India’s coal imports from Russia during 1-15 August, 2022 surged by 70% m-o-m to 1.46 million tonnes (mnt), as per Coalmint’s vessel line-up data. Out of the total coal coming in, 75% is thermal and 25%, coking coal.
About 1.09 mnt of Russian thermal coal arrived at Indian ports during the said period, with top buyers being the Rashmi Group, JSW/Bhushan Steel, IMR Resources, and Shri Cement.
With European sanctions not allowing Russian coal to enter its territory from 10 August, the latter made its way to India at quite competitive rates. In July, when the bookings were made for Russian coal, the same was cheaper by 25-30% on per CV basis compared to thermal coal from other origins like Australia, the US and South Africa.
Reeling from domestic coal shortage, captive power plants (CPP) have resorted to importing coal from Russia, in a bid to shift away from grid power. Cement manufacturers are also buying Russian coal whose specifications suit them because of its low sulphur content. Interestingly, the Indian sponge iron sector is also experimenting with Russian coal blends along with South African coal and the results are quite positive.
Apart from its viability in various sectors, another factor that has provided support to Russian imports is that Indian banks are adapting to payments in other Asian currencies, ditching the dollar (as the country has imposed sanctions on Russia). Indian coal buyers have been using the Chinese yuan, euro, the Hong Kong dollar (HK$), and the United Arab Emirates’ dirham for coal purchases in the last two months.
In the meantime, the Indian currency has hit record lows against the dollar, which means the cost of dollar-denominated imports have soared and thus doing trade in other currencies is proving to be beneficial for Indian importers. The rupee has lost around 7% against the dollar this year, but only 0.6% against the yuan and gained 3% against the euro.
Where coking coal is concerned, about 0.38 mnt is arriving at ports and that too for JSW Steel. According to market participants, Indian steel mills are wary of buying Russian coking coal because of the long voyage time, reduced steel demand at present, long-term contracts with Australian coal suppliers, and fear of sanctions by western countries in case of direct imports.
What lies ahead?
To avoid Western sanctions, India is considering using an alternative ruble-based payment system. However, currently, although Indian buyers are looking for more of Russian coal, especially thermal, vessel availability from Russia is emerging as a big challenge. Also, the freight between Russia and India for Panamax vessels has risen and is heard at $60-70/t which is adding to the cost of procurement. This is likely to restrict a significant rise in India’s Russian coal imports in the near term.
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