India's thermal coal imports projected to decline for the first time since pandemic

Industry officials at the Coaltrans India conference in Goa anticipate a reduction in India's thermal coal imports for the first time since the onset of the COVID-19 pandemic, citing increased domestic output and soaring inventories.

Of the eleven coal traders surveyed by Reuters at the conference, eight predicted a decrease in fuel shipments this year, while the remaining anticipated either stagnant imports or minimal growth.

Surging production and abundant supplies from Coal India, the world's largest miner, have led to record-high stockpiles exceeding 43 million metric tonnes at power plants. This surplus prompted Coal India to expand sales to non-power sector users like sponge iron and aluminium smelters, traditionally reliant on imported coal. 

Pawan Kumar, head of coal sourcing at SEIL Energy India, expects thermal coal imports to decline by over 3% to 170 million tons. In contrast, Rodrigo Echeverri, head of research at Noble Resources, forecasts a nearly 6% decrease.

India imported 176 million tonnes of thermal coal, primarily driven by power plants in 2023.

"Domestic production has increased, and coal is readily available at floor prices," noted Rajat Handa, vice president of international trade at Agarwal Coal. He anticipates imports to remain below 160 million tonnes this year as many previous importers switch to domestically sourced coal. 

The projected decrease in coal imports could affect major exporters like Indonesia, South Africa, and Australia, which collectively supply about 90% of India's coal imports, making it the world's second-largest coal importer after China.

This outlook coincides with indications of an oversupply in the global coal market for the first time since 2020, as per Noble Resources. Echeverri estimates a potential oversupply of 32 million tonnes in 2024, attributing it to various factors, including a milder-than-usual winter and sluggish demand from Europe due to high gas inventories. 

While lower Indian demand for imports might further dampen prices, freight rate hikes remain a concern, limiting import volumes despite ample availability, remarked K.C. Gandhi, joint president of materials management at Shree Cement.

According to industry sources, while utility sector imports could decline, growing demand from the cement and steel industries could partially offset this reduction. Nonetheless, challenges like freight rate hikes could restrict the growth of imports in these sectors despite anticipated industry expansion.