Skip to main content

The tiger roars as the dragon sleeps

Published by
World Coal,


India’s coal demand could hit 787 million t this year, according to coal and power minister, Piyush Goyal, with imports required to make up a more-than 200 million t shortfall in domestic production.

India’s coal production has grown at an annual rate of 2% over the past few years as public opposition to new mines and bureaucratic inertia has made it difficult to develop new and existing mines. The country’s main coal producers – Coal India Ltd and Singareni Collieries – are forecasting output of 561.5 million t for this year. The two companies account for over 90% of the country’s total coal production.

Meanwhile, India’s coal demand has boomed, leaving the country seriously short on coal supplies and dependent on imports. According to NTPC, the country’s biggest power producer, six of its coal-fired power plants, accounting for 15% of the country’s coal-fired capacity, are down to two days of coal inventories. And with the monsoon season coming up, bringing potential supply disruption, avoiding the blackouts that have plagued the country in recent years and dampened its economic growth, is likely to be a difficult task.

In response to India’s worsening coal shortage, Goyal has pushed companies to increase coal imports, while forcing Coal India to open a new mine this month – its first new mine in a decade. The minister is also lobbying for a more streamlined approach to mine development in order to achieve an 8% per year growth in coal output over the next two to three years.

India’s growing need for coal imports is good news for coal exporters in Australia, Indonesia and South Africa at a time when Chinese demand has cooled. In the first half of this year, China’s imports grew by just 0.9% to 160 million t compared to the same period last year, when imports rose by 13.3%. Inventories also remain above average, with Coal Guru reporting stocks of 300 million t in the country, compared to the usual 200 million t.

“This year, Chinese coal offtake was depressed by oversupply, a warm winter, high stocks and good hydro levels,” said Bank of America (BofA) Merrill Lynch in a recent note. Beijing has also signaled a long-term shift to natural gas by backing a gas-supply deal with Russia’s Gazprom.

With China cooling off, India’s growing need for coal imports will help to soak up some of the surplus supply still flooding the global seaborne market. According to the Australian Bureau of Resource and Energy Economics (BREE), Australia’s coal exports rose by 6% from July 2013 to June 2014 to 192 million t, while Indonesia’s output increased by 7.6% in the first half of this year to 213 million t.

“The emergence of India will likely prove to be a source of sustainable coal demand in the long run,” continued BofA Merrill Lynch in a recent note. “With India’s domestic coal production plagued by numerous problems, it is likely that seaborne coal imports will stay at healthy levels as long as prices remain below US$100/t.” The bank also lowered its price forecast for this year to US$71/t and US$73/t in 2015.

The global coal industry needs India’s coal demand. With demand for coal in mature markets in Europe and the US peaking, as a result of renewed regulatory activity, large increases in renewable energy supplies and cheap gas supplies, and China off the boil, India is one of the few bright points. Until the dragon wakes up again – as could happen 2015 and 2016 as inefficient domestic coal mines shut down – all eyes are on the tiger.

Written by

Read the article online at: https://www.worldcoal.com/coal/18072014/world-coal-india-hoovers-up-more-coal-as-chinese-demand-remains-soft-coal1102/


 

Embed article link: (copy the HTML code below):