The Hindu Business Line : Newcastle port congestion hits Indian thermal power sector

Hard times
According to reports, the vessels waiting for berths at Newcastle had recently risen to 70.
The power units are hit because they are depending more on imported coal.

Mumbai March 30 The worsening congestion at Australia's Newcastle port, the world's largest coal handling port, has hit at least one sector in India hard — the thermal power sector — which is the largest consumer of coal.

Indian thermal power units face the prospect of shelling out higher transportation costs to haul coal from different countries, including Australia, as the Newcastle congestion has flared up global bulk freight rates. The power sector is watching the situation at Newcastle closely, working out alternative measures if the congestion were to continue for long.

Congestion woes

According to reports, the vessels waiting for berths at Newcastle had recently risen to 70, since congestion hit the port towards 2006-end, with maintenance work on rail tracks aggravating the situation. Currently, the minimum waiting time for a vessel to get berth is reported to be 20 days at the Australian port.

The proposed reinstatement of a tonnage allocation system at the port has received interim authorisation from the Australian competition regulator. But, analysts say that the system, after it got full approval, would not be implemented until end of this month.

Thus, with the present vessels in queue being about 63, it is feared that the port will not be able to shorten the queue to a "working level" of about 20 vessels before the end of the second quarter of 2007. In fact, some analysts have even predicted that the vessels waiting for berths could increase to as much as 90 by the first week of April, mainly due to increasing demand for coal.

Higher rates

The Newcastle congestion, apart from other factors, has pushed up global freight rates in almost the entire bulk segment, as the delay in vessels getting berths at the port is leading to less availability of ships in the global market.

For example, the Panamax Index has been on a constant rise since the congestion began to build up — it rose by 20 per cent in February and 27 per cent in the 45-day period ending March 15, 2007. The Panamax Index rose from 3955 on February 1, 2007 (it was 1919 on February 1, 2006) to 4764 on March 1 (2345 on March 1, 2006) and further to 5039 on March 15 (2523).

Panamax ships haul about 40 per cent of India's coal imports, while Handymax vessels carry the remaining 60 per cent. However, the trend is changing towards more Capesize ships due to the setting up of ultra mega power projects in the coastal areas.

What has hit the power units particularly hard is that they are relatively depending more on imported coal, as domestic production is not able to brook the demand.

Imported coal

In the current fiscal, it is estimated that coal consumption would be 300 tonnes coal equivalent (TCE), as against a domestic production of about 270 TCE.

In physical terms, India imported about 24.25 million tonnes of coal in 2006, as against 21.5 mt in 2005, according to industry analysts.

Imported coal gives a certain amount of cost effectiveness to power producers, as it has lower ash content (9-12 per cent as against 40 per cent in domestic coal) and it can be blended up to 20 per cent with domestic coal.

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