SMEDC plans to expand market for coal in Mindanao

MANILA, Philippines - Sultan Mining and Energy Development Corp. (SMEDC), through subsidiary MG Mining and Energy Corp. (MGMEC), is planning to expand its market to Cagayan de Oro, Zamboanga and Davao as local demand for coal continues to grow.

SMEDC vice president for sales Michael Morales said they expect sales in Mindanao to reach 20,000 metric tons a month because of this planned expansion.

Morales said the company currently sells about 8,000 tons a month in General Santos City where it has a 95 percent market share.

He noted that their main market consists of canneries and other food manufacturers with large energy requirements for their boilers. Many of these firms have converted their boilers to use coal instead of bunker due to high fuel costs.

“The canneries and food manufacturing industry in Mindanao remains a niche market for us,” said Morales explaining that this is because of their proximity to their customers which allows them to cut shipment costs.

According to Morales, many manufacturers have converted or are converting their boilers to use coal because of the high cost of bunker fuel.

“Coal is three times cheaper than bunker fuel,” said Morales adding that coal was still cheaper than bunker even when oil prices plunged at the height of the global economic crisis.

He also noted that bunker fuel prices are going up again as world oil prices recover and thus expects demand for coal to continue rising as more industries shift from bunker to the cheaper fuel.

Morales said many manufacturers in Mindanao are now retrofitting their power plants to burn coal instead of bunker fuel.

They spend an initial P25 million to P30 million to buy new coal-fired boilers but are able to recoup this investment in less than a year from savings due to the huge difference between the costs of coal and bunker oil,” he said.