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It’s the largest coal miner in the world, and accounts for at least 80% of India’s coal production.

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Now, faced with India’s onward march on the path of renewable energy, Coal India Ltd (CIL) finds itself stuttering. So much so that it has decided to shutter as many as 37 coal mines by March of next year.

India’s Coal Ministry, in a review meeting with CIL and its subsidiaries, took special note of the fact that a substantial number of mines had not been able to recover costs in the form of even salaries paid to the workers. It then directed CIL’s arms to conduct a detailed study of such mines and report on action taken.

CIL also explained away the decision, saying its subsidiaries undertake an annual exercise to determine profit- and loss-making mines for comparative study of performance. The decision has been met, predictably, with protests from local labor unions. If and when the mines are shuttered, it would help the company save about $124 million. The mines make up about 9% of the total number of mines operated by CIL.

CIL is not alone in facing the challenge represented by the growing renewable energy sector.

One estimate by the Energy and Resources Institute predicts if the cost of renewable energy and storage continue to fall, India may phase out coal power completely by 2050. Both solar and wind energy prices have been steadily decreasing over the last three years.

In 2016-17, India added over 14,000 megawatts of new renewable energy power compared to almost 7,000 megawatts of new coal power capacity.

But green energy is not the only new challenge coal mines face.

(more…)


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In the week when the world pensively awaits the U.S.’s Section 232 judgement — a move promised by President Donald Trump during his election campaign and aimed largely at China — a recent Reuters report on Chinese steel exports makes interesting reading.

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Source: Reuters

China’s steel exports have been sliding for months.

According to Reuters, China’s January-May export total was 34.2 million tons, down 26% from last year’s equivalent period and the lowest level since 2014. The year drop in export tonnage amounted to 12.1 million tons — roughly equivalent to Canada’s production over a full 12-month period, Reuters reported.

Yet bizarrely enough, China produced 72.78 million tons of steel in April, an all-time record Reuters says. The following month, China tallied the second-highest monthly total at 72.26 million tons.

Meanwhile, profits on products like steel rebar have surged to $162 dollars per ton this month, as inventory levels have fallen and demand has remained robust (particularly from the construction sector). Investment in real estate is running at an annual growth rate over 6%, Reuters reports. Although there are fears of overheating in some regions, real estate has been stronger for longer than analysts outside the market expected.

As we noted in a piece yesterday reviewing the 232 probe, China’s share of the U.S. import market for steel products has been falling for the last couple of years, mainly due to successful anti-dumping cases. China no longer appears even in the top 10.

So, what exactly is going on in China with respect to steel production and demand? Can we take it that Beijing’s actions to tackle excess steel production have finally resolved China’s deflationary impact on global steel markets?

First, Reuters notes that China has been quite successful in permanently closing previously shuttered steel plants, as well as in in tackling older and more environmentally damaging mills. Those actions combined has resulted in the removal of some 100 million tons of capacity.

In addition, Beijing’s focus on environmental issues has hastened the closure of induction furnaces, which use scrap rather than iron ore as their input and are often labelled as producers of sub-standard products (and, hence, unapproved). Unapproved equates to illegal by Beijing — as such, their production and their closures does not figure in the normal statistics. A significant proportion of China’s rebar production came from these mills, which explains the record profits being earned by surviving state-owned manufacturers of the same products as they capitalize on the removal of these scrappy competitors.

Unfortunately, nobody expects China’s construction market to continue at the current pace and a slowdown is in the forecast for the second half of the year.  Replenishment of low inventory levels will maintain steel mill production runs for a while, but as Reuters notes, China’s mills have a notoriously poor record in adjusting output to demand. So, we should expect that as demand eases, inventorying levels will rise, prices will fall, and access production may well begin to leak through exports onto the international market.

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While America’s anti-dumping legislation will largely protect that market from Chinese material, the rest of the world may find itself under pressure next year from greater availability of Chinese steel at falling prices, further fueling an already rising tide of protectionist sentiment in both developed and emerging markets.