Identifying Emerging Coal Importing Destinations for India: Healing the Domestic Supply Crunch

The Commercial Coal Consumption Dynamics in India

For many years, the Indian mining sector has been a success story in waiting . Inspite of having the top five or six reserves globally in many commodities such as iron ore , thermal coal etc, the mining sector in India is still not fully matured and  accounts only 2 percent of country’s GDP.  However, the demand for coal continues to create ground for a robust sector but the supply remains shackled.  Hence, a crunch has always been witnessed in the domestic availability of coal due to the demand –supply mismatch.

At present, India is primarily dependent on coal to meet its energy requirements. Close to 60 percent  of the commercial energy requirement of the country is entirely coal driven. And with the high growth targets of 9-10 percent  which the country is targeting to achieve by end of 12th FYP , the demand of coal is bound to increase two –three times of what it is currently.  Even if we factor in the economic slowdown , the coal consumption in the country is estimated to witness a northbound trend. It is pertinent to note that coal demand in India  will stand at a staggering figure of 1000 MT by the end of 12th FYP, necessitating the need for imports to the tune of 200 MT.

India’s coal demand has grown at a CAGR of 7 per cent over the past decade. During FY12, it has touched the 700 MT mark. The prime consumers of commercial coal in India are power, cement and steel sectors. However, the growth in number of small scale industries and process industry is also adding to a significant amount in the demand for coal as observed from the current trend. A CAGR growth rate of six per cent, which is plausible, would result in demand for close to 950 MT of coal, by the end of 12th FYP.

The prime consumer would be power sector accounting for 70 per cent of the demand. The other sector also will grow in the demand pie cumulatively and will outnumber the cement and steel sector by more than 100 MT by FY 2017-18. The demand from the cement sector will grow at a steady pace from 25 MT in FY 2012-13 to nearly 35 MT in FY 2017-18. The steel sector’s demand will grow by 20 MT from 45 MT in FY 2012-13 to 65 MT in FY 2017-18.

Sector Wise Estimated Commercial Coal Demand in India

Coal Supply Deficit

From 2008-09, it is observed that the demand of coal is increasing at a higher rate than the domestic supply. This has widened the demand-supply gap. While the coal production in India was 506 MT for FY 2010-11, the demand was projected at 656 MT leaving a gap of about 140 MT to be met from other sources.

As per CIL estimates based on the LoA’s granted by SLC (LT) and other commitments, the future coal balance for CIL shows supply deficit of more than 300 MT in the medium-term, if all the LoA’s are materialized. The option to mitigate growing demand and supply gaps lie in enhancement in domestic production and importing coal at competitive prices.

Emerging Coal Importing Destinations for India : Securing the Soaring Demand

Countries such as US , Canada , Indonesia , South Africa and Australia are recognized as major coal exporters globally and at large satiate the demand pockets of Asia-pacific region , among which post China the largest demand centre is India.  The two categories of coal namely thermal and coking  coal are mainly supplied from following countries.

Non –Coking coal supplying countries- Australia , Indonesia , South Africa , South America , Mozambique and Russia

Coking Coal Supplying Countries- Australia , Indonesia, USA and Canada

Country Wise Study of Imported Coal in India

USA stands as a country which exports metallurgical coal to India. In past 4 years time USA has emerged as a destination for coking coal end users in India. Although, coal reserves wise USA leads the world but coal comes as secondary source of energy given the recent gas exploration of the country. With growing capacity of steel production and reduction in metallurgical coal supplies from Indonesia may see USA becoming a preferred destination for Indian players. However, the cost of imports will be high purely because of huge travel distance from USA to India. US contributed a total of 2.7 per cent of total metallurgical coal imported in India in the year 2012 (till November). The months of January and April in 2012 saw coal imports from USA in India.

Australia is a country which exports maximum metallurgical coal to India. Since last five years Australia is the leading destination for coking coal end users in India. Australia contributed to almost 80 per cent of the coking coal imports by India in 2012 (till November). Australia also supplies thermal coal, but in very less proposition as compared to Indonesia and South Africa. It is likely that most of the coking coal needs of India will continue to be fulfilled by Australia till 2020.

Indonesia is a country which exports maximum thermal coal to India. Since last five years Indonesia is the leading destination for non-coking coal end users in India. Indonesia contributed to almost 80 per cent of non-coking coal imports by India in 2012 (till November). Indonesia also supplies coking coal, but in very less proposition as compared to Australia. It is likely that most of the non-coking coal imports needs of India will continue to be fulfilled by Indonesia till 2020.

South Africa is a country which is gaining momentum in supplying thermal coal to India. Since last five years many Indian power companies have acquired coal assets in South Africa. South Africa contributed to almost 18 per cent of non-coking coal imports by India in 2012 (till November). South Africa also supplied to 10 per cent of coking coal to India till November 2012. It is likely that non-coking coal imports will grow from South Africa in years to come to a significant proportion.

Mozambique is fast gaining its popularity as next destination for non-coking coal in India. The testimony to this lies in the fact that the imports have grown almost 400 per cent from FY 09 to FY12. With growing thermal coal demand and a stable policy environment of Mozambique offers huge potential for imports. However, the development of the internal infrastructure of Mozambique will pose a major challenge to imports India.

Scenario Wise Import Volume of Coal in India from Key Destinations During 12th FYP (In MTs)_enincon perspectives

Comparative Analysis of Coking Coal Destinations for India Till 2020_enincon perspectives

Comparative Analysis of Non-Coking Coal Destinations for India Till 2020_enincon perspectives

*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

Leave a Reply