Indian manufacturers, including aluminium smelters and paper mills, are set to boost thermal coal imports for a second consecutive year due to a shortage of trains, even as state-run Coal India plans to increase output.
Higher demand from industry for seaborne coal will thwart efforts by India, the world’s second largest producer and importer of the fuel, to cut its dependence on shipments from mines in Indonesia, Australia and South Africa.
India’s demand for seaborne coal is set to peak during the summer season beginning this month, just as neighbouring China’s coal imports have jumped with the world’s No 2 economy recovering from the Covid-19 pandemic, supporting global prices.
That means India’s manufacturers face a double whammy, having to pay more for imported coal and for haulage, as the train shortage has forced them to receive coal by trucks, which costs more per tonne than by rail. Industrial coal users accounted for about 70% of India’s thermal coal imports in 2022.
Logistical challenges could boost overall Indian thermal coal imports by 3% in 2023 to 169 million tonnes, said Abhishek Rakshit, a senior analyst at consultancy Wood Mackenzie.
“Growth in Indian coal imports will definitely support the prices of the low to mid-calorific value coal market through most of 2023,” Rakshit said.
Coal India, which produces 80% of domestic output, plans to increase coal allocated to industries by as much as 57% from last year to 170 million tonnes for the year to March 2024.
However Indian Railways, which delivers most of the miner’s coal on trains, will likely fail to keep up with manufacturers’ demand as it prioritises power plants and as addition of new trains has not kept pace with demand, industry officials say.
Published in The Express Tribune, April 13th, 2023.
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