Coal shipments to the world’s second-largest importer of seaborne coal, India, in the first nine months of 2023 fell by 9 per cent y-o-y. This is thanks to a 12 per cent y-o-y increase in domestic coal mining replacing imports and electricity production continuing to rise despite lower production from hydropower, said a report by Bimco, the world’s largest international shipping association.
In the January quarter of 2023, coal shipment to India was nearly 52 million tonnes (mt), which increased to nearly 65 mt in the second quarter but dropped sharply to less than 50 mt in Q3. In contrast, in the January quarter of 2022 the coal shipment to India was 55 mt; in Q2 it was 72 mt and in q3 it was around 60 mt, the report said.
From May to August 2022, India’s government requested power plants to blend at least 10 per cent of imported coal to address low inventories at its power plants and combat power shortages. However, in 2023, the import request was lowered to 6 per cent between January and September and again to 4 per cent between September and March next year.
By the end of September 2023, the number of power plants with critically low inventories were 25 per cent below the level a year earlier, the report said.
In the first nine months of 2023, tonne mile demand fell 5 per cent y-o-y, significantly less than the drop in cargo volumes. The average haul increased as India imported more coal from Russia, the US and South Africa and less from Australia and Indonesia, its two largest trading partners.
To ensure energy supplies, India’s government has pushed for an increase in domestic coal mining. Indian coal imports peaked in 2019 and significantly fell during the Covid pandemic before partially recovering in 2022. So far this year, coal shipments accounted for 19.1 per cent of India’s coal supply, 3.3 percentage points less than a year ago, the report said.
Chinese coal imports
A surge in Chinese coal imports may have pushed India to seek new suppliers. Indonesia is China’s largest coal supplier and China’s ban on Australian coal was lifted in February, causing imports to increase. India is a cost sensitive market and usually prefers cheaper thermal coal with low energy content, directly competing with other importers in Asia.
Coal shipments to India are mainly carried by capesize and panamax ships and to a lesser extent supramax ships. This year, shipments to India on capesize ships fell by 30 per cent y-o-y, and panamax ships now transport the majority of coal to India for the first time since 2020. This shift may have occurred due to lower cargo volumes and higher freight rates for capesizes.
Increase in global coal shipment
Despite the lower coal volumes to India, global coal shipments have increased by 3.4 per cent year-to-date due to a significant increase in volumes to China. Coal therefore remains the second largest commodity, contributing nearly 25 per cent of all dry bulk volumes.
Future coal demand growth is expected in emerging economies, especially in Asia. However, decarbonisation and increased domestic mining in China and India could still drive seaborne coal volumes lower within this decade and impact overall demand growth prospects for the dry bulk sector.
An official of a large port in India concurred with Bimco’s report but was not sure if the trend would remain the same considering that India’s power demand keeps increasing.
The government is trying to reduce coal imports since domestic production is expanding in the hinterlands imports are expected to come down, Jagannarayan Padmanabhan, Senior Director and Global Head - Transport, Logistics and Mobility at CRISIL.
