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The monsoon and coal demand in India

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World Coal,

A strong El Nino could negatively impact monsoon rains in India, hitting hydropower capacity and increasing reliance on coal this summer, according to analysis from Marex Spectron.

India is one of the largest hydropower producers in the world, relying on it for 17% of its electricity generation. The monsoon season (June - September/October) is the peak time for hydropower generation as the country receives 70% of its rainfall during these months.

“During the monsoon season, therefore, hydropower can replace a significant share of coal power production,” explained Marex Spectron. “Coal imports are therefore crucially lined to the amount of hydropower produced, which is again strongly linked to the strength of the monsoon rains.”

Last year, a strong El Nino resulted in lower-than-usual rainfall in India – which led to an increased need for coal-fired power over the summer and consequent record lows at coal stockpiles around the country.

A similar scenario could play out this year with an even stronger El Nino expected, concluded Marex Spectron (although it is worth noting that not all El Nino years are linked with a drop in monsoon rains).

This could be good news for the global thermal coal market as India’s government seems determined to avoid the coal shortages and blackouts of previous years.

“Coal imports to India has increased considerably since early this year and have meanwhile reached record high levels,” the research note concluded – a trend that should continue, if rainfall is again disappointing this summer.

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