India’s thermal coal imports fell 22% month-on-month (m-o-m) to 12.4 million tonnes (mn t) in Jun’21 as against 15.8 mn t in May’21, CoalMint’s vessel line-up data revealed.
Coal imports from Indonesia fell to 4.6 mn t in Jun’21, down 47% m-o-m, while imports from South Africa remained largely unchanged at 2.8 mn t last month.
Coal imports from Australia, however, rose 37% m-o-m to 3.01 mn t in Jun’21, while Russian coal imports registered a 13% m-o-m increase at 0.5 mn t in the same month.
As per sector-wise thermal coal imports in Jun’21, cement and steel registered a m-o-m decrease in imports by 26% and 38% respectively, while imports for the power and chemical sectors rose by 4% and 100% respectively.
Imports decline on surging prices, weak demand
Coal imports have remained on a declining trajectory since April this year as domestic demand took a major hit after several state governments imposed lockdown restrictions during the months of April and May.
Reduction in capacity utilisation and decline in domestic sales volumes, coupled with rising imported coal prices, resulted in a sharp drop in portside trade of coal coming from Indonesia and South Africa. Several end-users in the country also shifted their focus to procuring larger share of domestic coal to continue operations.
Robust demand from China amid its constrained supply output and altered trade dynamics with Australia had led to the sharp rise in Indonesian and South African coal prices over the last few months.
Indonesian 4,200 GAR coal has risen by 10% m-o-m, whereas South African 5,500 NAR coal moved up by 5% in Jun’21.
Resilient freight rates further dent imports
A sharp rise in Supramax and Panamax freight rates also played a major role in the decline in India’s coal imports as importers were seen bringing shipments mostly in capsize vessels.
Majority of Indian ports are capable of anchoring Supramax and Panamax vessels. Hence, shipments from these vessels witnessed a major drop while several cases were reported where traders brought in coal in capsize vessels, and had to lighten them at different ports.
Capesize vessel freight between RBCT to Gangavaram has risen to $18/t, as against $11/t in Jan’21, while Panamax vessel freight from Newcastle to India has risen to $28/t, as against $16/t in Jan’21.
Imports from Australia and Russia rise
Owing to its relatively cheaper prices against its peers, Indian importers focused more on Australian coal purchases last month. However, due to the surging freight rates and rising Australian coal prices, a sharp rise in imports from the country was capped.
Australian benchmark 5,500 NAR thermal coal prices averaged $74/t in Jun’21, up 28% m-o-m.
Russian coal imports also witnessed a steady rise in June due to its competitive prices as against Indonesian and South African coals.
Sector-wise demand scenario
Sponge iron: Demand for South African coal from the sponge iron sector continued to remain muted last month due to weak sales volumes, significant rise in raw material costs and reduction in capacity utilisation. Iron ore and pellets prices are up 59% and 34% respectively since Jan’21. Majority of the sponge iron players have cut down on their imported coal procurement and switched to domestic coal.
Power: India’s power consumption witnessed a 4.7% m-o-m growth in June at 115.39 billion units (BU), as per official data. Majority of the power companies were heard to have increased more of domestic coal and imported coal blending, with the share of domestic coal being the highest due to its cheaper prices.
Cement: Major cement plants are heard to have accumulated sufficient coal inventory for the next two months as they typically avoid procuring coal during the monsoon.
Outlook
As per CoalMint’s analysis, weak domestic demand and difficulty in coal handling during the monsoon season, and the rising freight rates are likely to keep coal imports under pressure in the upcoming month.
Imports are likely to rise only if global coal prices see any considerable correction with the improving coal production in China, and easing of supply tightness in Indonesia and South Africa.
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