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Power companies rush to fix coal import deals amid fall in global prices

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It's busy season for the power sector with regards to coal imports as entities like NTPC, Madhya Pradesh Power Genco, MSTC and others are all finalising their import deals this week. Such has been the rush that suppliers have even requested these entities to space out their finalisation process so that deals don't get overlapped.

The sudden demand for imports has been triggered largely due to critically low coal stocks at many of the power plants specially those located away from the coal mines. Also, a combination of continued slide in global coal prices and even freight costs is making imports much more attractive, coal importers told dna.

"Many power utilities like NTPC, MPPGCL, HPGCL etc. have floated tenders for imported coal supplies. Hence all the prospective bidders shall remain occupied in the upcoming fortnight. Therefore, we request you to kindly extend the bid submission by minimum 15 days enabling more participation in the tender," a coal importer recently asked MSTC, a public-sector trader in commodities which is in the process of fixing deals for the imports.

MSTC, which supplies coal, iron ore and other minerals to state-owned as well as private sector players, had earlier invited offers from bidders for import of non-coking coal to power utilities for the next 12 months.
While MSTC hasn't decided upon the quantity yet, it has asked commitment of at least 0.5 million tonne of coal.

Power producers too are making their own import arrangements.

NTPC is current finalising import contracts for 5 million tonne of coal for its power plants in Talcher, Kaniha, Farakka, Kahalgaon, Badarpur, Simhadri, Ramgundam, Dadri, Unchahar, Sipat, Korba, Mouda, Rihand and Vindhyachal.

MP Power Generating Co, at the same time is firming up shipment of 7 lakh tonne including 2 lakh tonne each for units in Sarni, Khandwa, Chachai and 1 lakh tonne for Birsinghpur.

Interestingly, the sudden spurt in demand comes at a time when domestic availability is going up.

Coal India, after a long gap, was able to surpass its monthly target, producing 40.20 million tonne in October, beating its target of 39.74 mt for the month. It, however, missed its target of 259.85 mt for the first seven months of the current fiscal, producing 250.96 mt.

Private players are also working overtime in producing their captive blocks to mine coal as they have only six months before which the mines would be taken away following the Supreme Court directive.

"Higher production from Coal India plus greater productivity by private sector mines can't possibility fill up the surge in domestic demand of the power sector. Falling global commodity prices and also easing of freight costs triggered by sharp drop in crude oil prices have turned imports lucrative enough," VK Arora, president, Karam Chand Thapar & Bros. (Coal Sales) Ltd, a leading commodity trader, said.

Import price of coal from Indonesia having Gross Calorific Value of 5900 was $64-65 a tonne FOB (or Free On Board excluding ocean freight) during end-September. It is ruling below $60 now. The drop is explained partly by $2-3 fall in freight costs, Arora said.

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