The Complete Coal Procurement Checklist for Industrial Purchasing Heads
Industrial buyers know that coal procurement is not just about selecting a supplier. Every shipment carries financial risk, operational risk, and technical risk. To avoid costly mistakes, purchasing heads need a structured approach that covers payment terms, performance bonds, quality and quantity parameters, documentation, and pre-shipment testing. This checklist will help you approach coal procurement strategically and confidently.
Understand Payment Terms Before Signing Anything
Payment terms should be the first point of clarity in any coal contract. Good procurement teams evaluate how the payment structure affects cash flow, delivery reliability, and dispute handling. Most industrial coal deals use LC, TT, or a milestone-based payment approach.
A Letter of Credit is common because it protects both buyer and seller. It ensures the supplier will only be paid against documented proof of shipment. Telegraphic transfers may work for repeat transactions but are risky for large volumes. Many buyers prefer partial advance and balance on delivery once trust is established.
The safest method is to lock payment terms that reflect risk distribution. Do not accept unclear terms or verbal agreements, and avoid contracts where payment depends on seller declaration alone.
Know the PB Percentage
Performance Bond or PB is an important safeguard. It is usually a percentage of the contract value that the supplier submits to guarantee their performance. Typical PB ranges from 2 to 10 percent depending on deal size, buyer creditworthiness, and supplier reputation. The PB protects buyers from defaults, delayed shipments, or quality mismatches.
If your organization is new to international coal markets, insist on a strong PB clause. It not only filters unreliable suppliers but also signals vendor confidence. Good suppliers treat PB as standard business practice.
Q and Q Parameters Are the Backbone of the Deal
Quality and Quantity are the most sensitive parts of coal procurement. Industrial boilers and furnaces depend on consistent calorific value, ash levels, and moisture. Even a minor deviation can reduce combustion efficiency and increase operational cost.
Contracts must clearly list:
◾ GAR or NAR calorific value range
◾ Total moisture and inherent moisture
◾ Ash percentage
◾ Volatile matter
◾ Sulfur limits
◾ HGI or grindability
Quantity tolerances must also be clearly stated. Standard tolerance in coal shipping is 5 to 10 percent depending on the charter terms. Buyers should avoid vague quality statements such as shipment will be as per mine specifications. Instead, define measurable ranges and testing methods.
Documentation Is Your Legal Shield
Coal deals require accurate and complete documentation. Missing or incomplete paperwork often leads to demurrage, port delays, or payment disputes.
Every procurement team must ensure:
◾ Commercial invoice
◾ Packing list
◾ Bill of Lading
◾ Certificate of Origin
◾ SGS or third-party inspection report
◾ NOC or export clearance, depending on origin country
◾ Insurance certificate if CIF terms are used
Documentation is not a formality. It is the legal evidence that unlocks payment, clears customs, and protects both parties in case of disagreement. Partner with suppliers who follow strong documentation processes instead of pushing responsibility onto brokers or traders.
Coal quality at the mine does not equal coal quality in the vessel. Moisture absorption, blending errors, or handling issues may change coal characteristics. That is why third-party pre-shipment testing is mandatory for serious industrial buyers.
Reputed providers like SGS, Intertek, and Bureau Veritas test moisture, calorific value, ash, sulfur, and other parameters. Buyers should review sampling procedures before approving cargo. A proper pre-shipment inspection reduces rejection risk at port and prevents disputes once the coal reaches your plant.
Final Thoughts
Coal procurement is complex, but a structured checklist helps purchasing heads maintain control. Always negotiate transparent payment terms, enforce reasonable PB percentages, write clear Q and Q specifications, demand full documentation, and never skip pre-shipment testing. A disciplined process may take more time upfront but it protects your production, your finances, and your supply continuity. Get more insights on Gsinfotechvis.
Follow us on Instagram.
