Indian companies like SAIL and Tata Power have been losing sleep over the huge delay in shipment of coal that comes from New Castle in Australia.

First there was a delay due to bad weather and now the port congestion has further blocked shipment.

The vessels that carry coal from Australia’s New Castle, the world’s biggest export harbour for the fuel to India were stranded for a week because of stormy weather.

The shipments may have resumed now but the port congestion has added to the shipment backlog causing further delays.

“Shipment problem is there, sometimes they are delayed by 2-3 weeks also,” said Arun Kumar Jagatramka, VC and MD, Gujarat NRE Coke.

Indian steel giants like SAIL, power companies like Tata Power who depend on imported coal have been facing supply constraints. The Australian market has made a loss of $1.7 billion in last six months due to missed exports to Asia.

Shipment troubles

Shipment troubles have raised prices in international spot market by $3-4 per tonne in the last two months, while in India about one-fifth of the coal demand by the steel companies are met through Australian imports. The coke prices have surged to $135 per tonne from $95 per tonne last November.

“There needs to be a coal index for proper trading,” said Andrew Fereday, Coal Derivatives Trader, Standard Bank.

“Hedging strategies should be adopted to counter coal shipment problems,” said Janelle Singh Matharoo, MD-Energy Derivatives, Standard Bank.

Steel and power companies that depend heavily on imported coal will now have to act fast to deal with the situation.

That is why perhaps Steel Minister Ram Vilas Paswan was in Australia recently to locate mines for the PSU companies and perhaps long term solutions like hedging also need to be given some serious thought.