Iron ore crisis to slow steel capacity expansion after 2020
The country is likely to face a major iron ore crisis due to the lapse of key operating mines by March 31, 2020. The deficit in domestic iron ore supplies after March 2020 is seen at around 80 million tonne. This, in turn, is bound to put brakes on building India's steel-making capacity as it targets an ambitious 300 million tonne (mt) output by 2030.
Supplies in iron ore would be more pronounced in Odisha, the largest producing state where 17 mines are set to run out of operations. The combined annual capacity of these mines is estimated at 66 mt. The shortfall from Odisha would especially hurt the domestic steel companies as the state's iron ore is predominantly used in within the country as opposed to the export-oriented ore in Goa and Karnataka.
"We had earlier requested the government to extend the validity of such mines. There will be chaos if the mines are thrown out of operations. Steel plants without captive iron ore sources will suffer the most, they will have to fall back on imports”, said R K Sharma, Secretary General, Federation of Indian Mineral Industries (Fimi).
Data by the Indian Bureau of Mines (IBM) suggests that 250 such mines are going to expire by March 2020. Of this, barely 50 are currently in operations. The Union ministry has been issuing reminders to states asking them to work on a roadmap to enable auctioning of such mines. No roadmap is, however, ready yet.
By 2020, the demand for domestic iron ore is pegged at 234 mt which is further projected to escalate to 447 mt by 2030.
A spokesperson at Essar Steel said, “The government has already initiated the process of auctioning iron ore mines and to get them operational. Also, many of the steel companies have captive mines to meet their requirements either fully or partially. Further, in addition to the state-owned companies, private miners also meet the requirement of steel companies. In any case, the import option is always available if the prices are favourable.”
As per the provisions of the amended Mines and Minerals (Development & Regulation) Act, the validity of existing non-merchant mines has been extended till March, 2020 while those of captive leases have been extended till 2030. Major mining leases that will lapse by 2020 include Rungta Mines, KJS Ahluwalia, Serajuddin & Co, Kaypee Enterprises, Kalinga Mining Corporation, Mid East Integrated Steel Ltd, KN Ram, RB Das, Tarini Prasad Mohanty, KC Pradhan and Lal Traders.
Iron ore blocks going for auctions need to be explored at least up to G2 level as per the policy of the Government of India. Most of the mining leases expiring in 2020 have not been explored to that level. There is an exploratory obligation on the holder of the mining lease as per the conditions laid down in the approved mining plan under the Mineral Concession Development Rules (MCDR), 1988. Further, Rule 22 of Mineral Auction Rules 2015 stipulates license holders to complete detailed exploration at G1 level and prepare a detailed feasibility study report, over the entire area under the mining lease, within a period of five years from the date of commencement of such mining lease.
SC asks Karnataka govt for alternatives to e-auction of iron ore
The Supreme Court on Tuesday asked the Karnataka government to indicate alternatives to e-auction of iron ore in the state.
A bench comprising justices Ranjan Gogoi, P.C. Pant and Navin Sinha was hearing a batch of pleas relating to iron ore mining in Karnataka. The court had earlier asked the central empowered committee (CEC) to ascertain whether e-auction of iron ores is still preferable in the state.
Several mining companies and the Federation of Indian Mineral Industries (FIMI), a mining industry body had sought a halt on e-auction for sale of iron and manganese ores in Karnataka as per the apex court’s 2013 directions.
In April 2013, the court had ordered that all sales of iron and manganese ores in Karnataka should be only through e-auctions that will be monitored and overseen by the CEC. It also ordered several measures to prevent environmental damage due to mining. The court’s ruling came in a 2003 case filed by non-profit Samaj Parivartana Samudaya against large-scale depletion of forests in Karnataka due to massive illegal mining.
The apex court in its April 2013 order had also directed Karnataka to cancel 51 C-category leases for involving in rampant illegal mining and re-allot them to end users through a transparent bidding mechanism. Karnataka in January 2016 announced an e-auction of 11 of the 51 C- category mines.
FIMI and the state government have also sought the court’s nod to increase the cap on quantity of iron ore that can be mined in the state by at least 10 million metric tonnes. The court on Tuesday asked CEC to consider the plea.
China will encourage coal miners to merge, restructure - state planner
Beijing will encourage coal companies to merge and restructure to increase efficiency in the industry and take measures to return thermal coal prices to a "reasonable" range, China's economic planning agency said in a statement on Wednesday.
The comment by the state planner, the National Development and Reform Commission (NDRC), came after a meeting with coal mining firms on Tuesday as thermal coal prices continue to rally while utilities that consume the fuel lose money.
The NDRC issued a similar release on Tuesday following a gathering late last week with utilities.
Coal India FY18 production target cut on weak demand
In an unprecedented move, the Union government has reduced the production target for Coal India Ltd (CIL) from 660 million tonnes (mt) to 600 mt in the current year due to tepid demand for the fuel from thermal power plants.
CIL, the monopoly state-owned miner, has stock of around 69 mt of coal, according to a key official, who asked not to be named. In addition, power plants across the country have in their stock 26-28 mt of coal, this person added.
In 2016-17, CIL produced 554.1 mt as against a target of 598.6 mt, and despatched 543.1 mt of coal. With production exceeding despatches, CIL’s inventory (or stock) rose by around 11 mt.
CIL’s mines can produce up to 660 mt in the current year, but there is no point in stepping up production unless demand for coal improves, said another official at the miner, who, too, asked not to be identified. Pithead inventory (or stock stored near the mine) is a potential fire hazard, according to this person.
According to estimates by Motilal Oswal Securities Ltd, CIL’s sales in the current year should rise 6.8% to 580 mt, and further to 618 mt in 2018-19, despite an increase in the share of renewable energy in power generation.
A report by Nomura Securities International Inc. says CIL registered its highest ever production growth in fiscal 2016-17 with output in March exceeding even the firm’s own target by 4.5%. But sales for the month were 10.3% below target, according to Nomura.
Weak demand from thermal power plants apart, coal despatches suffered due to poor railway infrastructure, said the CIL officials cited above. Several new tracks are behind schedule, which meant sales couldn’t keep pace with expansion in production, they added.
The key problem is that Indian power plants are currently operating at 55% of their installed capacity, according to Partha S. Bhattacharyya, former chairman of CIL.
It appears that the country is focusing on renewable energy at the cost of sub-optimal capacity utilization of thermal power plants, he said. The marginal cost of scaling up generation from thermal power plants is going to be “much lower” than the cost of generating renewable power, he added.
And from the emissions standpoint, compliance with international protocols will not be difficult even if CIL produced 1 billion tonnes of coal and its entire production was consumed by power plants, he added.
CIL should explore other ways of using coal: the fuel can be processed to produce even fertilizers, Bhattacharyya said.
China to retrain 500,000 workers after massive capacity cut in steel, coal
China, the world's top steel and coal producer and consumer, today said it plans to offer free retraining to 500,000 workers made redundant during its massive capacity cuts in the strategic steel and coal sectors this year.
Subsidies will go to employers that re-employ laid-off staff in other posts inside the company, and the government will offer free retraining, the Spokesperson of the Ministry of Human Resources and Social Security Lu Aihong said.
In 2016, the central government spent over 30 billion yuan (4.4 billion U.S. dollars) in providing aid to 726,000 employees affected by the downsizing of the two heavy industries.
The work has to continue as another 50 million tonnes of steel production capacity and at least 150 million tonnes of coal capacity will be cut this year, the official Xinhua news agency reported.
According to preliminary forecasts, the coal and steel sectors will see combined laid-offs of around 1.8 million.
China is the world's largest producer and consumer of steel and coal. Cutting overcapacity is a high priority as the two industries have become a major drag on growth.
China retired 45 million tonnes of steel and 250 million tonnes of coal production capacity by the end of October last year, meeting its full-year goals ahead of schedule.
Steel capacity will be cut between 100 million tonnes and 150 million tonnes by 2020, while about a half billion tonnes of coal capacity is scheduled to be slashed in the next three to five years.
In 2017, it is important to phase out excess capacity through reforms, Premier Li Keqiang had said last year, highlighting further steps in mergers and acquisitions in steel enterprises, and the integration of coal mining and power generation.
Coal Scam: CBI Files Case Against Its Former Director Ranjit Sinha
Did Ranjit Sinha, the former director of the Central Bureau of Investigation or CBI, misuse his powers to influence the investigation in the coal scam case? Three months after the Supreme Court ordered a detailed inquiry into the matter, the agency has filed a case against its former chief. The charges involve criminal misconduct and abuse of official position. Mr Sinha has denied any wrongdoing. The scam, dubbed Coal Gate, involved the allocation of coal fields to private firms and took place when Dr Manmohan Singh was the Prime Minister.
In 2014, as Mr Sinha was about to retire as the head of the agency, allegations surfaced that he had met people accused in the case at his home as often as "50-60 times". Senior lawyer Prashant Bhushan, who took the matter to court, said Mr Sinha had compromised his agency's investigation against the people who had been accused of corruption in the allocation of coal blocks.
The court, accepting the logs from a visitors' book at Mr Sinha's home as authentic, had put the new CBI chief, Alok Verma, in charge of the investigation.
Both Alok Verma and interim chief RK Asthana had to give affidavits that investigating a former chief by CBI men will not involve a conflict of interest.While Mr Sinha was not available for comment, his lawyer Vikas Singh said he has no information about the matter.
The coal scam had hit the headlines in 2012 after an audit by the national auditor revealed that the country has lost up to Rs. 1.86 lakh crore in the process of allotting coal blocks. The allotments of mining rights over a decade were made to private firms at depressed prices, the auditor said. In 2014, the Supreme Court cancelled the allocations.
Prime Minister Manmohan Singh has not been charged with any crime, but has been investigated for criminal breach of trust and conspiracy in the allocation of a coal field in 2005 to Hindalco Industries. The firm, part of the $40 billion Aditya Birla Group, has denied that it manipulated the government and its processes.
India’s Coal Bed Methane production jumped more than 44 percent to 565 MMSCM last fiscal
India’s production of Coal Bed Methane (CBM), a clean energy source extracted from coal seams, grew more than 44 percent last financial year to around 565 million standard cubic metres (MMSCM) as compared to 393 MMSCM in 2015-2016. This comes as a major boost for the government’s efforts to cut down India’s import dependence for energy supply.
The huge growth in CBM output in 2016-17 was, however, lower than the government’s projections. India’s upstream regulator DGH had last year informed a parliamentary panel India’s CBM production was pegged to quadruple to 1,449 MMSCM at the end of 2016-2017.
Oil minister Dharmendra Pradhan had last year said in a tweet coal bed methane is likely to contribute to five percent of natural gas production by 2017. Data published by petroleum planning and analysis cell (PPAC) shows that in 2016-2017 domestic production of CBM contributed to 1.78 percent of India’s total natural gas production of over 31,000 MMSCM.
In a bid to incentivize production, the Cabinet Committee on Economic Affairs (CCEA) had last month approved a new policy allowing marketing and pricing freedom for CBM gas. The new policy allows contractors to sell CBM at arm’s length price in the domestic market. “The contractor, while discovering the market price for arm’s length sales, has to ensure a fully transparent and competitive process for sale of CBM with the objective that the best possible price is realized for the gas without any restrictive commercial practices,” said an official statement.
CBM producers hailed the new policy. “The Cabinet approval for marketing and pricing freedom will be a game-changer. Under HELP, the companies will be able to tap other hydrocarbons including shale gas,” Prashant Modi, Managing Director & Chief Executive Officer at Great Eastern Energy Corporation (GEECL), India’s first CBM producer, told ETEnergyWorld in an interview.
India houses the world’s fourth-largest coal reserves. The government has identified 26,000 square km of area for CBM operation with total estimated CBM Resources of 2,600 billion cubic meter (91.8 TCF). Of this, in-place reserves have been established at 9.9 TCF. The centre has so far awarded 33 blocks though four rounds of bidding between 2001 and 2008. However, CBM is currently produced from only four -- Jharia block in Jharkhand by ONGC, Raniganj East in West Bengal by Essar Oil Ltd, Raniganj South in West Bengal by Great Eastern Energy Corporation and Sohagpur West in Madhya Pradesh by RIL.
Also, state-run miner Coal India Ltd (CIL) plans to finally initiate a pilot study to extract coal bed methane. “Coal India is making an action plan under which the PSU will have to announce projects on coal bed methane, gasification and coal-to-liquid,” coal secretary Susheel Kumar recently told a news agency. The CCEA had originally in December 2013 approved a policy on exploration and exploitation of CBM areas under coal mining leases allotted to CIL.
CBM blocks were carved out by DGH in consultation with the coal ministry and Central Mine Planning and Design Institute (CMPDI). The 33 blocks awarded so far cover 64 percent of the total available coal bearing areas in 12 states including Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Maharashtra, Assam, Odisha, Rajasthan, Tamil Nadu, Telangana and West Bengal.
Despite the huge reserves, a mismatch exists between estimated resources and gas in-place. In its reply to a Parliamentary panel last year, the oil ministry attributed the mismatch to lack of commercially exploitable reserves. “Methane gas is always present in coal seams. However, the quantity of methane present is required to be present in commercial quantity for CBM venture to be successful. In majority of the blocks where exploration work is carried out, commercial CBM potential could not be established technically due to less quantity of gas present,” the ministry said.
The petroleum ministry gave multiple reasons for slow production of coal bed methane including overlapping with coal blocks, delay in land acquisition and statutory clearances, water handling problems and lack of gas infrastructure in CBM blocks.
Despite the hurdles, the ministry is confident of healthy growth in output going forward that will result in the share of CBM in total gas production rising to 5 per cent from the current less than 2 per cent. "Right now (August 2016), we have reached 1.456 MMSCMD as compared to 1.07 MMSCMD in 2015-16. In two years, we are expecting to reach about 5.77 million which is going to be a significant part,” the ministry told the panel.
The Parliamentary Standing Committee on Petroleum and Natural Gas headed by senior BJP leader Prahlad Joshi had recommended a slew of measures to increase the pace of CBM extraction. This included formulating a new comprehensive CBM policy, reassessment of CBM to be included in DGH’s ongoing reassessment of hydrocarbons, auctioning of new CBM blocks through HELP, formulation of a separate pricing and marketing mechanism for CBM and timely grant of clearances by state governments.
Mahagenco Quotes CIMFR Test Results: ‘90 per cent of SECL coal samples found substandard’
Approximately 90 per cent of the 513 coal samples, which were picked up from the supply of South Eastern Coalfields Limited (SECL) between September 9, 2016 and January 31, 2017, have been found to be of substandard quality by Central Institute of Mining and Fuel Research (CIMFR).
Maharashtra State Power Generation Company Limited (MSPGCL), also known as Mahagenco, which is one of the main buyers of coal from SECL, disclosed to The Indian Express these test results while talking about serious quality issues that are still present. SECL is the largest subsidiary of Coal India Limited and it has been facing major questions regarding quality of coal supplied.
“All the rakes loaded and dispatched from SECL are sampled by third-party agency. Currently, CSIR-CIMFR is working as third party agency and during 9.9.2016 and 31.1.2017, it has sampled around 513 samples. On the basis of results issued by CIMFR, around 90 per cent samples have been found to be deviating from the declared grade,” Mahagenco told The Indian Express.
On December 29 last year, SECL told the Parliamentary Standing Committee on Steel and Coal that it has been taking various adequate measures to improve the quality of coal. The SECL also told the committee that Mahagenco has filed total 13 complaints — 10 complaints were about “oversized” coal and three were about “quality” issues — in between April, 2016 and September, 2016.
As per coal quality supply agreement between the SECL and Mahagenco, the former is required to supply coal having size less than 100 mm. Any coal having size more than 100 mm is deemed “oversized” or “lumpy” coal. The SECL did not reply to the queries sent by The Indian Express.
“As soon as Mahagenco receives lumpy coal from any company, it is general practice to bring it to the notice of concerned coal company through letter. Generally, the SECL does not reply to such letters of Mahagenco. However, Mahagenco expects improvement in the quality of coal dispatched. Between October 16 (in 2016) to March 17 (in 2017), Mahagenco has filed around 14 complaints for oversized coal and around 7 complaints related to quality of coal with the SECL. The deviations in the grade of coal is still observed,” Mahagenco told The Indian Express.
Coal India’s largest subsidiary South Eastern Coalfields Limited (SECL) received 55 complaints from power generation companies — including Jindal Power Limited (JPL), NTPC Ltd and GMR Warora Energy Limited (GWEL) — regarding poor quality of coal supply between April 2016 and September 2016. Maximum 13 complaints against SECL came from Mahagenco only. Mahagenco’s issues were related to coal supply from areas such as Kusmunda, Gevra, Raigarh and Bishrampur.
As the number of complaints from power utilities have been quite high, the SECL has been taking various steps for coal quality improvement. On December 29 last year, the SECL told the Parliamentary Standing Committee on Steel and Coal that it has put a “quality regime” in all areas under its supervision. It has suspended the production from the “mine where thin seam workings deteriorated the quality of coal produced”.
A coal seam is a bed of coal usually thick enough to be profitably mined. The SECL told the panel it is stopping the extraction “from the seams where due to geo-mining condition, quality has deteriorated”. Other steps to improve quality include revision of grade of mines and sidings, no dispatch of coal to power sector from siding (railway line) where crushing arrangement is not available till date, and installation of two washeries at Kusmunda and Raigarh area.
Between April 2016 and September 2016, JPL filed 11 complaints with the SECL on coal supply quality from the latter’s Raigarh area. As per SECL data, JPL had filed ten complaints related to “quality” issues, while it submitted one complaint related to “oversized” coal issues. NTPC’s Sipat plant and GWEL submitted five complaints each with SECL in the same time period.
“SECL has entered into tripartite agreement with CIMFR and power utilities for third party sampling of coal being supplied to power utilities,” the SECL told Parliamentary committee. Meanwhile, for better coal quality supply, the SECL told the Parliamentary committee that it has also established laboratories “with NABL (National Accreditation Board for Testing and Calibration Laboratories) accreditation for coal sampling analysis”.
According to the SECL, the area labs of Kusmunda, Gevra, Dipka, Sohagpur, Johilla, Hasdeo, Bhatgaon and Bishrampur have been accredited by the NABL. “Two areas Baikunthpur and J&K area are in the process to get accreditation from NABL, and three areas — Raigarh, Korba and Chirmiri — are to file the application in this regards,” SECL told the Parliamentary Committee.
BHP cuts output targets for iron ore, coking coal, copper
BHP Billiton on Wednesday trimmed its full-year production guidance for iron ore, coking coal and copper due to bad weather at mines in Australia and industrial action in Chile over the last quarter.
Iron ore output guidance was narrowed to 268 million to 272 million tonnes, while coking coal guidance was reduced to 39 million to 41 million tonnes, the company said.
Copper guidance was cut to a range of 1.33 million to 1.36 million tonnes, it said. (Reporting by James Regan, editing by G Crosse)
http://in.reuters.com/article/bhp-billiton-output-idINL4N1HW2LZ
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