India’s growing appetite

No amount of green aspiration is going to halt the spiralling world demand for coal – and India is the one to watch. Felicity Landon reports


The recent floods in Queensland certainly put pressure on Australia’s coal export industry. But much more dramatic drivers are shaping the world’s coal trades.


Blaine Ouimette, an international developer and project manager specialising in coal trades, says: “For a couple of months Australia’s problems may cause slight changes in the pricing, but they won’t have a long-term lasting effect. I would be more concerned about any damage done to the internal rail infrastructure. For a country like Australia, as a major coal exporter, there are two lifelines – the ports, and the rails to get there.”


Take that thought and refocus on India, where the government has laid down a strategy of adding 80,000 MW of power plants every five years, with a very high percentage of these set to be coal-fired; and the issues are clear.


“India is just hungry for more and more coal every year; it has this very aggressive policy of increasing electricity across the whole country,” says Mr Ouimett. “Coal is a very carbon rich and dirty form of energy – but it is what we have. And until the price of wind and solar energy and other renewables come down, coal is going to remain the major player.”


Jayendu Krishna, senior consultant in Drewry’s Indian office, says the increase in thermal coal imports to feed the power expansion, as well as in coking coal imports as India embarks on a tremendous increase in steel production capacity, is going to be huge.


Taking thermal coal alone, at present India imports about 34m tonnes a year; this compares with 100m tonnes that goes to the world’s biggest importer of thermal coal, Japan, 80m imported by South Korea, 100m by the EU countries, and 40m by China. If the Indian government’s plans for power expansion go well, then India’s imports will exceed 200m tonnes a year within four to five years, he says.


“India will certainly overtake all the countries in terms of thermal coal. We have looked at all the power plants unit by unit being set up and what are the expected imports of these units. By 2015/16 we can expect 200m imports.”


Quite apart from the environmental issues, the main concern in India is coal terminal facilities for handling these volumes, says Mr Krishna. “Most of the country’s ports/terminals are very ill equipped. If you exclude the latest developments, we would have difficulty finding any coal terminal with capacity for more than 10,000 tonnes a day – which means you are able to import 3m tonnes a year through one terminal.”


Until now, such handling rates across India’s main ports have met import requirements – but no longer.


Mr Krishna points to ports such as Gangavaram, Krishnapatnam and Mundra that have broken the trend, setting a benchmark of a minimum 30,000 tonnes a day – with Gangavaram, for example, handling as much as 60,000 tonnes in one day on some occasions.


The government is keen to put public-private partnership deals in place to develop existing ports around India’s coastline, and Mr Krishna says that in all the proposal documents he has seen, coal handling is generally required at 30,000 tonnes a day ‘as a benchmark’.


“So with existing terminals moving from 10,000 to 30,000 tonnes a day and many other new ports planned, things are really moving quite fast.”


Port expansion and investment is not being matched by inland infrastructure improvements, he warns – but in the case of thermal coal this may not be such an issue, as most coal fired power plants are being built near the coast.


Of course, there are real environmental concerns about all of this. On a local level, Chennai, which increased its discharge capacity from 10,000 to 30,000 tonnes a day, used to unload coal from vessels for storage in open stacking yards. However, two years ago the port installed a closed conveyor system and many Indian ports are looking at this type of system, says Mr Krishna. In many cases there will the opportunity to supply coal by closed conveyor direct to a neighbouring power plant.


Where India is to source its coal is another question. Apart from the obvious sources such as Australia, the US and South Africa, Blaine Ouimette points to Indonesia. “Indonesia has a lot of fairly low-cost coal, close to the surface and cheap to mine, and a good level of river and barge transport available,” he says.


Whether for handling burgeoning Indian imports or exports from Africa, Indonesia or elsewhere, the design and layout of a coal terminal and equipment for efficient operations are well-known processes – in fact the technical and engineering challenges are more manageable than the political issues in many countries, says Blaine Ouimette.


However, it is possible to over-engineer, warns Jonathan Tyler, business group director, maritime, at Royal Haskoning.


“There are economies of scale to be gained from certain types of facility but there may be certain locations which realistically are never going to handle a certain number of tonnes a year, and therefore don’t need the latest cutting-edge ship loaders. They actually need something effect and robust at the right price – not something with all the widgets for 30m tonnes.


"The challenges are similar to other sectors; you need to have an investment which is right to make it happen, so hopefully you start off with an initial investment where future investment is funded by growth, and you avoid building white elephants.


“Many people see the opportunities to build fantastic ports with the latest equipment. But the higher capacity equipment needs a higher level of maintenance and a given level of understanding to operate it. It is possible to have something which is unnecessarily complex; and it isn’t just that you have wasted money by buying bells and whistles you don’t need, but also the level of complexity leads to an ongoing cost you don’t want to have.”
(Source:http://www.portstrategy.com)