Japan utilities, Glencore set annual coal contract at $110/T: sources

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Japanese utilities and global mining giant Glencore have settled an Australian thermal coal import contract for April 2018-March 2019 at $110 a tonne, according to several people with knowledge of the matter.

The deals were struck between Glencore and Japanese utilities such as Shikoku Electric, Chugoku Electric and Kansai Electric after bilateral talks, a source at a Japanese coal buyer said, requesting anonymity as he was not allowed to speak in public about commercial deals.

Glencore did not respond to a request for comment.

A Chugoku Electric spokesman confirmed the utility struck some annual contracts at $110 a tonne with Glencore, but said other deals were agreed at different levels or index-linked prices.

Shikoku Electric said it settled the April-March contract with Glencore last month but declined to disclose the price. Kansai Electric declined to comment.

“We’ve agreed with Glencore at $110 per tonne for the April-March contract late last month,” said another source at a utility directly involved in the talks, also declining to be named.

A trader with a major commodity merchant also confirmed the deals.

The deal marks a breakthrough after Japan’s Tohoku Electric and Glencore, the world’s biggest exporter of seaborne thermal coal, failed earlier this year to agree an annual supply deal that has in the past been used as an industry benchmark.

The contractual price came in nearly 30 percent higher than an annual supply price a year earlier, and 16 percent above a deal for October 2017-September 2018, reflecting a tighter global market for the world’s dominant power generation fuel.

Australian spot thermal coal cargo prices have hit several six-year highs in recent months, and at $120 per tonne remain a third above this year’s lows in April, pushed up by a summer heatwave across the northern hemisphere as well as output cuts in China, the world’s biggest consumer of coal.

CLARITY

The deals between Japanese utilities and Glencore give coal markets welcome clarity after Tohoku and Glencore abandoned their talks on an annual contract that traditionally set prices for the region.

With annual imports of around 115 million tonnes, Japan is one of the world’s biggest importers of thermal coal. Its utilities buy around 40 percent of all Australian thermal coal exports.

But volumes under the long-term contract have been declining as utilities try to diversify supply sources and trade more in the spot market as part of Japan’s energy market liberalization.

Still, miners say term contracts will remain important.

“End users like to have a mix of spot exposure and they like to have some certainty in their portfolios – as, I have to say, producers also benefit from,” Paul Flynn, Chief Executive at Whitehaven Coal said in an earnings conference call on Tuesday. Japan is Whitehaven’s biggest customer.

“Despite the gyrations that you’ve seen over the last 18 months and two years, in particular, with the setting of those prices, I think both sides of that equation continue to have a commitment to maintain both pricing regimes.”

In a sign the decades-old practice of buyers and miners bilaterally working out a fixed price will continue, Tohoku and Glencore have already begun preliminary talks on an October 2018-September 2019 annual contract, multiple sources said.

Source: REUTERS

China coal output hits lowest in years, but heatwave boosts power generation

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China’s coal output fell 2 percent in July to its lowest in years as Beijing’s crackdown on polluting industries crimped mining in the world’s top consumer of the fuel, driving import demand as hot weather boosted thermal power generation.

The country produced 281.5 million tonnes of coal in July, down 2 percent from the same month last year and the lowest since September 2016, the National Bureau of Statistics said on Tuesday.

The drop came as a heatwave scorched the nation, prolonging a hotter-than-average summer and helping push coal imports to their highest in 4-1/2 years.

That underscores the challenge for China as it aims to wean the nation off its favourite fuel as part of its war on smog.

The sizzling weather boosted output of thermal electricity, generated almost entirely by coal-fired capacity and the country’s main source of power, along with hydropower.

“Coal miners were not under big pressure to ensure coal supplies this summer since China bought lots of coal from the overseas market while stocks at ports have been at a high level,” said Wang Fei, coal analyst at Huaan Futures.

Chinese coal output over the first seven months of 2018 reached 1.98 billion tonnes, up 3.4 percent compared with the same period last year, the data showed on Tuesday.

The production of coke used in steelmaking fell 4.3 percent in July to 35.51 million tonnes, its lowest since December 2017.

Year-to-date output was 247.46 million tonnes, down 3.3 percent.

Source: REUTERS

Aluminium sector faces coal shortage

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The ongoing coal shortage has begun affecting other segments besides power plants and the railways, with the Federation of Indian Mineral Industries (FIMI) stating on Wednesday that aluminium makers are seeing an adverse impact on their refinery and smelting operations. The reason, FIMI Secretary General R K Sharma said, is that these manufacturers are unable to run their captive power plants due to the coal shortage. The low availability of railway rakes is exacerbating the issue, he added.

According to FIMI, coal is usually allotted to primary aluminium smelters by Coal India Ltd (CIL) or its subsidiary through linkages by way of FSAs (fuel supply agreement). “However, both aluminium smelters and refineries being under non-core category, the supply of coal to aluminium sector is severely affected due to priority given to core sectors by CIL,” it claimed on Wednesday.

The industry body also noted that it had earlier requested the coal secretary to include the aluminium sector in the core category to ensure regular coal supplies, but no relief has been given yet. The industry had already faced an acute coal shortage in September 2017 due to restricted supply to non-core sectors.

Source: THE NEW INDIA EXPRESS

Private power companies seek more coal to soften prices

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Private power producers are complaining they pay more for coal than other sectors in some auctions, and have sought higher supplies to soften prices.

The Association of Power Producers says non-power consumers paid Rs 1,649 per tonne for G-11grade coal against the notified price of Rs 1,145 per tonne, while power producers paid Rs 80 more for the same grade although the notified price was Rs 955 per tonne.

“Thus retail power sector customers are paying more for the same grade of coal than the unregulated sector customers,” said Ashok Khurana, director general at the association.

Coal India will offer 42 million tonnes under special forward e-auctions in 2018-19, same as last year but 34% lower than 2016-17. Lesser coal is offered mainly because of lower supply by South Eastern Coalfields and Mahanadi Coalfields, which contribute more than 50% of Coal India’s output.

Coal offered by South Eastern Coalfields fell from 26.62 million tonnes in 2016-17 to 8.6 million tonnes in 2017-18. For Mahanadi Coalfields, it fell from 9.76 million tonnes in 2016-17 to 2 million tonnes. The association wants Coal India to offer more coal so that tariffs are not increased.

Source: THE ECONOMIC TIMES

Coal India arm incurs Rs 95 cr loss on blending steel grade coal with inferior type: CAG

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Coal India arm BCCL suffered Rs 95 crore loss due to blending inferior grade coal with superior steel quality dry-fuel, the government auditor CAG has said. Bharat Coking Coal Ltd (BCCL), one of the fossil fuel producing subsidiaries of CIL, is engaged in mining, washing and distribution of coal to meet the energy requirement of its consumers and produces both coking and non-coking coal.

“Steel grade coal is precious, fetches higher revenue and can be used directly by consumers in the steel sector. Due to relatively low ash content, it does not require washing. However, BCCL blended steel grade coal with inferior washery grade coal in its four washeries, instead of supplying the steel grade coal directly to customers and earning higher revenue,” the CAG has said in its latest report.

This has resulted in loss of Rs 95.09 crore to the company during 2013-14 to 2015-16, worked out on a conservative basis, it said.

Coking coal having less than 18 per cent ash is termed as steel grade coal, which can be used directly by consumers in the steel sector.

Coal having higher ash content (18 per cent to 35 per cent) is termed washery grade coal and requires washing to make it suitable for use in production of steel.

During 2013-14 to 2015-16, BCCL fed 26.33 lakh tonnes of coking coal into its four washeries by blending 13.91 lakh tonnes of steel grade coal with 12.42 lakh tonne washery grade coal, which finally yielded only 6.64 lakh tonne of washed coal (25 per cent) along with middling, slurry and rejects, it said.

The government auditor pointed out that this was done by BCCL despite having a memorandum of understanding (MOU) with Tata Steel and SAIL for supply of raw steel grade coking coal.

The company was to supply 25 lakh tonnes of raw coking coal to Tata Steel in 2013-14, which it could not supply, it said.

BCCL had also agreed to supply 12 lakh tonnes of steel grade raw coking coal to SAIL during 2014-15 to 2015-16, against which the company could supply only 1.02 lakh tonne, it said.

The yield of washed coal, even after blending of steel grade coal, was abnormally low during 2013-16, when compared to prior and subsequent periods, CAG said, and recommended for a critical review of the output to assure that the interests of the company have not been compromised.

Source: PTI

Coal India Q1 profit jumps 61% to Rs 3,786 cr, production rises 15%

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Coal India has reported massive 61.1 percent year-on-year growth in consolidated net profit to Rs 3,786.4 crore, driven by growth across the board.

Profit in the year-ago period was at Rs 2,350.8 crore.

Consolidated revenue during the quarter increased 26.6 percent to Rs 24,260.9 crore compared to Rs 19,161.7 crore in the corresponding period last fiscal.

Coal India said production for the quarter grew by 15.23 percent year-on-year to 136.9 million tonnes and offtake rose by 11.7 percent to 153.5 million tonnes.

EBITDA (earnings before interest, tax, depreciation and amortisation) in Q1 surged 62.8 percent to Rs 5,732.5 crore and margin expanded by 520 basis points to 23.6 percent YoY.

Source: MONEYCONTROL

Anglo Pacific buys iron ore royalty stake, seeks more deals

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London-listed Anglo Pacific Group has bought a 4.25 percent stake in Canada’s Labrador Iron Ore Royalty Corp (LIORC) for $50 million and hopes to do two more deals this year to broaden its portfolio, the company said on Thursday.

Anglo Pacific shares were up 2.5 percent by 1053 GMT, while the wider sector had gained 1 percent.

Chief executive Julian Treger said the deal locked on to Chinese demand for high-quality iron ore, used in steel-making, which has traded at a premium over lower-quality, more polluting grades as the world’s biggest commodity market seeks to reduce its emissions.

He said the group, the only mining royalties company listed in London, aimed to do further deals.

“Our intention would be to make another two acquisitions this year, one development royalty and one producing royalty,” he said in a telephone interview.

A mining royalty provides the holder with the right to a share of revenue, profit or production. Historically royalties resulted from the sale of a mineral property, but increasingly they are created by operators or developers as a source of finance.

Anglo Pacific’s profits have risen as miners struggling to raise capital on equity markets have increased their use of development royalties.

The company in March said its income from mining royalties increased 90 percent last year and its free cash flow more than tripled, positioning it to acquire a broader range of royalty assets.

Its flagship royalty is for the Kestrel mine in Australia, which Rio Tinto sold early this year as it ended its exposure to coal production. Kestrel’s output has since risen, boosting Anglo Pacific’s earnings as it retained the royalty despite Rio’s mine sale.

Thursday’s deal cuts Anglo Pacific’s percentage exposure to coking coal to 41 percent from 49 percent, while its iron ore exposure rises to 20 percent from 5 percent.

LIORC has a 15 percent stake in the Iron Ore Company of Canada (IOC), which is 59 percent owned by Rio Tinto and 26 percent by Japan’s Mitsubishi Corporation.

Sources say Rio Tinto is looking at a sale or a public listing of the IOC unit, which Treger said could give LIORC a further boost. Rio Tinto said it could not comment.

Source: REUTERS

Australia’s Mount Gibson expects iron ore sales to slip in 2018-2019

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Australian iron ore miner Mount Gibson said Wednesday that it is expecting sales of its product to ease in fiscal 2018-2019 (July-June), and for all-in group cash costs to rise, as it wraps up production from its Mid West operations and prepares to restart the high grade Koolan Island project.

The miner has given iron ore sales guidance for the current fiscal of 2.7-3.3 million wet mt, which compares with actual sales of 3.6 million wmt in fiscal 2017-2018. All-in group costs are pegged at A$52/wmt-A$57/wmt ($37.56/wmt-$41.17/wmt) FOB, up from A$45/wmt in the last fiscal, it said.

Mount Gibson is planning to complete mining at its Mid West business later this year, and commence ore sales from its Koolan Island project in January-March next year.

Shipments from the Mid West operations, which include Iron Hill and Extension Hill, are expected in the March quarter next year, while the Koolan Island project is over 80% complete and scheduled to start sales in the same quarter, the company said.

The miner expects the average grade of Koolan iron ore to be 65.5% Fe, which compares to Iron Hill, which typically sees a grade around 59% Fe for its standard direct shipping ore fines.

Almost 70 million mt of high grade (67% Fe) iron ore was mined by BHP from Koolan Island from 1959 to 1993. Operations were suspended in November 2014 following a seawall failure, which resulted in the flooding of the main pit.

Site cash cost guidance for the Mid West operations for 2018-2019 is A$38/wmt-A$42/wmt against Koolan Island, which is A$70/wmt-A$75/wmt.

Source: S&P GLOBAL PLATTS

Sponge iron makers urges steel min to ensure raw material supply

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The Steel Ministry assured sponge iron producers that steps would be taken to address their concerns as the industry pitched for ensuring availability of non-coking coal and checking rising prices of iron ore.

Steel Minister Chaudhary Birender Singh at a conference here said that steps will be taken to address the concerns of the sponge iron industry.

Without elaborating on the steps, he stressed that the ministry has always taken action required in a particular situation.

Sponge iron producers are facing issues like interrupted supply of raw materials and high prices of iron ore, Sponge Iron Manufacturers Association (SIMA) Executive Director Deependra Kashiva said on the sidelines of India International DRI Summit here.

The industry urged the steel ministry to ensure availability non-coking coal and check rising prices of iron ore, he said.

“We have told the minister the issues being faced by sponge iron manufactures in India. Iron ore is coming at very high rates. Iron ore rate varies from state to state and non coking coal which is very much available in the country is being imported from countries like South Africa to run the units. The non coking coal is being diverted to power plants,” Kashiva said.

Sponge iron or direct reduced iron (DRI) is used in producing semi-finished steel items, ingots and billets, which are further used to make various finished steel items. Iron ore and non-coking coal are main raw materials used to produce sponge iron.

The minister noted that India’s sponge iron production has grown 25 per cent to 28.5 million tonnes in last four financial years, he said.

“The National Steel Policy 2017 lays out an ambitious growth path for India’s sponge iron industry. Sponge Iron production is anticipated to reach 80 million tonnes by 2030-31,” the minister said.

While acknowledging that the sponge iron industry plays an important role in providing employment, Singh said that “gas-based plants have been facing challenges like non availability of gas. These issues have been also taken up by the ministry.

I am sure in the coming years, gas availability will improve further. By 2031, share of gas based capacity is expected to grow to about 30 per cent.

Source: PTI

KIOCL & RINL JV iron ore pellet plant to come up in Vizag

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Board of KIOCL Limited, formerly Kudremukh Iron Ore Company Ltd, a public sector organisation under the Ministry of Steel, has approved the technoeconomic feasibility report (TEFR) for establishing a two million tonne iron ore pellet plant in Visakhapatnam with an investment of INR 900 crore.

KIOCL Ltd entered into a joint venture with Rashtriya Ispat Nigam Limited (RINL) last year for the greenfield pellet plant. The supply of pellets, going by the present cost, will benefit RINL by at least INR 2,000 per tonne towards freight cost. At present, RINL is meeting its pellet requirement with supply from Mangalore.

In an exclusive interview, KIOCL Ltd CMD MV Subba Rao told The Hindu that they were expecting a detailed project report from MECON by this month-end, after which they would start work on the project in an area of 75 acres to be allotted by RINL at Ukkunagaram. The steel plant is located at Ukkunagaram.

Stating that the plant would be commissioned by 2021, he said they had supplied three lakh tonne of pellets to RINL last year.

He said their board had cleared the proposal for setting up of a two lakh tonne ductile iron span pipe unit, two lakh tonne coke oven, and a 10 megawatt power plant using waste gases with a total investment of INR 850 crore at Mangalore. The deadline set for completing the project is 2020.

KIOCL Ltd is also exploring the possibility of establishing a 1.5 million tonne pellet plant in collaboration with SAIL Bokaro Steel Plant. Admitting that they had closed the captive mines at Kudremukh in 2006 due to environmental issues, he said they had obtained statutory clearances for mining in 475 hectares in Bellary, Karnataka. It would provide KIOCL Ltd the much-needed raw material security, he remarked.

Source: THE HINDU