Coal importers geared to meet India's rising demand

by Arusha Das

September 16, 2009: Demand for coal is all set to see an upward trend in the coming years. India is striding fast to ramp up its power capacity. Along with that is the demand from other coal hungry sectors.

Banking on this growth, all major coal traders in India told Coal Insights that they are all geared up to meet the challenges that lie ahead. The demand for imported coal in India is mainly driven by sectors like cement, chemical, independent power producers, captive power producers, public sector power utilities and then the retail and sponge iron sectors.

Coal importers or traders have a very important role to play in this process. The role is primarily to bridge the requirements of the customer with that of the supplier. Apart from this, the traders also have a vital role to play in terms of providing the logistics and security of supplying through interpretation of the market movement.

Responding to this growing demand of coal in India, one of the prime names in the coal traders, Knowledge Infrastructure Services Private Ltd, is embarking on a two pronged strategy.

On one hand they are working to secure long-term supplies for Independent Power Producers (IPPs) and on the other hand they are expanding their infrastructure footprint including planning for a measured progress on backward integration to bring in efficiency in the supply chain.

Speaking along the same lines, the managing director of Visa Comtrade, Vikas Agarwal, said that traders generally have a good instinct for understanding the market movements. He said they are therefore able to provide that security by making timely moves.

Meanwhile, Maheswari Brothers' director Amit Mandhani stated that India has been following a role of securing cargo on a very short term basis or a short term year long contract on a fixed price basis with minimum flexibility involved on the price change side.

But of late it has been observed that there has been a change in trend. A fixed tonnage basis contracts with a flexible pricing system based on various tools are available in the market like indices of various hedging mechanisms and some complicated structures which give the flexibility of deferring the month, quantity and price. Thus, this helps to hedge the risks on all three, depending on the international scenario.

Meanwhile, Dubai-based Coal and Oil Group is targeting to supply to several IPPs, State Electricity Boards (SEBs), cement, sugar, and steel plants to meet future requirement of imported coal in India.

The company has skewed its focus on signing several long term contracts with big mining houses and is lining up investments for acquiring its own mines in South Africa and Indonesia and also ships. Apart from this, the company has signed many term contracts ranging from five to 10 years with producers in different countries with an intention to serve the Indian market. The group is also looking into developing ports and jetties to cater to the requirement of Indian coal consumers.

Interestingly, KISPL has positioned itself as an end to end solutions provider to provide the full range of service and flexible contracts keeping the end user's interest aligned to the company's business model.

Visa, however, has come up with a two pronged strategy in this regard. Firstly, they intend to have access to low cost based coal production which can be done either through investment in own coal mines abroad or through strategic tie-ups. Secondly, to develop very strong reputation and sound relationship with most of the large mining companies which the company managed in the due course of its presence in the market. These relationships help the company to get preferred treatment.

It was interesting to note that Maheswari Brothers, taking the growing competition in the market in a sporting manner, said that it is good for the market as coal supplying has become more service oriented. The company at present is trying to make a perfect match between expectations and deliverables to match the requirements of the customers in a better way.

In the mean time, Coal and Oil is also gearing up to face the competition in the market. However, the company relies on its experience in coal handling and delivery to plants. Further, their proposed acquisition of mines and ships would provide an edge over competition. The end to end solution along with lowest possible total cost of ownership (TCO) and unparalleled service would be their unique selling proposition.

To be the most preferred trader is again a challenge for these traders. To this, KISPL said that the company's strategy varies from client to client, taking into account the client's need like handling total delivery chain with single point responsibility, flexibility of contracts, staggered deliveries, de-risking commodity prices and exchange rate fluctuation etc.

Agarwal mentioned that Visa has a certain target customer base. Their biggest customers are in the cement sector and that is the sector they would like to consolidate. Gupta Coal on the other hand has a simple strategy in place to provide the right quantity and right quality of coal at the right time and price to the right customers.

Some of these companies intend to scale the heights by honouring their commitments in terms of timely delivery, supplying coal as per the agreed specifications, and by keeping a track of their consumption patterns, providing follow up service after the sale has been made and building a long-term relationship.

Reliability and dependence are the two key words. For that, the traders intend to adopt the global best practices as a way forward.

Source: Coal Insights