and west coasts.
“Once the rail links on the coastal railways improve, we will be using more domestic coal,” Reddy said.
Indian state-run Port Rail Corporation plans to align rail networks with 25 ports across the country. The company plans to invest around $646m (Rs 43bn) beginning in March next year to connect two eastern ports with coalfields in Odisha state on the east coast.
Reddy said that in the fourth quarter of 2016, Essar had started importing Indonesian thermal coal in preference to South African due to a spike in prices of the latter.
The IHS McCloskey Richards Bay FOB marker, which benchmarks prompt thermal coal values on a 6,000 kc NAR basis, rose by more than a quarter from the start of September, while the IHS Indonesian sub bituminous marker rose by 10% during the same period.
Imported thermal coal feeds into Essar’s coal power plant assets in the west, central and eastern part of the country. The plants have a generation capacity of 4.7 GW, and this is expected to expand to 6.2 GW by 2017-18.
In terms of freight charges influencing the company’s choice of import origin, there was little to choose between them.
“Freight charges are not very high these days from South Africa or Indonesia,” Reddy said.
The freight rate for Richards Bay to Indian west coast ports in a Capesize vessel is less than $5.00/t, while Panamax freights from Indonesia to Indian east coast ports is around $5.50/t and a Supramax for the same route is less than $6.00/t, industry sources said.
India imported 3.18 mt of bituminous coal in Sep