India's Thermal Coal Imports Rise Nominally by 6% in Jan-Oct 2024: What Lies Ahead?
India's thermal coal imports witnessed a nominal 6% rise in the January–October 2024 period (10MCY'24), climbing to 151 million tonnes (mnt) compared to 143 mnt during the same period last year. While the growth appears modest, the dynamics driving these numbers—ranging from increased power demand to geopolitical and weather-related factors—paint a more nuanced picture. This blog delves into the key drivers of this uptick and explores what the future holds for India's thermal coal imports.
The 2024 Snapshot: Import Volumes and Trends
Thermal coal imports for October 2024 remained flat at 14 mnt month-on-month (m-o-m). However, year-on-year (y-o-y), there was a 6% increase in volumes over 10MCY'24, primarily attributed to the following:
- Indonesia’s Dominance: Indonesia retained its position as the largest exporter to India, supplying 92 mnt in this period, an 11% increase from 83 mnt in the same period last year. Geographical proximity and competitive pricing made Indonesia the preferred source for Indian buyers.
- South Africa’s Contribution: Imports from South Africa rose to 25 mnt, a 12% increase from 22.4 mnt in the corresponding period last year. Favorable pricing and specifications of South African coal contributed to this growth.
- Flat Imports from the US: Imports from the US remained unchanged at 11 mnt y-o-y, underscoring a plateau in demand for American coal amidst competition from other suppliers.
Drivers Behind the Growth
- Rising Power Demand
India's power consumption surged by 6% in January–October 2024, reaching 1,427,790 MU compared to 1,352,063 MU in the same period last year. This increase was driven by:
- Heat Waves and Droughts: Intense heat waves spanning 24 days and prolonged drought conditions significantly escalated electricity usage. Cooling appliances such as air conditioners and essential water-pumping systems contributed to higher power loads.
- Coal's Continued Dominance: Coal accounted for 49.1% of India’s total installed power generation capacity as of May 2023. The fossil fuel remains critical in bridging the gap between energy supply and demand.
- Sponge Iron Industry Growth
Sponge iron production rose to 40 mnt in January–September 2024, up from 36 mnt in the same period last year. South African coal, favored for its higher productivity and efficiency compared to domestic coal, played a pivotal role.
- Competitive Pricing: Prices for South African coal grades RB3 (4800 NAR) and RB2 (5500 NAR) fell 14% and 12% y-o-y, respectively, making imports economically viable for sponge iron producers.
- Fuel Mix Preference: Imported coal comprised 60% of the sponge iron sector’s fuel mix, with domestic coal accounting for the remaining 40%.
- Nominal Domestic Production Growth
India’s domestic coal production from Coal India Limited rose by a modest 2.5% y-o-y to 403.8 mnt during April–October 2024. The slight increase in production, coupled with a 1.5% rise in offtake (428.5 mnt), was insufficient to meet the growing demand, necessitating increased imports.
- Indonesia’s Export Surge
Indonesia, the world’s largest exporter of non-coking coal, ramped up production in 2024. Exports surged by 13% to 329 mnt during 10MCY'24, supported by the government’s ambitious production target of 922.14 mnt for the year. India accounted for the second-largest share of Indonesian coal exports at 89 mnt, up from 82 mnt in the previous year.
Challenges Ahead
- Seasonal Rainfall in Indonesia: The rainy season in Indonesia, spanning November to March, is expected to disrupt coal production and export volumes. As a key supplier to India, any reduction in output could impact Indian imports in the short term.
- Domestic Supply Constraints: While India has made strides in ramping up domestic coal production, the growth remains insufficient to keep pace with the rising demand. Investments in mining infrastructure and technological upgrades are necessary to reduce reliance on imports.
- Geopolitical and Environmental Pressures: Global focus on decarbonization and the transition to renewable energy sources could influence India’s coal import strategy. The government’s push for cleaner energy alternatives may gradually reduce dependency on fossil fuels.
Outlook: What Lies Ahead?
India’s coal imports are expected to remain robust in the near-to-medium term, buoyed by increasing power demand. The International Energy Agency (IEA) forecasts an 8% rise in India’s cumulative power consumption in 2024. However, the interplay of global factors such as weather disruptions in Indonesia and fluctuating international coal prices will play a significant role in shaping future import trends.
Key Developments to Watch:
- Renewable Energy Expansion: India’s efforts to diversify its energy mix may temper the growth of coal imports in the long term.
- Policy Interventions: Government initiatives aimed at boosting domestic coal production could reduce dependency on imports.
- Global Market Dynamics: Price competitiveness and supply stability from major exporters like Indonesia and South Africa will influence procurement strategies.
OMC Auction Details as on 20.11.2024
| Mines Name | I/O Size | Grade Fe% | Auction Quantity | Booking Quantity | Balance Quantity | Auction Price (₹) | Bidding Price (₹) | Rate Increase (₹) |
|---|---|---|---|---|---|---|---|---|
| Daitari | 10-40 | +62 | 40,000 | 40,000 | 0 | 5,350 | 6,900 | 1,550 |
| Gandhamardhan Block-B | 10-40 | +62 | 225,000 | 225,000 | 0 | 5,000 | 6,000 | 1,000 |
| Guali-Barbil | 18-40 | +62 | 65,000 | 65,000 | 0 | 5,700 | 6,900 | 1,200 |
| Jilling-Barbil | 5-18 | +62 | 70,000 | 70,000 | 0 | 5,255 | 6,500 | 1,250 |
| Jilling-Barbil | 18-40 | +62 | 100,000 | 100,000 | 0 | 6,400 | 7,600 | 1,200 |
| Apahatu Quarry of Jilling | 18-40 | +62 | 60,000 | 60,000 | 0 | 5,300 | 6,350 | 1,050 |
| Khandadhar-Koira | 10-40 | +62 | 30,000 | 30,000 | 0 | 5,400 | 6,750 | 1,350 |
| Tiring Pahar-Barbil | 10-40 | +62 | 12,000 | 12,000 | 0 | 5,350 | 6,900 | 1,550 |
| Khandbandh | 10-40 | +65 | 12,000 | 12,000 | 0 | 6,850 | 7,250 | 400 |
| Banspani-Barbil | 10-40 | +62 | 35,000 | 35,000 | 0 | 5,800 | 6,700 | 900 |
| Unchabali-Barbil | 10-40 | +62 | 35,000 | 35,000 | 0 | 5,100 | 6,350 | 1,250 |
| Roida-C | 5-18 | +62 | 16,000 | 16,000 | 0 | 5,800 | 7,000 | 1,200 |
| Unchabali-Barbil | 10-40 | +58 | 15,000 | 15,000 | 0 | 4,100 | 4,700 | 600 |
| TOTAL | 867,000 | 867,000 | 0 | Booking in %: 100% | ||||
Conclusion
India’s thermal coal import story for 2024 reflects a complex interplay of rising domestic energy demands, economic considerations, and global supply dynamics. While the nominal 6% growth may appear incremental, the underlying drivers suggest a well-entrenched dependency on imports to sustain industrial and power requirements.
As India balances its growth aspirations with sustainability goals, the coming years will witness a critical re-evaluation of its energy mix. For now, coal remains an indispensable part of the equation, and understanding these trends is vital for stakeholders across industries.