Pakistan Steel Mills (PSM) has reportedly prepared a plan to procure 40,000 tons Glennies Creek Coal at a price of $154 per ton against $146 per ton provisional price for the quarter January-March 2013 on Freight on Board (FoB), causing financial loss of $0.320 million to the national exchequer.
The sources said, Executive Committee of Management (ECM), which is comprised of directors of different departments and retired general managers working at substantial salaries, has already cleared the proposal and now Board Price Committee (BPC) is being pressurised to accept recommendation of the committee.
As per COBP requirement of one shipment of high volatile coal by the 1st week of April 2013. Letter of Credit (LC) was established for procurement of Moura Dawson Coal but on February 25, 2013 M/s Anglo American Metallurgical Coking Coal Limited, Australia requested PSM to discontinue the LC due to mine and rail remaining under water and bunching of vessels at Port Gladstone.
Consequently, PSM asked M/s Vale Coal, Australia to supply Glennies creek coal who agreed to supply only 49,000 tons plus/minus ten percent coal at a rate of $154 per ton whereas its provisional price for the quarter January-March 2013 is $146 per ton on FoB basis. However, PSM argues that its usance cost is the same, ie $1.80 and 1.35 per ton for 120 and 90 days for deferred LC. M/s Vale Coal, Australia had asked to establish LC not later than March 13, 2013 and it was apprised that existing COA is only for shipment size 50,000 tons plus/minus 10 percent and they did not agree to lift 40,000 tons plus/minus 10 percent coal, so in the ECM meeting held on March 8, 2013, it was agreed to hire a ship with 40,000 tons capacity on spot basis.
“PSM is of the view that as the previous provisional price of $146 per ton has already been approved by the BPC, the new provisional price of $154 per ton needs to be approved by the same committee for this one shipment,” the sources added. Regarding chartering for lifting of 40,000 tons (minus) 10 percent chopt, coal from Port Newcastle, Australia to Bin Qasim has also been discussed at a higher forum. M/s Vale Coal Australia agreed to supply 40,000 ton minus 10 percent Glennies Creek Coal basis 20-29 March 2013. Accordingly, notice of nomination on March 11, 2013 was served upon M/s Shadab private limited C/o their local agent M/s Cooper & CO, Karachi for nomination of vessel to lift 40,000 tons coal from port Newcastle Australia.
M/s Cooper& CO refused to lift 40,000 tons coal from Port Newcastle which was against the clause 32(b), 33(a) of the Charter Party and requested to give notice as per COA terms and shipment size as per contract. The source said, in view of these constrains in quantity of cargo offered by M/s Vale Australia PSM had no option except to go for spot chartering.
The Freight Evaluation Committee (FEV) considered the following circumstances and facts which led to urgent procurement of high volatile coal from M/s Vale, Australia and subsequent spot chartering for lifting of one shipment 40,000 tons) from Ports Newcastle.
The provisional price of Glennies Creek Coal from M/s Vale Coal, Australia for January-March 2013 quarter was $146 tons. However, they informed that the only way they could offer an early cargo in March 2013 to PSM is to delay the loading of another customer”s vessel that is in the queue and for which vessel has already been nominated. Doing so entailed M/s Vale Coal, Australia to pay an estimated $8 per ton towards commercial charges. M/s Golden Maritime Agencies have offered lowest freight rate for port Newcastle, Australia as $40.82.
PSM is also considering credit rating of M/s Swiss Singapore with whom contract signed on January 24, 2013 for the supply of 50,000 tons minus plus of iron ore fine against tender number BMD/02/IOF and IOL/12. According to sources contract was signed with M/s Swiss Singapore for supply of iron ore Fine Vale Brazil Brand Fe 63.5/63 percent. As they did not agree on usance LC, establishment of LC was delayed due to cash flow position.
In second week of March 2013, efforts were made by Finance Department for opening of LC but as per credit report of M/s Swiss Singapore, the risk factor of doing business is higher than average. PSM sought advice from Chairman BPC and also clarification obtained from M/s Swiss Singapore. M/s AJCL on behalf of their principal have offered comments on the report and tried to clarify the position.