Mon October 22, 2012
First Shipment in Kentucky-India Coal Deal Delayed
The first shipment in a huge deal to export coal to India hasn’t yet left Appalachia.
The much-touted $7 billion dollar agreement was first announced in August by Governor Steve Beshear and representatives from Booth Energy and the Abhijeet Group. The plan was to send up to nine million tons a year of Appalachian coal to India for 25 years, and the first shipment was supposed to be on its way by the end of September.
But that shipment is delayed, and the coal trading company responsible for transportation says it’s unknown when it will leave the country.
John Grantham is a vice president with River Trading Company. He says as far as he knows, the deal is still on, but the first shipment isn’t scheduled yet.
“We have seen a decrease in price since the deal was inked, and it probably got a little over-reported at the time. But India’s a far ways away and communication isn’t always fluid,” Grantham said. “But yeah, I think it’s driven by market conditions.”
IHS Global Insight coal analyst James Stevenson says the market for coal is still weak, but factors like rising natural gas prices have caused a slight improvement.
“Prices are still a little bit below cost,” he said. The outlook is definitely improved, but right now, coal prices still aren’t that great. But there’s definitely a bit more positive in the air.”
Neither analysts or anyone from the media (that I know of) have seen Booth’s contract with Abhijeet, so it’s unknown what kind of pricing it includes, and how market fluctuations could affect the deal.
But here’s another thing: Stevenson says Asian buyers are known to want to renegotiate contracts when the price moves against the buyers—while Western countries tend to accept they’ve made a bad deal and will eat the cost. And another snarl in the deal is the recent coal scandal that’s been going on in India, and involves officials at Abhijeet.