Rising demand from China and India, coupled with global recovery, is driving thermal coal prices that have appreciated by about a fourth in the past few months.
Trade sources expect global prices to remain strong and go up further going forward.
China, which turned a net importer of coal about two years ago, is expected to remain a net importer this year too.
In 2009, China's coal imports more than doubled to 130 million tonnes from the previous year. Closure of smaller mines, coupled with increased demand from power sector, has triggered China's demand for imported coal.
Thermal capacities up
India has emerged as one of the major buyers of global coal, with imports doubling in the past four years. The imports are likely to be around 90 million tonnes for the current year as it adds new thermal capacities. India imports about three-fourths of its coal requirement from Indonesia, while South Africa accounts for the rest.
The Asian benchmark thermal coal prices at Australia's Newcastle port have moved up by a fourth from around $76 a tonne CIF (cost, insurance and freight) in October to $101 in March.
“The global prices are likely to move up by another 15-20 per cent in the near term,” said Mr P.S. Bhattacharyya, Chairman, Coal India, the largest producer world wide. However, Coal India does not have any plans to revise its prices tracking the global prices, he said.
Coal India is likely to turn a net importer this year as it expects to import some eight million tonnes. The Singareni Collieries Company Ltd, which revised its prices upwards at the beginning of April and does not have any immediate plans to hike prices, company sources said.
The coal prices depend upon the ash content and the calorific value. The average prices of the Indian thermal coal are almost half of the global prices mainly due to high ash content and low calorific value.
Bulk of the imported coal in India is used by power companies, which use it to blend with the local coal to improve calorific value. Domestic coal has a calorific value of 3,000 Kilo Calories (kcal) per kg, whereas the coal imported from Australia and Indonesia has a calorific value of 6,000 kcal.
CIL investments
In a bid to wash its coal to reduce ash content and improve the calorific value, Coal India is investing about $480 million over the next five years to set up some 20 washeries.
The average price of CIL's coal was around $20 dollars per tonne with the lowest being $11 per tonne and the highest at $35 per tonne, Mr Bhattacharrya said, while the global average was around $45 per tonne freight on board.
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