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LCC makes spot tender for 2.7mn metric tonnes of coal
A long-term tender floated by Lanka Coal Company (Pvt) Ltd (LCC) for the supply of 2.7mn metric tonnes of coal for the Lakvijaya power plant had no takers at all.
Officials opened the bid on July 26 to find that nobody had bid for it. Just three days before the closing date for the term tender, however, LCC also floated a spot tender for 300,000 metric tonnes of coal. It was opened on August 16. It remains unclear why a spot tender was called while there were still three days to go for the term tender to expire.
The coal is now to be procured from Richards Bay Coal Terminal (RBCT) in South Africa. Because of attendant delays in getting the consignments, the cost of freight has also dramatically gone up, according to aCabinet paper put forward by the Ministry of Ports and Shipping.
The Colombo Shipping Company (CSC) has an agreement with M/s PCL Shipping (Pte) Ltd, Singapore, for sea transportation of coal by ships. It has a separate agreement with United Shippers Ltd, India) for coal discharging and lightering (process of transferring cargo between vessels of different sizes).
But PCL notified CSL on August 19 that it was unable to nominate vessels for the first three shipments of the 300,000 metric tonnes from RBCT and asked for a delay until mid-September onwards. The reason was the non-availability of their own ships and since most-other dry bulk carriers are going to Brazil to load iron ore to China. The Cabinet paper notes that this is a much more lucrative trade for ship owners due to resumption of exports of iron order from the Port of Vale in Brazil.
Dry bulk ship charter market rates and, therefore, freight rates have increased sharply in the past month, the Cabinet paper states.
Now CSC plans to deploy its own vessel, M V Ceylon Breeze, for the first shipment. For the remaining shipments, the CSC will charter ships from the spot market on “voyage charter” basis in order “to cater to the critical coal requirements of the Ceylon Electricity Board (CEB) with the view to avoiding catastrophic national economic consequences in the event that the Lakvijaya power plant has to be shut down due to lack of coal”, the Cabinet paper says.
If the ships are not available on time at the loading port, it adds, the coal suppliers could claim liquidated damages from LCC. The total freight cost for a shipment of 60,000MT will now be around US$ 1.02mn (about Rs 180.5mn) at US$ 17 a MT.