American firms woo Indian buyers with long-term contracts, discounts
The US is emerging as a new source of coal supply for India as traditional exporters like Indonesia and Australia jack up their coal prices. American firms are trying to woo Indian buyers with offers of long-term contracts and discounts on international prices.
In what marks a new trend in international coal trade, US-based FJS Energy has signed a $7 billion deal to supply 9 million tonnes a year coal to India?s Abhijeet Group for 25 years.
The company made an announcement to this effect on Thursday. Coal will be supplied from the company?s mines in Kentucky. ?We did research on this (export of coal to India) for one year. We have entered into end-to-end contracts with shipping, ports and logistics firms,? said Christopher Sargunam, chief operating officer, FJS Energy.
Geographically, Indonesia and Australia are better located to supply coal to the Indian market. But these countries have started jacking up their coal prices. Indonesia, which has been selling coal to the Indian market at a deep discount to the global market, has changed its mining law to bring its coal price in line with the international market.
It is also looking at fresh measures like imposing export tax and regulating foreign direct investment (FDI) regime for the coal sector.
Similarly, Australia has levied carbon tax on coal. Besides, coal suppliers from these countries are also not keen to sign long-term supply contracts. Now US suppliers are luring Indian buyers with long-term contracts.
What has made US suppliers to look at the Indian market is the growing availability of shale gas ? a cleaner substitute for dirty coal.
US power project developers are increasingly switching over to gas from coal to cut emissions. The excess coal is trying to find market outside the US. Besides, port capacity in Indonesia and South Africa is unable to handle the growing Indian coal imports, which is estimated to go up to 150 million tonnes in the current year 2012-13.