Indian Thermal coal imports rise by 9% in Aug’20 riding on Indonesian coal demand

Key Highlights

—India’s non-coking coal shipments were recorded at 12.2 mn t in Aug’20 against 11.2 mn t in Jul’20. In Aug’19 the same was recorded at a similar level of 12.8 mn t.

—Thermal coal imports from Indonesia used primarily by power plants recorded a notable rise of 22% m-o-m at 8.22 mn t. This has surpassed Aug’19 imports from Indonesia at 7.88 mn t.

—Imports from South Africa rose by 5% m-o-m in Aug’20 at 2.89 mn t while y-o-y the same has fallen by 16%.

—Mundra port received the highest shipment of 2.6 mn t in August whereas Adani Enterprise remained the top importer of thermal coal at 1.36 mn t.

What led to surge in Indonesian coal imports?

—India’s power consumption in Aug’20 recorded a drop of 4% m-o-m and 2% y-o-y at 108.9 billion units. Despite this country’s coal imports from Indonesia surged during the month.

—Buyers are stocking up Indonesian coal taking advantage of lower prices and in anticipation of domestic demand pickup in the upcoming months.

“While there is increased availability of domestic coal by CIL, power plants in coastal areas still prefer buying imported coal given the new price lows, making imported coal a cheaper and preferred option to buy”,  quoted a market participant based in Mumbai.

—Lower-rank (4200 GAR) Indonesian coal slipped to $22.63/t in the ongoing week, down by 38% from its 2020 peak of $36.7/t from mid-February.

—Mundra port have highest stock of Indonesian coal at 2.64 mn t towards the month-end with majority stock being held by Adani Power and Tata Power.

Major changes observed

—Thermal coal imports from Australia recorded a significant rise of 82% m-o-m at 0.73 mn t while y-o-y the same has surged by 40%.

—Amid ongoing trade war between Australia and its biggest coal consumer, China, Australian sellers are diverting their exports to India. Also, Australian coal (5500kcal/kg) coal prices have plunged by 38% since Jan’20, making it an attractive buying option especially by Indian cement sector.

—Thermal coal imports from other key destinations like U.S. and Colombia has been recorded at nil in Aug’20 while imports from Mozambique plummeted by 73% at 0.05 mn t.

Future Outlook:

With business activities returning to normalcy thermal coal imports are likely to increase in the upcoming months. Market participants believe that although availability of domestic coal is increasing, coastal area units would still prefer imported coal, given the lower prices and better quality material.