- Thermal coal imports up 14% y-o-y amid domestic supply crunch
- Coking coal imports from Australia down 16% on supply disruptions
- Higher prices, dull steel demand may keep imports subdued in the rest of 2022
Morning Brief: The commodities markets witnessed a major turbulence in 2022, triggered by the onset of the Russia-Ukraine conflict. With subsequent sanctions on Russia by western countries, coal prices across the globe touched their all-time high levels.
However, this did not deter India from cutting down on its fossil fuel imports. Its total coal imports marked a 10% rise to 183 million tonnes (mnt) during January-September, 2022 against the corresponding period of the previous year.
As per data compiled by CoalMint, the highest rise in shipments was seen in thermal coal which rose 14% y-o-y to 128 mnt during the first nine months of the year. On the other hand, its coking coal imports remained stable at about 42 mnt y-o-y during the said period.
Thermal coal imports from Russia, Indonesia up
India’s coal imports were seen higher only from three destinations such as Indonesia, Russia, and Mozambique, while those from South Africa, Australia, the US, and others recorded a drop in 2022.
The decline in shipments from these countries happened as strong European demand lifted their prices to record levels.
The Russia-Ukraine war resulted in Europe banning Russian coal imports. This goaded Russian miners to find newer markets in Asia. They lured buyers in India and China with steep discounts.
High-CV Russian coal gained prominence in the Indian sponge iron, cement, and even the power sector. In fact, sponge iron manufacturers experimented with more of Russian coal blends in a bid to find an alternative to sky-high South African coal.
More-than-expected hot summers in India this year also supported the case for higher thermal coal imports especially from Indonesia. In a bid to meet the rise in power demand, the Indian government has announced a directive for 10% blending of imported coal with domestic, thus incentivizing domestic power utilities to make Indonesian coal purchases at least till August 2022.
India’s largest producers also had raised imported coal tenders over 20 mnt during the first half of the year.
With China already dealing with the slowdown in industrial activities due to the resurgence in Covid and increased production of domestic coal, its traditional demand for Indonesian material took a hit. Adding to it were increased imports from Russia, making Indonesian coal relatively cheaper than other-origin, thus benefiting Indian users.
Mozambican coal imports gained strength this year especially in the June-September quarter as one of India’s reputed steel mills promoted its usage in the sponge iron sector. This was helped by the rise in traditional South African coal prices.
Elevated South African and Australian coal prices this year resulted in reduced demand in other emerging Asian countries such as Pakistan and Bangladesh.
Domestic coal scenario led to higher imports
A domestic coal supply crunch also supported the case for higher thermal coal imports, as domestic output failed to match demand.
A decline in coal dispatches to the non-power sector also compelled them to switch to imported coal procurement. Coal dispatches to the non-power sector fell by 24% on a y-o-y basis to 77 mnt, while that to the power sector rose by a whopping 17%.
CIL’s coal allocations in e-auctions also dropped 54% y-o-y to 45.61 mnt during January-September, 2022 against 100.02 mnt in January-September, 2021. Adding to the woes, the introduction of single window sales from March 2022 have resulted in increased competition for the end-users.
Coking coal imports remain stable
India’s crude steel production during January-August, 2022 stood at 83.5 mnt, up 7% y-o-y. However, its coking coal imports in January-September 2022, remained largely unchanged y-o-y at 41.8 mnt.
Interestingly, India imported more of met coke this year as the same rose by 7% to 2.08 mnt. This year Chinese met coke provided cost advantage against costlier coking coal to Indian steel mills. China’s steel demand has been sluggish so far due to the ongoing property crisis, resurgence of Covid, subsequent restrictions and slowed industrial activities.
Coming to India’s country-wise coking coal imports, the arrival from its top destination, Australia, fell 16% to 29 mnt for the above-mentioned period due to weather-related supply disruptions there.
Interestingly, imports from the US surged by 118% y-o-y to 5.53 mnt during January-September, 2022. This rise can be attributed to Indian steel mills diversifying their coking coal sourcing base, as part of a raw material security strategy.
Imports from Russia increased over 50% y-o-y to 1.41 mnt as the country offered cheap, at times, at discounts of more than 40% which attracted steel manufacturers. Majority of Indian steel mills are avoiding Russian coking coal due to sanctions. However, a few traders did buy and a large primary mill also bought Russian coking coal to replace Australian thermal coal in its COREX technology.
Near-term outlook
India’s coal imports are likely to see a modest increase in the remaining months of the year. This is due to higher price expectations for thermal coal in the upcoming winter. However, weak domestic steel demand and the likelihood of supply disruptions in Australia due to heavy rains may limit any surge in coking coal imports.
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