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Commodity
COAL
Description | Overview | History | Coal producing countries | Indian coal market | Major trading centers
Description


Coal is referred to as a dark brown to black, organic and combustible rock made of mainly carbon, hydrogen and oxygen, which is extracted from under the ground through mining. This graphite like sedimentary material is used as fuel and is primary source of energy on earth. Coal is formed under the earth’s crust from the plants and animal remains that got fossilized with the time. That is why in other words it is also defined as the altered remains of prehistoric vegetation that has been consolidated and transformed with consistent effect of heat and pressure over million of years. Coal also played an important role in industrial revolution and most of the world’s electricity is produced using coal only.

Overview


Coal is a fossil fuel that is used for combustion and producing heat and light. Currently, it is the prime source of electricity produced through out the world. Though coal’s lead is being shaken by the emergence of oil in the scenario but around 40% of the electricity is still being produced using coal. The solid fuel can be converted into gaseous or liquid form of fuel such as coal gas, gasoline or diesel. Also coke is derived from coal that is used producing coal tar, ammonia, light oils etc. the fuel is credited with the initialization of the great Industrial revolution in the 18th century.

It is estimated that there are 909 billion tons of proven coal reserves in around 70 countries of the world. The largest coal reserves are in United States of America followed by Russia and China. But China leaves the above two countries behind in the context of production. The world production of coal hovers around 400 million tons and due to the current rising trend in the production it is estimated to reach 7 billion tons by 2030. Asia has a share of around 56% in the total consumption of coal in the world, china being the topmost consumer of coal in the world. Most of the coal is utilized in the place of its production only. The developing countries are the major source of demand for coal, as they need higher quantities to keep the development process continued. The top ten coal consuming countries of the world along with their consumption figures are

  • China (1728 million tons)

  • USA (1004.9 million tons)

  • India (430.4 million tons)

  • Germany (252.5 million tons)

  • Russia (240.5 million tons)

  • Japan (183.4 million tons)

  • South Africa (173.7 million tons)

  • Poland (144.1 million tons)

  • Australia (132.7 million tons)

  • South Korea (80.3 million tons)

The world trade in coal has reached a figure of 718 million tons. Australia is the most dominant country in the world coal market having a 2006 exporting figures of around 231 million tons. World trade in context of coking coal is limited, Australia again bagging the largest share of supply to the market i.e. 51%. USA, Canada and China play an important role as the other major suppliers of coking coal. The major coal exporting countries are

  • Australia (231million tons)

  • China (79 million tons)

  • Russia (92 million tons)

  • South Africa (68.5 million tons)

  • Colombia (60 million tons)

  • United states (45 million tons)

  • Canada (31 million tons)

  • Poland (22million tons)

Most of the coal reaches the world markets through the modes of shipping and sea. Transportation of coal forms the major cost of the cost of the coal. Majority of the countries fulfill their domestic demand through imports of coals. The following list shows the major importing countries of coal in the world and their importing figures for the year 2006

  • Japan (179.8 million tons)

  • South Korea (78.4 million tons)

  • Taiwan (57.8 million tons)

  • Germany (41million tons)

  • United Kingdom (51million tons)

  • Russia (26.5 million tons)

  • Canada (25.1 million tons)

  • Spain (23.7 million tons)

  • Italy (23.3 million tons)

  • France (22.7 million tons)

History

Coal as mentioned earlier, is the altered form of prehistoric vegetation transformed under severe heat and pressure under the earth’s crust. All this matter is believed to have started decomposing in a period ranging from 360 to 290 million years ago, which is known as the first coal age, the Carboniferous period. As a consequence of all the heat and pressure that affected the prehistoric vegetation for million of years under the earth’s crust, it got converted into fossil fuel.

It first came into the notice of human beings in China where it was used in the process of smelting copper and casting coins in around 1000 BC according to some historians. But the earliest ever reference regarding coal was made by Aristotle in around 350 BC who called it as a charcoal like rock. At that time, coal had limited number of uses and was only used for mining purposes. But with time, and development of technology, the new and improved uses of coal were discovered. It took a long time for coal to gain its current reputation. In the 18th and 19th century, during the time of industrial revolution, the demand for coal started to rise. The most important invention in the pages of history, invention of steam engine in 1769, could not have been possible without coal. The concept of electricity generation from coal developed in 19th century when it was used to produce gas for the gaslights in many cities. This concept spread all around the globe and the time wasn’t too far when the first practical coal electric generating station was set up in New York in 1882, developed by Thomas Edison.

Recently in around 1960s, oil took over the lead from coal as the source of primary energy but still coal plays an important role contributing to around 23% of the total energy needs of the world.

History of coal in India

The East India Company started coal mining in India in 1774 in the state of Bihar. Initially the development of coal mining in India was slow and dull and this continued for about a century. But the introduction of steam engine in India resulted in a boom in the coal industry. The production of coal shot up sharply within a short span of time and with the outbreak of the First World War, it gained momentum. Till the independence, the country was producing over 30 million tons of coal annually. Two companies were set up namely National Coal Development Corporation (NCDL) and Singareni Collieries Company Limited (SCCL), which were government of India undertakings, controlled the operations related to coal in the country.

But due to the improvement in the technology, country’s ever increasing domestic demand and some other factors like poor labor conditions, unscientific mining practices etc, the need of nationalizing the coal mines arose. The nationalization of coalmines was done in two phases, the first phase being the nationalization of coking coalmines in 1971 and the second phase being the nationalization of non-coking coal mines in 1973.

Coal producing countries


Coal is found out under the earth’s crust and the production is done through mining. The coal reserves are present worldwide in every continent, including at least 70 countries of the world. The estimated and proven coal reserves present currently sum up to over 984 billion tons that would be lasting for around 190 years more with the present rate of consumption. The countries having the largest coal reserves on earth are

  • United States of America (around 250 billion tons)

  • Russia (around 155 billion tons)

  • China (around 120 billion tons)

  • India (around 92 billion tons)

  • Australia (around 80 billion tons)

  • Germany (around 65 billion tons)

  • South Africa (around 50 billion tons)

  • Ukraine (around 35 billion tons)

For discovering coal reserves, a complex method is adopted that includes the preparation of geological map of the area in which the presence of coal is to be checked, conducting geochemical and geophysical surveys, and finally exploration drilling. Only if a sufficient quantity of coal is confirmed in the method, then only, the mine is developed in that area. There are 2 basic techniques through which coal is mined namely surface or open cast mining and underground or deep mining, the latter one used quite prominently. The world production of coal was 5451 metric tons, the leading producing country being China. The major producer countries in context of coal along with their production figures pertaining to the year 2006 are

  • China (2380million tons)

  • United States of America (1053.6 million tons)

  • India (447 million tons)

  • Australia (373.8 million tons)

  • Russia (309 million tons)

  • South Africa (256.9 million tons)

  • Germany (197.2 million tons)

  • Poland (156 million tons)

  • Indonesia (195 million tons)

  • Greece (67 million tons)

Most of the coal produced is consumed at the place where it is produced and nearly 18% of the coal reaches the international market. The rate of production of coal is rising since the last 20 years with a total of 38% increase in the world total production.

Production of coal in India

India is one of the leading producers of coal in the world as well as it is one of the countries having the largest coal reserves. The coal mining in India was initiated by M/s Sumner and Heatly of the East India Company in 1774. Now for over 220 years, coal has been mined in India and the country has reached the 3rd place in the major coal producing countries list with an annual production of around 400 million tons. In context of coal reserves in India, the state of Jharkhand leads the scenario with over 35000 million tons of coal reserves followed by Orissa, West Bengal and Chattisgarh. The total proven coal reserves in India are estimated at around 85 billion tons. Most of the Indian coal production i.e. approximately 81% is contributed by the production in the open cast mines.

The largest supplier company of coal in India is the Coal India Ltd that is totally a government of India undertaking and it accounts to almost 88% of the total coal produced in the country. The major states that are indulged in the production of coal in India are

  • Jharkhand

  • Madhya Pradesh

  • Orissa

  • Andhra Pradesh

  • Maharashtra

  • West Bengal

  • Uttar Pradesh

Indian coal market


Though India is quite a dominant player regarding the coal reserves and the production context but still it is not traded in the domestic commodity exchanges. The coal sector in India is largely under the control of the government. India places 4th in the list of the countries having the largest reserves of coal in the world and 3rd among the countries that produce the maximum output of coal. Indian coal reserves are estimated at around 85 billion tons and the production of coal in India annually is around 400 million tons. Jharkhand, Madhya Pradesh and Orissa are the top three states in the country that produce coal. The production level in the country has increased sharply since the 1970s when the production was a mere 70 million tons and is still rising with the domestic demand.

In the list of the major coal consuming countries, India stands at the third place. The main demand of coal i.e. 70% demand in the country arises from power sector. The remaining 30% of the demand comes from the heavy industry and consumer sector. The country’s domestic production is just enough to satisfy the vast domestic demand. Although, India is one of the major producers of coal, but still, the country has to import coking coal as it produces small quantities of it. Australia serves as the primary exporter of coking coal to India. The import duty on coal in India has recently been reduced to 15% from 20% showing that the government is working on a policy to increase imports on coal.

The government is also working on discontinuing the public sector monopoly in the coal sector and that is why it is seeking the private sector’s support. The company that controls the operations of coal in the country is the Coal India Ltd. The various subsidiaries that come under this company are

  • Central Coalfields
  • Eastern Coalfields (Sanctoria)
  • Bharat Coking Coal (Dhanbad)
  • Northern Coalfields (Nagpur)
  • Western Coalfields
  • Southern Eastern Coalfields (Bilaspur)
  • Mahanandi Coalfields (Sambalpur)
  • Central Mine Planning & Design Institute (CMPDI) (Ranchi)
Major trading centers of coal


The major commodity exchange where the future contracts of coal are traded is the New York Mercantile Exchange(NYMEX). 

 
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