By Shriram Sivaramakrishnan and Irene Tang

June 23, 2018 - Pakistan's thermal coal importers will have to discharge all of their cargoes at Port Qasim from August, after the country's Supreme Court banned the unloading of thermal coal at the nearby Karachi port, shipping sources said Friday.

A notice has been served to the Karachi Port Trust, the administrator of the country's largest maritime gateway, saying that only those vessels whose bills of lading have declared Karachi as the port of discharge will be allowed to call until the end of July, a shipping source close to the matter said.

The judgment, which was passed by the Supreme Court on June 20, cited environment pollution and health issues as reasons behind the new ruling.

"The Supreme Court has ordered to shift the offloading and handling of imported coal from Karachi port to Port Qasim and directed to make necessary arrangements in six weeks," Pakistan Business Recorder newspaper reported Thursday.

The new ruling is considered as a victory for environmentalists who filed the lawsuit saying the storage and transport of coal at Karachi port violated local health and safety regulations, according to sources.

From August, all coal imports into Pakistan will be received at Port Qasim, which has three dedicated coal terminals namely Pakistan International Bulk Terminal or PIBT, PQEPC and MW IV.

PIBT, which is Pakistan's first port terminal to be listed on the Karachi Stock Exchange, is considered to have the necessary requisites for handling dirty cargoes in an environmentally friendly manner.

The terminal has the capacity to handle up to 12 million mt/year of coal and 4 million mt/year of cement and clinker.

"Importers that had been using Karachi port will likely incur higher port costs at Port Qasim with average handling costs at $10-$14/mt compared with just $4/mt at Karachi," a trade source said.

The higher handling charges at Port Qasim was cited as a reason why many importers prefer using Karachi as the discharge port despite ocean freight into PIBT being lower by 75 cents/mt to $1/mt. 

"Although PIBT is more advanced and the [unloading rate] is good, the handling charges are high. Which is why no one wants to use it," a ship operator said.

Shipping sources cited the lack of availability of storage space at Port Qasim as an important bottleneck. 

"As per the chairman [of Port Qasim Authority], they will take coal vessels till they [run out of] storage space. [Once stockpiles are full], vessels would have to await at Port Qasim's outer anchorage," a second ship operator said. 

Pakistan's coal imports have been rising sharply over the last few years with the demand coming from power utilities as well as the country's fast-growing cement industry.

Industry estimates have put Pakistan's coal imports at 11.2 million mt in 2017, up sharply from 3.42 million mt in 2013.

Given the significant investments in coal-fired power plants under the China-Pakistan Economic Corridor plan, imports are expected to rise to 40 million mt by 2025, according to industry experts.