Coal shipments to India rose 10 per cent year-on-year (YoY) between January and August 2024, outpacing the 8 per cent YoY increase in domestic coal mining. Much of it was thermal coal shipments, driven by strong demand for electricity and the coal import mandates. However, the growth in shipments may slow during the rest of the year, as demand cools, says Filipe Gouveia, shipping analyst at advisory firm Baltic and International Maritime Council (BIMCO).
Indonesia is the source for 45 per cent of India’s seaborne coal imports, mostly thermal coal. Supramax ships are sometimes preferred for these routes due to the limited crane availability or draft restrictions in smaller ports.
India, the second largest coal importer globally, saw electricity generation rise 9 per cent YoY between January and July 2024. Power generation from coal rose 13 per cent YoY, compensating for the 6 per cent decrease in hydropower generation due to low water levels.
Since 2022, to maintain coal stockpiles and avoid blackouts, all power plants in India have been mandated to blend in a minimum ratio of imported coal. This ratio was lowered to 4 per cent between June 27 and October 15, 2024, from 6 per cent.
“Dry bulk carriers in the capesize and panamax segments benefited the most from the increase in coal cargoes, as we saw a shift to larger ships in transporting coal to India. Cargoes aboard supramax ships have stagnated and their share of coal shipments to India have fallen to 21 per cent so far this year, from 23 per cent in 2023,” says Gouveia.
Coal demand and shipments to India are expected to reduce with an increase in hydropower generation as the monsoon rains, which picked up pace in August after a slow start, have pushed up reservoir levels by 26 per cent YoY.
Coal inventories, too, are at healthy levels in all power plants, except 22. It remains unknown whether the coal import mandates will be eased or removed in October, but if that happens then imports could slow.
“Unlike in advanced economies where coal demand has peaked, or in China, where a large investment in renewables is reducing demand, India’s coal demand is expected to grow in the medium term. However, import demand growth will be limited by the country’s ambitious target to increase domestic mining by an average of 7 per cent per year until the end of the decade. Should India reach its target then cargo growth would slow, although a reduction in volumes from current levels is unlikely,” says Gouveia.