With the rising cases of COVID-19 in India, both Central and State government has decided to lockdown majority of states to contain its spread, thus containing the free movement of people and services in the country barring essential ones. Let us analyse how the country’s coal supply and demand dynamics are being impacted amid this pandemic and Indian states lockdown:
Domestic coal supplies to remain uninterrupted
Amid the lockdown in India, Ministry of Coal has issued a notice specifying that the coal production and supply has been classified as an essential service under Essential Services Maintenance Act,1981 and any service or any establishment or undertaking dealing with production, supply, and distribution of coal would continue unhampered. This means that the coal supplies in India especially to the power sector (a key thermal coal consuming sector) would remain uninterrupted in the coming weeks ahead.
CIL- India’s biggest coal miner has recorded highest single day output of 3.17 MnT on 20 March in past one year and is trying hard to ramp up its production in order to achieve its annual production target of 610 MnT. As on 23 Mar’2020, India’s total coal production stood at around 575.9 MnT, CoalMint has received this information from its reliable sources.
Can imported coal enter India?
Apart from domestic production, India also imports considerable quantity of coal (coking and non-coking) from countries like Indonesia, South Africa, U.S. and Australia. India’s total coal imports during Apr’19 to Feb’20 stood at 221.6 MnT, up by 4% y-o-y basis.
Coking coal which is used in steel production is mainly imported from U.S. and Australia whereas thermal coal being used in power and sponge iron sector is imported majorly from South Africa and Indonesia.
Now amid this lockdown, the ports in the west coast of India have been closed whereas ports in the east coast are working without any disruptions. India’s majority of coal imports (more than 60%) come at the eastern ports which means that the imports may continue to come to India.
Global coal suppliers in a limbo
On the supply side, there are increasing reports from around the world of miners either idling output or cutting it back as they try to manage the impact of the coronavirus. While few coal-producing countries have exempted coal operations from lockdown few have ordered complete halt. Also the ports at various countries have suspended their operations and many are facing manpower shortage resulting which coal export have become a tricky affair.
India’s domestic coal demand under pressure
On the demand side, coking coal demand, which is used in steel manufacturing, is going to be adversely impacted in the coming weeks ahead. This is because, although the steel manufacturers are continuing their production under Essential Service Maintenance Act, its key end users such as automobile majors and white goods units, have shut down their operations whereas majority of construction activities have been halted, thus affecting the steel demand subsequently.
Apart from this sponge iron units that requires thermal coal have also been shut down on the government orders.
In case of power sector, the demand for thermal coal will also be affected in the coming weeks ahead as there will be drop in its usage from the industrial sector amid various units suspending their operations.
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