India, a leading importer of thermal coal along with China, has recorded a fall of 14% y-o-y in its steam coal imports in CY20 at 158.9 mn t against 186.6 mn t in CY19, vessel line-up data with CoalMint reveals.
While Indonesia continued to be the top exporter of thermal coal to India at 95.5 mn t (60% of the South Asian country’s total exports), Indian imports from Indonesia fell by 19% on year. Imports from South Africa too recorded a drop of 10% y-o-y at 37.6 mn t. Only Australia outshined the other importing countries as India’s imports from Australia rose by 27% y-o-y at 8.24 mn t in CY20.
All the major thermal coal importing sectors, including power and sponge iron, registered a y-o-y drop of 11% and 20% respectively. Only the cement sector’s imports moved up by 7% to 10 mn t in CY20.
COVID-19 & changed trade dynamics
The outbreak of COVID-19 and the subsequent lockdown in India since Mar’20 was a key reason for poor energy and steel demand in the country, especially in Q2 of CY2020. While the Indian economy started crawling back to normalcy in Q3 (Jul-Sep’20), with gradual lifting of restrictions, the process is taking time, as expected. The situation is expected to show remarkable improvement only from Q2 of CY21 onwards.
The year 2020 also saw a sea-change in the trade dynamics between China and Australia, with the former unofficially banning Australian coal imports due to escalated political tension between the two.
As China was the biggest consumer of Australian coal, the changed dynamics forced Australian exporters to divert their cargos to other countries including India.
Given the fact that Australian coal is more suitable for the cement sector, CoalMint recorded increased Australian coal imports by the Indian cement sector in CY20.
Boosting domestic coal
These apart, India’s thermal coal imports were impacted by the government’s push to boost usage of domestic coal in the country. State-owned Coal India Limited (CIL), which accounts for over 80% of domestic coal output, recorded a 4% y-o-y increase in its coal production for 2020. The PSU miner aims to substitute around 80 mn t of the imported dry fuel with more domestic supplies in the ongoing fiscal.
In order to slash reliance on imports and tackle the weak demand scenario post COVID-19, CIL made its pricing attractive by keeping the base price almost at the same level as the notified price (the price of coal sold under long-term fuel supply agreements) until Sept’20. The premium to the notified price gained momentum only in the Oct-Dec’20 period.
In addition, non-power sector consumers such as cement and sponge iron firms have been steady buyers at CIL e-auctions. The company is looking to raise its sales to these consumers in the near future.
Outlook
Coal demand from utilities witnessed a modest easing following the festive season, leading to an increase in stockpiles in Dec’20. This, coupled with the recent surge in seaborne thermal coal prices, is expected to restrict the volume in the near term. In the long run, India’s coal imports are likely to plunge amid the government’s planned and consistent efforts to bolster domestic coal.
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