The near-monopoly in mining, shipping and logistics sees 'great opportunity' as transfer of mines will lead to a lag in coal production. As the country faces uncertainty over coal supply in wake of cancellation of coal block allocations by the Supreme Court, Gautam Adani-owned Adani Group is set to cash in on the burgeoning demand for both steam coal and coking coal.
For the Ahmedabad-based trading giant, which is already a near-monopoly thanks to its presence in mining, ports, shipping and logistics, what lies ahead is a "great opportunity" despite the higher cost of imported coal.
The group, which handled 27 million tonne (mt) of coal imports, primarily steam coal, in 2014 (during January-August), is already India's largest coal trader, ahead of JSW (10.7 mt, of which 6 mt is coking) and state-owned Steel Authority of India (SAIL) with 6.8 mt of coal imports (mostly coking coal), according to a leading shipbroker in New Delhi that tracks coal imports. Adani mostly deals in steam coal imports (used in power production), but is now steadily increasing import of coking coal (used by steel companies).
What makes Adani a coal trading behemoth is its presence in the entire value chain -- mining, ports, stockyards, ships and other logistics facilities -- all under one roof.
The company, which sells coal to NTPC and several state-owned and private power utilities, is hoping to cash in on the "imminent shortage" of fuel.
"The transfer of coal mines as ordered by the Supreme Court will lead to a lag, and it will have to be filled by imports," said a senior Adani Group official told dna.
While the group's flagship Adani Enterprises Ltd takes care of coal trading, its subsidiary Adani Mining operates a mine in Queensland in Australia. Adani, which was selected as 'mine developer and operator' for Machakatta coal block and Chhendipada and Chhendipada-II coal blocks in Odisha, is however likely to lose the contracts.
According to a report by India Ratings, India imported 171 mt of coal at $16.41 billion in 2013-14 as against 145 mt at $17.01 billion in the previous fiscal. "A halt in domestic production of coal would increase our import dependence further," it said, adding that the 2015-16 coal import bill is likely to widen by $6.22 billion in the given scenario.
Adani Ports & Special Economic Zone (APSEZ), India's largest port company which operates several ports and terminals across the country including Mundra and Dhamra, handled around 20 mt during the first six months of the current financial year (April-September), up 20% year on year. "We expect to handle more than 25 mt in the second half, thanks to the apex court ruling," said the official quoted earlier.
Mundra Port, which has a capacity to handle around 60 mt of coal annually, managed around 40 mt of imports during 2013-14. "This includes coal brought in by Adani Power and Tata Power, which operates two mega power plants, run on imported coal, at Mundra."
Tata Power's plant is a 4,000 mw ultra mega power project, while Adani operates a bigger 4,620 mw plant in close proximity. Both plants have direct conveyer belt facility connecting the port, for quick delivery of coal to their backyards.
The shipping arm of the group owns 4 Capesize bulk carriers, having 185,000 tonne of capacity each. It also charters similar bulk carriers for importing coal. "Annually, around 400 such vessels come to Mundra," said an official from the shipping arm.
APSEZ also operates a coal import terminal at Visakhapatnam Port through a subsidiary Adani Vizag Coal Terminal Pvt Ltd. The 6.4 mt capacity terminal, which flagged off in December 2013, marked the group's entry on the east coast of India. Subsequently, it took over Dhamra Port from a joint venture between Tata Steel and L&T. Dhamra is already handling over 12 mt of coal imports. APSEZ also operates a coal handling facility at Goa. All ports put together, it has a combined capacity of 90 mt.
Another industry official, however, said the spike in demand will primarily depend on the government's action plan. "Many electricity generators are already running at lower plant load factor as the state-run utilities, buyers of electricity, continue to face financial crunch. Power produced by imported coal will be always expensive and hence the generators may not find any takers for their electricity," he said.