High quality coal, good infrastructure, political stability and the ease of doing business has made Australia the preferred coal supplier for India, with many Indian private companies acquiring mines and setting up joint ventures to tap into the continent’s vast reserves.
“With large high-quality reserves of all coal types, Indian investment is a valuable component in the rapidly expanding Australian coal industry,” Arun Kumar Jagatramka, chairman and managing director of Gujarat NRE Coke, told this correspondent.
Gujarat NRE Coke owns and operates two hard-coking coal mines in New South Wales. It produces 1.5 million tonnes per annum (mtpa) of coking coal and plans to increase it to around six mtpa by 2015. This would make the company one of the top 10 hard-coking coal producers in the world. “With rising demand for coal of all forms and the emerging supply challenges of Indonesia, India should continue to seek opportunities in Australia”, says Jagatramka.
India sources its coal imports from Australia, Indonesia and South Africa. While coal mines in Indonesia, the world’s largest thermal coal exporter, are cheaper, recent changes to their tax regime, plus governance and infrastructure issues, have made Indian companies look at Australia.
In March, Lanco Infratech and Griffin Coal in Western Australia signed an AU$730 million deal. Lanco’s subsidiary Griffin Coal is fighting a $3-billion court case filled by Perdaman Chemicals over a dispute to supple coal to the latter's urea plant in western Australia. In August, the Gujarat-based Adani Group bought Linc Energy's Queensland coal tenements worth AU$2.72 billion and paid another AU$2 billion for the Abbot Point terminal near Bowen.
Last month, GVK acquired a 79 per cent stake in Hancock Coal's thermal coal assets in Queensland's Galilee Basin, worth AU$1.26 billion. Many Indian companies, GVK being one, are investing in what is referred to as ‘pit-to-port’, i.e from mine and mining equipment, land and sea transport, to the railway and port, to secure supply of the raw material.
Jindal Steel and Power Ltd. (JSPL) invested in coking coal exploration projects in Australia in 2009. It has four fully owned coal exploration blocks in the Bowen and Surat basins in Queensland and has started studies on these. It also has a 27.29 per cent stake in an ASX-listed coal exploration company. Jasbir Singh, JSPL (Australia) Director, told this correspondent, “We are currently mostly importing coking coal from Australia and a small percentage from Indonesia. The change in legislation in Indonesia may have an impact on future investments in Indonesia and we might expand more into Australia and Africa”.
BOOM SEEN
The Australian Bureau of Agricultural and Resource Economics and Sciences predicts that Indian coal imports would rise from 60 mt in 2010 to 77mt in 2011, going up to 128 mt in 2016, accounting for 30 per cent of the increase in the global coal trade over the period.
“To sustain high economic growth, India needs to have an assured energy supply. This would mean getting it from wherever, provided price, quality and other parameters are met. Australia will naturally be an important supplier,” says Amit Dasgupta, consul general of India in Sydney.
India's rising coal import story applies strongly for both coking and thermal coal. India is short of good quality coal and infrastructure constraints will limit a stronger domestic response in the short to medium term. “It will come down to a question of price. The technology improvements in thermal power will mean low to medium-ranked Indonesian coal producers should be the big winners. Australia will also benefit due to its high level of available coal supply. Talk of Indonesia looking at banning coal exports under a certain quality would imply an even stronger supply response from Australia, although we think any ban would likely be watered down”, Mark Pervan, the head of commodity research at the Australia and New Zealand Banking Group, told this correspondent.
He says India will be even more leveraged or dependent on coking coal imports because of very low domestic reserves. “Australia is the big winner, as it dominates (and will continue to) seaborne supply,” he adds.
Australia is the world's largest coal exporter, accounting for 56 per cent of all steel-making coal traded by sea and 21 per cent of sea-borne thermal coal used in power generation.
