India’s coal import shipments have been hit hard by COVID-19 induced lockdown as the same have plunged by 28% from 16.9 MnT in Apr’20 to 12.2 MnT in May’20 and by 45% against May’19, CoalMint’s vessel line-up data reveals (excludes pet coke).
Analysing commodity-wise imports, India is a major non-coking coal importer and in May’20 it has plunged by 33% m-o-m at 8.23 MnT and on y-o-y basis by 53%.
It is no surprise that lockdown in the country since March which has been extended to certain areas until June end has taken a toll on India’s power demand (key non-coking coal consumer) and thermal coal imports subsequently. The slump in economic growth has curbed the country’s average power demand in the last three months by 25%.
In May’20, India’s electricity generation from coal has fallen by 22%, an analysis of daily load despatch data from POSOCO showed. Whereas coal’s contribution to overall electricity generation in May fell to 64%, compared with an average of over 71% last year.
Apart from this, India is also focusing on reducing its dependency on imported coal and utilising the domestic ones.
In May’20, Coal India’s production rose by 2.6% m-o-m at 41.3 MnT whereas its offtake was up by 2.2% at 39.9 MnT. CIL’s coal supplies especially to non-power consumers during May was up by 37% at 9.76 MnT against 7.11 MnT in April.
Inventory build-up weighs on coking coal imports
In case of coking coal used in the steel sector, imports observed a fall of 18.5% m-o-m at 3.61 MnT in May’20.
According to the market sources, while India’s crude steel output improved by 122% m-o-m basis at 12.5 MnT, its coking coal imports fell as the buyers took advantage of competitive coking coal prices in April and stocked up the same to be used in upcoming months.
Imports from S. African collapse, rise from U.S.
If we look at country-wise thermal coal imports, India’s imports from top supplier Indonesia, which typically ships lower-energy coal used for power generation dropped by 30% at 4.54 MnT.
Whereas from South Africa which supplies high CV coal majorly used by sponge iron units almost collapsed by 59% m-o-m basis at 1.14 MnT. The sponge iron units in India are still facing labour problems and are yet to revive their operations in full capacity.
United States: Interestingly, thermal coal imports from U.S. used by cement sector observed a surge of 4% m-o-m basis at 1.01 MnT. India’s efforts to curb the use of polluting petroleum coke as a fuel have created an opening for thermal coal from U.S over the past two years.
The resumption of construction activities and subsequent revival in cement demand in May has resulted in increased buying of thermal coal from U.S. The high heat content and low levels of ash in U.S. coal coupled with reasonable price have made it economical for cement manufacturers to use it for blending with Indian coal.
Coking coal imports from U.S. have also increased from 0.4 MnT in Apr’20 to 0.62 MnT in May’20, whereas from all the other countries, Australia, Canada, and Russia have reported a decline.
Outlook
Short-run: As India starts to re-open its economy, the imported coal demand will once again pick up from power and sponge iron sector.
CoalMint data reveals that South Africa’s RBCT port has reported a more than 150% increase in vessel booking from India in the last two weeks of May indicating increased thermal coal shipments arriving in June.
In case of coking coal, buyers are not booking any spot contracts because of the upcoming monsoon season during which steel demand is tepid. However, Indian manufacturers at present are focusing on catering to export markets resulting which coking coal imports in June may increase but any significant surge is unlikely.
Long run: It is possible that India’s imports may see a structural decline in the long run as India’s environment ministry has reversed its 2014 decision that placed limits on the amount of ash in coal at some plants, in order to promote domestic coal usage.
Also, there is increasing availability of renewables such as solar at prices lower than for electricity generated by coal which may result in diminished demand for imported thermal coal.
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