India: Thermal coal imports dip 3% in May'21 on surging prices

India's thermal coal imports fell 2.7% month-on-month (m-o-m) to 15.8 million tonnes (mn t) in May'21 as against 16.2 mn t in Apr'21, CoalMint's vessel line-up data revealed.

Coal imports from Indonesia fell to 8.87 mn t in May'21 from 9.56 mn t in Apr'21, while imports from South Africa remained largely stable at 2.77 mn t last month from 2.70 mn t in Apr'21.

Coal imports from Australia, however, rose 50% m-o-m to 2.19 mn t in May'21, while Russian coal imports registered a 75% m-o-m increase at 0.42 mn t in the same month.

As per sector-wise thermal coal imports in May'21, power and cement registered a m-o-m decrease in imports by 20% and 29% respectively, while coal imports for the steel and manufacturing sectors rose by 36% and 41% respectively.

Surging Indonesia, SA prices keep away importers

After witnessing weak domestic demand conditions in March and April due to the rising Covid-19 cases in the country and consequent lockdown restrictions, importers largely kept to the sidelines and avoided any major bookings.

Strong Chinese demand ahead of its peak summer month has pulled up Indonesian thermal coal benchmark prices by 15% to $55.04/t as gainst $48/t in Jan'21, whereas South African coal prices are up by 30% from $87.67/t in Jan'21 to $114/t at present (as on 7 June'21).

The sharp rise in the coal prices, alongside resilient freight rates, compelled several domestic manufacturing units to switch to domestic coal, while tight supply of imported coal at Indian ports kept portside prices higher.

Australian imports rise

Australian benchmark 5,500 NAR thermal coal prices averaged $58/t in May'21 (much cheaper against its peers), motivating Indian buyers in the cement sector to opt for Australian coal with an intention to stock up before the monsoons begin. However, the prices rose sharply to $70/t, FoB Newcastle in the last week of May.

Sector-wise demand scenario

Sponge iron: Demand for South African coal from the sponge iron sector remained largely muted last month due to lockdown-induced restricted production. Owing to a surge in portside prices for South African coal, major sponge iron players were also heard to have cut down on their imported coal procurement and switched to domestic coal.

Power: India's power consumption witnessed an 8.2% year-on-year growth in May at 110.47 billion units (BU), as per official data. However, it fell 7.4% m-o-m from 119.26 billion units (BU) in Apr'21 which justifies the fall in Indonesian coal imports. Lockdown restrictions at several parts of the country resulted in lower power demand last month.

Cement: Sufficient coal inventory at cement plants resulted in reduced coal imports by the sector last month.

Outlook

As per CoalMint's analysis, elevated global coal prices, alongside skyrocketing freight rates, are likely to keep thermal coal imports from Indonesia and South Africa under pressure in Jun'21. However, relaxation of Covid-19 restriction in several parts of the country may support thermal coal imports this month.