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India's thermal coal imports rise nominal 6% in Jan-Oct'24. What lies ahead?

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Non Coking

BigMint Bureau

189 Reads

21 Nov 2024, 09:48 IST

India's thermal coal imports rise nominal 6% in Jan-Oct'24. What lies ahead?

- Heat waves, drought drive up power demand

- Sponge makers ride slower SA export offers

-Rainy season may hamper Indonesian imports

Morning Brief: India's thermal coal imports rose a nominal 6% to 151 million tonnes over January-October, 2024 (10MCY'24), compared to 143 mnt in the corresponding period last year (CPLY). On a m-o-m basis, volumes remained flat at 14 mnt in October 2024.

Indonesia was, of course, the largest exporter at 92 mnt in this period as against 83 mnt in CPLY, followed by South Africa at 25 mnt (22.4 mnt in same period last year). The US's volumes remained flat, at 11 mnt y-o-y. Geographical proximity is a huge factor that favours India's thermal coal imports from Indonesia.

Company-wise break-up

Adani Enterprise recorded the highest import volumes at 25 mnt (down against 27 mnt in January-October, 2023) followed by Adani Power at 16 mnt (against 10 mnt in CPLY) and Agrawal Coal, at 8.5 mnt (8 mnt).

Reasons behind rise in imports

Rising power consumption: India's power consumption rose 6% through January-October to 1,427,790 MU against 1,352,063 MU in CPLY because of intense heat wave conditions spanning 24 days across India during the peak summer months. Plus, the droughts that had set in, in 2023, continued into 2024. These factors marked increased usage of intensive power consuming appliances like water pumps, air-conditioners etc. Higher coal-fired power generation, to satisfy consumption, necessitated increased usage of this fossil fuel. The share of coal in India's total installed power generation capacity is 49.1%, as per the Ministry of Power's data till May 2023.

Rise in sponge iron production: Sponge iron production was recorded at 40 mnt in January-September 2024 against 36 mnt in CPLY. Sponge iron producers prefer imported South African coal, whose specifications offer higher productivity and efficiency levels when pitted against the high-ash domestic coal. That apart, South African coal prices were more viable this year compared to last year. Average price of the RB3 (4800 NAR) grade, CNF Gangavaram, was 14% lower in January-October 2024 at $89/t against $104/t in CPLY. Similarly, RB2 (5500 NAR) prices decreased 12% in this period to $106/t CNF Gangavaram ($121/t), driving sponge iron producers to increase imported coal procurements. Sponge units' fuel mix comprises 40% of domestic coal with the balance 60% imported.

Nominal increase in domestic production: India's cumulative domestic coal production from Coal India over April-October 2024 also rose a nominal 2.5% y-o-y to 403.8 mnt, warranting the coal imports, while offtake upped a lower 1.5% y-o-y to 428.5 mnt.

Indonesian exports up amid heightened production: Indonesia, the largest non-coking coal producer and exporter, saw its overseas sales of the same increasing 13% to over 329 mnt in January-October 2024, against 292 mnt in the year-ago period, on the back of its rising coal production. Overall, China remained the top destination, with shipments totalling 87 mnt, up 4.5% from 83 mnt in CPLY. India received the second highest volumes at 89 mnt in January-October 2024, an 8.4% increase from 82 mnt in CPLY.

In 2024, the Indonesia government fixed a thermal coal production target of 922.14 mnt, which is almost 30% higher than the previously set 710 mnt. Despite significant domestic consumption, the surplus is being exported.

Outlook

India's coal imports may remain supported in the near-to-medium term on account of the likely increase in power demand this year. India's cumulative power consumption is expected to increase 8% in 2024, as per a forecast by the International Energy Agency (IEA).

However, with major miners in Indonesia bracing for the rainy season, which stretches from November till March, production may be hampered, a factor that may impact Indian imports to an extent.

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