Indian Thermal Coal Imports: Running Out Of Steam?
For some time, India was a positive driving force in seaborne steam coal trade, with rapid import growth recorded between 2008 and 2014. However, consistently increasing domestic coal production has had a significant impact on Indian steam coal import demand in recent years and raises questions over the outlook for the country’s role in global seaborne steam coal trade.
A Change Of Direction
Between 2008 and 2014, Indian steam coal imports grew rapidly, by a CAGR of 30%, to reach 172mt. Coal plays a major role in India’s power sector, accounting for over 70% of the energy mix, and the strong increase in imports during this period was driven by rapid growth in power demand and the construction of new coal-fired power capacity, including large coastal plants designed to use imported coal. Growth in Indian steam coal imports accounted for over a third of expansion in global seaborne steam coal trade in 2008-14, and by 2014 India was the second largest importer of steam coal globally.
However, in 2015-16, Indian steam coal imports fell by an average of 9% p.a. A further 8% y-o-y decline was recorded in the first four months of 2017, whilst reports indicate that imports by Indian coal-fired power plants fell 19% y-o-y in April to July 2017. The most significant driver of this change in direction has been rising domestic coal output. Production by state-owned Coal India has continued to rise, with production growing by an average of 5% p.a. in 2010-16 to 540mt last year, which has started to undermine demand for imports. The Indian government has also appeared keen to reduce reliance on imports, with some reports that India could be targeting coal self-sufficiency.
Full Steam Ahead?
While previously India had been seen as a likely key driver of further growth in global steam coal trade, recent trends have cast doubt over this outlook. The government has set the ambitious target of Coal India producing 1,000mt of coal in 2020. While production seems unlikely to rise sufficiently quickly in the short-term to meet that target (partly reflecting the impact of slower than expected growth in coal demand in recent years on the rate of increase in production), overall expansion in domestic coal output (including potentially from private miners) could well further limit imports in the coming years.
However, some argue that strong growth in Indian power demand could continue to support expansion in coal imports into the long-term, especially if Coal India continues to miss output targets. Plans to connect the c.300m people in India without electricity to the grid, combined with continued firm economic growth, could support requirements for rising coal imports, even if coal output grows further.
So, India’s thermal coal imports are currently projected to fall to 134mt in 2017, the lowest level in five years. However, the outlook remains unclear, with imports over the coming years likely to depend on the balance between growth in domestic coal production and power demand going forwards. With uncertainty surrounding both of these elements, it remains to be seen whether Indian coal imports really are running out of steam.