India is increasingly catching up with China in its thermal coal imports, as the world’s two largest foreign buyers of the power generation fuel adjust purchases to align them with differing trajectories of their economic growth.
India, widely seen as one of the last remaining major growth markets for the fuel, has intensified purchases from Indonesia and Russia following the invasion of Ukraine, which Moscow calls a special operation.
Consultancy Wood Mackenzie said India’s thermal coal imports are expected to grow 7% annually to 158 million tonnes in 2022 and 3% to 163 million tonnes in 2023.
In contrast, shipments of the fuel resource to China, the world’s largest importer, could fall to 182 million tons in 2022 and 176 million tons in 2023, up from 246 million tons in 2021, Woodmack said.
The coronavirus lockdown suppressed fuel demand in China, while a massive surge in electricity demand accelerated India’s imports.
India’s economy recovered from weak consumer demand in the June quarter to grow at the fastest pace in a year. China, on the other hand, avoided contracting in the second quarter and has grown by 2.5% this year due to the COVID-19 lockdown in many parts of the country.
Indian Thermal Coal According to Indian consultancy Colmint, imports grew nearly 12% to 114.2 million tonnes in the eight months ended August 2022. China’s overseas purchases of the fuel resource fell 26% from a year earlier to 106.36 million tonnes in the first seven months of 2022, government data showed.
Analysts at Indian consultancy CRISIL and ICRA expect India’s coal imports to grow 16%-20% for the year ended March 2023.
In 2022, Russia displaced the United States to become India’s fourth largest marine coal supplier. According to government data, the share of Russian thermal coal supplies to China also increased.
“We are moving from South African imports to stronger imports from Russia and this is driven by large discounts for Russian coal,” said Jake Horslain, analyst at consultancy Energy Aspects.
“There is a demand for medium to high calorific value coal in India for more industrial uses, such as sponge iron production.”
Coalmint data shows India’s thermal coal imports have increased by 28% in the six months since Russia sent thousands of troops to Ukraine. Indonesian supply to India grew 43.6% in 2022, at the expense of supply from Australia, which fell 28.5%, and South African supply, which declined by a fifth.
domestic production
Indian imports are mainly driven by growth in electricity demand, which is growing this year at the fastest pace in at least four decades.
The rise in power usage has resulted in more imports by utilities, it has also pushed state-run Coal India to increase supply to power plants at the expense of the non-power sector, government data shows.
“The logistical constraints in transport and priority supply to the power segment have prompted the non-power sector to continue to depend on imports,” said Hetal Gandhi, director, CRISIL Research.
Chinese imports were low due to high domestic production, low electricity demand and Beijing’s price cap on domestic thermal coal, which made imports far more expensive than locally produced coal.
While India’s total thermal coal imports will be higher in 2022, shipments are expected to be lower during the last quarter as compared to the second and third quarters.
Ritabrata Ghosh, an analyst at ICRA, said, “We are now seeing a reversal in import trends, with August 2022 imports declining sequentially in July 2022.”
“The supply crunch is expected to ease some with pick-up in domestic coal production post monsoon,” Ghosh said.
This story has been published without modification in text from a wire agency feed.
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