Does COVID-19 to have Limited Impact on Thermal Coal Supplies?

The COVID-19 pandemic that has literally brought the whole world to a standstill not sparing any of the businesses from its adverse impact including coal. However, industry experts are of the opinion that compared to other commodities, coal production is expected to have marginal impact as thermal coal mines globally are permitted to operate during lockdowns being deemed as essential to maintain power supplies.

According to the GlobalData analysis, unlike other commodities, the world's coal production growth is expected to be at 0.5% in 2020 against previous year. While the thermal coal output is expected to grow by 0.5% to 7.05 billion tonne, metallurgical coal production growth is forecasted to be flat at 1.1 billion tonne.

If we analyse country-wise coal scenario, China's overall annual coal consumption is expected to fall by 0.5%, due to the lockdown in parts of industrial areas, with thermal coal consumption is anticipated to fall by 0.3% in 2020.

In case of India, its key producer Coal India Ltd (CIL) has already targeted about 750 MnT of coal output for FY21 against an actual output of 602 MnT in FY20. The only cause of concern for the company is the production from its subsidiary, South Eastern Coalfields and Mahanadi Coalfields will as both recover from the impacts of the severe monsoon and labour strikes in 2019.

In case of South Africa, thermal coal mines in the country have been permitted to operate with reduced capacity despite the country's new extended 21-day lockdown.

Recently, Indonesia's energy ministry confirmed that country's coal production remains on track to reach its 550 MnT target for 2020, with output during January-March at 137.3 MnT, or around 25% of the target. Market experts are of the opinion that South African and Indonesian producers will temporarily halt or reduce their production of thermal coal, but these supply cuts will not be enough to have major dent on the overall production for 2020.