India may soon become the world’s largest importer of thermal coal, nudging the current top-ranking China to second position. India’s thermal coal imports have begun to attract global attention as volumes steadily grow and China begins to slow.

Although India has been among the top destination markets for thermal coal over the last ten years or so, the expectation of increased demand in the coming years – on account of economic growth prospects, growing power demand and government policies – is driving traders to keep a close watch on developments here.

Over the last decade, India’s thermal coal demand has grown robustly, estimated at around 25 per cent CAGR. Currently, at 150 million tonnes (mt) import, the country accounts for about 16 per cent of the seaborne trade of 915 mt. Although a large coal producer, Indian coal quality is sub-standard with a high ash content of over 30 per cent. So, many power plants routinely blend indigenous coal with imported ones to derive productivity benefits.

Starting at a modest 25 mt in the year 2000, thermal coal imports expanded to 50 mt in 2009 and to 100 mt in 2012 and further to 150 mt in 2014. Projections for the next three years are placed at 165 mt, 180 mt and 190 mt until 2017.

At the same time, domestic thermal coal production is expected to increase by approximately 30 mt per annum from 510 mt in 2014.

For years, coal-fired power capacity additions have exceeded other forms of power generation while domestic feedstock production growth has trailed demand growth. By 2018, India is poised to overtake China as imports potentially reach 200 mt accounting for a fifth of the world seaborne thermal coal trade. According to the Ministry of Coal, although India has adequate coal reserves (over 300 billion tonnes of which 125 billion tonnes are in the ‘proved’ category), actual production falls short of consumption demand and the gap is met through imports.

“The domestic production of coal has been constrained due to problems in expanding the capacity arising from difficulties in land acquisition, geo-mining conditions, environment and forest clearance issues. Inadequate infrastructure is another constraining factor,” the government has said.

For coal exporters such as Indonesia, South Africa and Australia, India is some kind of a saviour even as Chinese coal imports are slowing and may not anymore be the buyer of last resort. It is generally known that China’s metals and mining sector is not in a good financial shape.

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