The Ebb and Flow in India’s Coal Imports
Filipe Gouveia, a Shipping Analyst at BIMCO, points out an interesting trend in the coal trade industry during the initial nine months of 2023. India, the world’s second-largest seaborne coal importer saw a 9% y/y (year over year) drop in its coal shipments. The slack was picked up by a notable 12% y/y increase in domestic coal mining.
Despite decreased hydroelectric power outputs, India’s electricity production continues to march upward. This suggests a shift in energy policy feelers from the Indian government pushing for a greater foothold in domestic coal production to fortify energy supplies.
The Influence of Covid-19 on India’s Coal Imports
Before the Covid-19 pandemic in 2019, India’s coal imports had reached an all-time high. However, imports took a considerable hit during the pandemic but made a mild recovery in 2022. In 2023, roughly 19.1% of coal supplies in India were shipped in, a decrease of 3.3 percentage points compared to the previous year. This data is according to figures brought forth by BIMCO.
Addressing Power Shortages: A Change in Import Strategies
Between May and August 2022, the Indian government urged power plants to blend a minimum of 10% of imported coal in their operations. This was an effort to mitigate low power plant inventories and tackle looming electricity shortages. This year, the government reduced the request drastically to 6% between January and September 2023, and further down to 4% between September 2023 and March next year. In a seeming victory to this policy shift, by the end of September 2023, there was a 25% dip in power plants wrestling with critically low inventories compared to the same time the previous year.
India’s Search for New Coal Suppliers
Meanwhile, India’s coal import partners also started shifting. The country began to import more coal from the US, Russia, and South Africa, while simultaneously reducing imports from its primary sources, Australia and Indonesia. Gouveia suggests that this change might have been triggered by a surge in Chinese coal imports. With China’s ban on Australian coal lifted in February, a sudden increase in coal imports ensued, likely directing India toward alternative suppliers.
Shifts in Coal Transportation Preferences
While the past few years have seen capesize ships as the preferred mode for delivering coal to India, the tide seems to have turned in 2023. Shipments on Capesize ships fell by 30% y/y and for the first time since 2020, Panamax vessels took the reins, transporting the majority of India’s coal supply. This alteration can be attributed to less cargo volume and escalated freight rates for capesize vessels.
The Global Coal Scene and the Future Outlook
Despite India’s reduced coal volumes, global coal shipments saw a 3.4% increase year-to-date, thanks to a spike in volumes bound for China. Coal, in no small part, remains the second biggest commodity, making up close to 25% of all dry bulk volumes.
Gouveia expects an upswing in coal demand within the foreseeable future, primarily driven by emerging economies, especially within Asia. Nevertheless, he cautions that strategized decarbonization efforts and a push for increased domestic mining in powerhouse nations like China and India could potentially pull the plug on seaborne coal volumes within this decade. This might even influence overall growth prospects for the dry bulk sector, he suggests.
