Coal India to import tens of millions of tons of coal under long-term supply deals

bySayeh Tavangar,
Coal Trader International
Feb7,2011
Coal India Limited is putting the finishing touches to a long-term coal supply contract framework that could see it purchase tens of millions of tons of imported thermal coal from Australia, Indonesia, South Africa and the US from a list of pre-selected coal suppliers for delivery starting in April, according to sources in the Indian market.

The Kolkata-based Indian coal producer is assembling a panel of coal suppliers, each able to supply Coal India with a minimum of 1 million mt/year of imported thermal coal under the terms of its 10-year Long Term Off-take of Coal contract framework.
Coal India has already drawn-up a short-list of potential coal suppliers from parties that responded to its request for expressions of interest last August.

These short-listed suppliers have now been invited by Coal India to participate in the second round of its panel selection process which is currently underway.
Companies that were successful in qualifying for the second selection stage have been sent copies of Coal India's draft Contract for Long Term Off-take of Coal (CLTO) and have been asked to comment on its proposals.

In its CLTO document, Coal India said its objective is to "select companies for entering into a CLTO for a period of 10 years for the supply of thermal coal for the generation of power for any or all of the four countries namely; Australia, USA, Indonesia and South Africa."
A final draft of Coal India's coal supply tender document is expected to be released to interested parties within one week, according to a market source.
Tender evaluated on an CFR India basis Importantly, Coal India said its long-term coal supply contracts are "expected to be finalized at a price less than the prevailing import price." All price offers for the tender will be evaluated on a cost and freight (CFR) India basis, the document said.
"The purpose of such a CLTO is to insulate [Indian] consumers from any international price volatility and secure the quantities for a period of 10 years," Coal India's document said.
Offers into the Coal India tender are to be grouped into 16 categories, eight for high calorific value coal (i.e. more than 5,500 kcal/kg GAR) and eight for medium cv coal (which it defines as between 4,000-5,500 kcal/kg GAR).

Coal from each of the four countries of origin specified in the tender document are to be quoted for delivery to both the east and west coasts of India.
Coal India will identify lowest-price bids on a C&F India basis in each of its 16 bid categories, said the document.
Suppliers that are successful in the tender will be asked to provide Coal India with a minimum quantity of 1 million mt/year of imported thermal coal, starting delivery in April 2011 through to March 2021, adding up to a total of 10 million mt over the 10-year period of each supply contract.

Prices for the coal supplied to Coal India under each 10-year deal will be linked to price indices for Richards Bay and Newcastle coal, the document said.
Coal India could potentially purchase up to 25 million mt/year of coal under its long-term coal supply contract framework, adding up to a total of 250 million mt over the 10-year term of the CLTO tender, according to one market source. Other market sources said the quantity of coal purchased in the tender could add up to tens of millions of tons.
India's minister for coal, Sriprakash Jaiswal reportedly told an Indian conference February 3 that India was facing a growing gap in its supply of coal that could reach 142 million mt in the financial year to March 2012 and 200 million mt in the year thereafter.
Mike Cooper, (sourced:Platts)