India's NSEL starts spot coal trade, eyes transparency

Last Updated: Mon, Aug 06, 2012 15:40 hrs

By Malini Menon

NEW DELHI, Aug 6 (Reuters) - India's National Spot Exchange Ltd (NSEL) has launched delivery-based imported coal spot contracts, in an attempt to organise a fragmented market, a senior official at the exchange said on Monday.

The move was a sign of a maturing market and would bring in transparency and liquidity, said a coal market participant, who expects Indian thermal and coking coal imports to be around 100 million tonnes in this fiscal year ending in April 2013.

Indian coal imports have been on the rise as many industries increasingly rely on overseas buys to bridge the supply gap and in turn become exposed to global price volatilities as well as the policies of coal exporting countries.

The NSEL platform enables importers to sell quality-certified non-coking coal of South African and Indonesian origins directly to end users, from the Mangalore port, in southern India.

"We plan to add Kandla port (in the western Indian state of Gujarat) and Dhamra port (in eastern Indian state of Odisha) as well," said Pradeep Mishra, assistant vice-president for product development at NSEL.

NSEL, promoted by Financial Technologies India Ltd and National Agricultural Co-operative Marketing Federation of India Ltd, expects to sell 80,000 tonnes of coal, lying at the Mangalore port, over the next one month.

Aastha Minmet India Ltd owns the 80,000 tonnes of coal at the port, Mishra said.

In sharp contrast, in the international coal market, smallest parcels tend to be around 25,000 tonnes. A panamax vessel typically hauls 70,000 tonnes of coal, a capesize ship 150,000 tonnes.

While large importers of coal are les likely to use the NSEL platform given their direct links with end-users, smaller players will stand to gain, said the coal market participant, declining to be identified.

"This is a sign of a maturing market. It will tend to bring in more transparency and liquidity. Margins will fall, but then, volumes will increase," the participant added.

Some global suppliers of coal are also in advanced negotiations with the exchange, seeking a complete process from handling logistics at Indian ports to connecting with the buyers, Mishra said.

The exchange charges a transaction fee of 200 rupees ($3.59) per 100,000 rupees from both buyers and sellers, Mishra said.

The minimum trading lot is 500 metric tonnes (MT) and prices are quoted in Indian rupees per MT.

"We are planning to import 2 million tonnes of Indonesian, Australian, and American non-coking coal...which will be sold exclusively through NSEL platform," said Mohit Aggarwal, chairman and managing director at Aastha Minmet, in a statement.

"This platform helps in accessing clients on pan-India basis with low cost of transaction and payment guarantee," Aggarwal said.

($1 = 55.7550 Indian rupees) (Editing by Keiron Henderson)

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