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Home News Power Sector News Global coal prices cool, but weak rupee worries importers

Global coal prices cool, but weak rupee worries importers

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CoalPower companies that use imported coal have got a respite from skyrocketing fuel costs as international coal prices have softened considerably, and are projected to fall further, but the depreciation of the rupee has limited their gains.The coal price index for Australian coal, popularly called the NewCastle Index, and an Asian benchmark had jumped 92% between April 2009 and March 2011 to touch 127.87, but has cooled off to 98.24 last month, dropping 23% over the past year, including a 14% decline since May. API4, the index for South African coal, mirrored the trend.

Experts believe that the prices may decline further in the months ahead, making it easier for Indian power generation companies that are reeling under short supply of coal from Coal India.

Power producers such as NTPC, DVC and the Adani group say that generation cost in the past few months has declined by up to 5 paise per unit as the rupee's depreciation limited the benefit of cheaper coal.

"Rough estimate shows that the cost of generation will go down by 2-3 paise for every unit of power generated," an Adani Power official said.

A senior NTPC official said: "Although international coal prices have declined, a rise in rail freight and substantial depreciation of the rupee have negated some of the declines for Indian companies. Nevertheless, taking into consideration all the factors, cost of generation has declined by 4-5 paise per unit."

Debasish Mishra, senior director at Deloitte Touche Tohmatsu India, said: "We expect coal prices to soften further over the next year as demand from China continues to decline and Japan restart its nuclear reactors, thus reducing its dependence on coal."

A top executive from a private utility, which buys significant amount of coal from the spot market, said he expected price to fall further. "It is a big relief for Indian power utilities who are buying from the spot market. This would improve our margins, especially on merchant power sales," he said.

"During January 2012 thermal coal prices went out of bounds for a large number of users, including power and cement producers. Now price is softening due to gradual slowing of global economies. In fact, coal prices in Malaysia, South Africa, Ukraine has already come to stable levels from their unrealistic highs of December-January last. The coal from Malyasia and Indonesia is now ruling at $82-84 per tonne against $90-95 per tonne even six months ago," Gautam Kumar, director, Asian Minerals, told ET.

According to reports, thermal coal prices in Europe have dipped 15% this year to the lowest level since October 2009. Coal prices have eased 10% in South Africa and 13% in Australia, the lowest levels in at last 19 months.

Source- ET

 

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