Understanding Import Dependence of Coal in India & Examining Domestic Market Scenario for Imported Coal w.r.t. Demand from Steel Industry

Coal Import Dependence of India

India historically has been an importer in terms of coal and has seen magnanimous growth in numbers from FY 2004 to FY 2016. Further the imports have grown ten folds from 21.7 Mt from 2004 to 210 Mt until December 2016. The share of India’s thermal & metallurgical has been third and second respectively among global importers in FY 2016-17 (till December 2016).

Globally there has been a resurgence in Chinese steel production this year as compared to last year witnessing marginal growth in their coking coal imports. Whereas in India the met coal imports have gone done by 4 Mt from FY 2015-16 levels in FY 2016-17 owing to slowdown in steel production.

Thermal coal imports have also seen a downfall by 10 Mt in FY 2016-17 from FY 2015-16 levels in India courtesy the falling in thermal power plants PLFs and lower generation owing to subdued demand in the country. However, there was a consistent surge in numbers from FY 2004 till FY 2015 which witnessed a first downfall only in  FY 2016 though not by big quantum on the whole.

Exhibit 01 Steam Coal Imports in India – Global Context (FY 2016)_enincon

Coal Dependence- The Year on Year Track

Recent trends show an increasing dependence on coal imports, which have surged since FY2012. As seen in Exhibit 2, import dependence (measured as the share of total imports in total supply of hard coal) increased from 11.5 per cent in FY 2011 to 25.7 per cent in FY 2015. It has seen a marginal dip and stands at just over 23 per cent in FY 2016.

Exhibit 02 Coal Import Dependence & Evolution (FY 04-FY 16)_enincon

Coal Import Market in India – By Steel Industry

Steel production in India increased 8.7 per cent year-on-year in the September quarter 2016, as producers continued to ramp up output in anticipation of growing demand from the government’s infrastructure development plans and the ‘Make in India’ campaign. In 2016, steel output is estimated to have risen by 6.8 per cent to 95 million tonnes. India is forecast to become the world’s second largest steel maker by the end of 2018, with output forecast to grow by 7.0 per cent in 2017 and 8.3 per cent in 2018 to 110 million tonnes. Domestic steel output will continued to be supported by a range of policies (such as safeguard duties, minimum import price mechanisms and anti-dumping duties imposed on a range of steel products) that have already resulted in substantially reduced imports. Iron and steel imports declined by 28 per cent year-on-year in the four months to October 2016. Year wise track of steel production and its import in India is given in Exhibit 3.

Exhibit 03 India’s Steel Production & Imports YoY Track (Jul 14 to Oct 16)_enincon

This scenario has propelled the level of coking coal imports in the country and the void globally created due to the lost sheen from China is expected to be off set by the growth peddled by India. The met coal imports are expected to be on consistent rise courtesy the higher steel production anticipated by India in near future to meet its local demand. The expected rise in level of coking coal imports in India over a period from 2015 to 2018 (f) shall be of 3.6% with volume of met coal imported standing at 57 MTs by 2018 (f).

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

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