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Tag: thermal coal

  • India: Record coal production in FY23 fails to rein in imports

    India: Record coal production in FY23 fails to rein in imports

    • Govt mandates imports to meet peak power demand
    • Shipments from Indonesia, Russia increase sharply
    • Imports likely to remain high in Q1FY24

    India’s coal imports increased sharply by around 18% y-o-y to over 237 million tonnes (mnt) in financial year 2022-2023 (FY23) from 202 mnt in FY22, data maintained with CoalMint reveals.

    Interestingly, imports surged despite record domestic coal production in FY23. The country recorded historic growth in its coal output at 892.21 mnt in FY23, Union Coal Minister Pralhad Joshi informed recently. Total coal production was 15% higher from 777 mnt in FY22.

    Out of total import shipments in the recently concluded fiscal, those of non-coking or thermal coal stood at over 166 mnt, which is roughly 70% of total imports. Non-coking coal imports edged up by 23% y-o-y on higher demand from power producers and with the government mandating imports to meet peak power demand.

    On the other hand, total imports in FY23 of coking coal and PCI coal stood at over 69 mnt compared with 65 mnt in FY22. While hard coking coal imports increased by just around 3% y-o-y, imports of PCI coal for usage mainly in blast furnace steelmaking rose sharply by 22% on the year.

    Why imports increased?

    *High power demand: Government data shows India’s power consumption surged 10% to 1,375.57 billion units (BU) during the April-February period in FY23, thereby already surpassing the level of electricity supplied in FY22.

    Power consumption in April-February of FY22 stood at 1,245.54 BU. In FY22, power consumption was 1374.02 BU, which is less than 1,375.57 BU recorded during the April 2022- February 2023 period. So, the imported coal-based power plants had to raise imports.

    *Govt mandates imports: To ensure adequate power availability, the Ministry of Power (MoP) has instructed power plants to import 6% (by weight) of their coal needs for blending purposes till September, 2023. A similar mandate had been issued last year too. That time, the blending ratio was kept at 10%. As a result, India’s State-owned power producers as well as major miners raised coal imports till June-July 2022 although shipments fell post September as peak summer demand subsided along with monsoon-related logistical disruptions.

    This year, too, the government has asked the imported coal-based (ICB) power plants to carry on operations at full capacity. In addition, a tender has been floated to procure electricity from ICB plants for April-May when power availability is expected to be less than demand.

    *Steel production rises: India’s steel production edged up to nearly 125 mnt in FY23, as per government data, from around 118 mnt in FY22, an increase of 6% on the year. In the absence of quality domestic coking coal reserves, imports naturally increased. Besides diversifying import sources amid historic-high coking coal prices, Indian steelmakers also ramped up usage of PCI coal to increase furnace efficiency even while reducing the usage of costly metallurgical coke. This saw volumes from Russia increasing sharply y-o-y.

    Trade flows

    The top exporter to India was Indonesia, with total shipments standing at 112 mnt -up 55% on the year. Indonesia is the world’s largest seaborne exporter of coal, accounting for 32.3% of the global seaborne coal market in 2022. The country has set an export target of over 500 mnt of coal in 2023. India purchases mainly high-to-low-CV non-coking coal from Indonesia.

    With the rise in Russian supplies, it is expected that only low-CV Indonesian coal will henceforth be attractive for Indian buyers, said a miner source based in Indonesia. After persistent pandemic disruptions and temporary export bans, Indonesian exports surged in FY23.

    Imports from Australia, however, fell by over 20% to around 55 mnt, out of which over 36 mnt was coking coal. Even coking coal imports from Australia dropped 13% on the year as a result of India’s efforts to diversify coking coal sourcing amid record-high global prices following the outbreak of the Russia-Ukraine war in February last year.

    Similarly, India increased its met coal imports from the US and Canada sharply to around 10 mnt from less than 5 mnt in FY22. Marked growth in Canadian coal production and easing of disruptions in key US coal terminals supported higher shipments.

    Notably, imports from Russia surged by over 170% on-year as the country stepped up shipments of cheaper cargoes to Asian consumers to amid sanctions imposed by the EU and US as well as G7 allies. Imports from South Africa, on the other hand, decreased by 33% as Mozambican and Russian exports to India surged. Imports from Mozambique rose by 97% y-o-y to nearly 11 mnt in FY23, with Indian DRI producers ramping up sourcing due to record-high South African coal prices amid global energy inflation.

    However, with subsequent correction in global coal prices, trade flows seem to be returning to settled patterns.

    Outlook

    Experts say power consumption is expected to grow in double digits in the coming months in view of forecasts of unprecedented high demand, especially in summer. The power ministry has estimated peak power demand in the country at 229 GW during April this year, which is higher than 215.88 GW recorded in the same month a year ago.

    Following the government’s mandate, NTPC, India’s largest power producer, has decided to import around 5.4 mnt of coal during the first half of FY24. So, imports are expected to remain high through till July-August this year.

    Interestingly, India’s coal imports have returned to the pre-Covid levels of around 240 mnt seen in FY19 and FY20.

    Despite the government’s aim of augmenting domestic washery capacity and achieving coking coal production of 140 mnt by FY30, imports are likely to grow parallelly with India’s fast-expanding steelmaking capacity. Imports are projected to reach 75-80 mnt by 2025-2026.

    Logistical bottlenecks and high freight rates have increased dependency on imports by impeding pit to plant coal transport. Total coal loading by the Indian Railways in FY23 increased by over 11% to 653.36 mnt and total freight earned rose by 22% y-o-y. The allocation of more rakes, special lines and dedicated freight corridors for coal transportation and rationalization of freight rates are expected to increase domestic availability of coal.

    2nd Asia Coal Outlook & Trade Summit

    There has been no let-up in India’s coal imports of late and 2023 may be another year likely to witness sustained growth. How is the government planning to rein in imports by 2025-26? To follow the discussion, book your seat at CoalMint’s 2nd Asia Coal Outlook & Trade Summit in Bangkok, Thailand, on 24-25 April, 2023.

  • Will China’s coal imports from Australia rise post lifting of ‘unofficial’ ban?

    Will China’s coal imports from Australia rise post lifting of ‘unofficial’ ban?

    In a significant development, Chinese authorities have allowed all domestic companies to import Australian coal, thereby putting an end to ‘informal’ trade restrictions imposed in late 2020. Ports and customs offices have been told to allow Australian coal cargoes.

    Earlier this year, the authorities had given four State-owned companies permission to resume purchases of Australian coal. Of the four, State-owned Baowu Group was the lone steel producer, while the rest were power companies.

    It is believed that more than 1 million tonnes (mnt) of Australian coal cargoes are set for Chinese shores in March. Due to the rise in global coal prices after Russia’s invasion of Ukraine, the price difference between China’s domestic coal and Australian coal had substantially decreased. As a result, the withdrawal of the ‘unofficial’ ban on Australian coal will bring marginal economic benefit to China.

    Imports from Australia

    CoalMint data reveal that China’s imports of non-coking coal from Australia, mainly high-energy coal, decreased by about 90% in 2021 from 2020. China’s imports fell to 5.5 mnt from over 42 mnt in the previous year. Imports were recorded at zero in 2022.

    As regards coking coal, China’s imports from Australia declined sharply by over 80% y-o-y in 2021 to just about 6 mnt compared with more than 35 mnt in 2020.

    However, volumes are sure to surge after China’s move to resume imports. The decision to resume coal imports from Australia is partly driven by the need to tame domestic coal prices amid global volatility.

    But China’s coal imports from Mongolia and Russia increased significantly on-year in 2022, as Covid restrictions were slowly eased along the China-Mongolia border allowing for free vehicular movement, as well as cheap Russian coal offers amid global energy inflation.

    Impact on coking coal market 

    Sources believe that with the full reopening of Australian coals into China, the increase in supply of seaborne imported material will exert some downward pressure on the coking coal market. China’s domestic raw coal production in Jan-Feb’23 also increased by around 6% y-o-y to 735 mnt, as per NBS data.

    In fact, coking coal and coke futures on China’s Dalian Commodity Exchange (DCE) edged down after news came in of permission being granted to all Chinese companies to resume Australian coal purchases. FOB Australian prices of premium low-volatile coking coal are still higher than CFR China prices by around $6-10/t. In the CFR China market, prices inched lower on weaker sentiments, with the DCE futures market observing May coking coal and coke contracts dropping by 4.53% and 3.04% yesterday.

    Outlook 

    Domestic met coal production in China is set to face hurdles going forward as environmental restrictions push authorities to clamp down on mining activities in coal-rich provinces. At the same time, high steel industry capacity utilisation at times may drive met coke imports from SE Asian countries with surplus capacities.

    Demand for Australian high-energy Newcastle coal may remain rangebound in the near term even though new domestic coal mining capacity is approved.

    In the short term, however, Australian premium low-volatile hard coking coal may continue to attract buying interest, despite competitive offers from Russia, even as uncertainties persist over pricing and logistics from Mongolia.

    CoalMint’s 2nd Asia Coal Outlook & Trade Summit

    China’s coking coal imports increased by over 15% on the year in 2022. Will imports increase in 2023, too, with the resumption in inflow of Australian cargoes? Would Chinese buyers have appetite for Australian thermal coal given other low-priced alternatives?

    Follow the discussion at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held at the Grand Hyatt Erawan, Bangkok, Thailand on 24-25 April, 2023, where Mr. Jiyuan Wang, Marketing Manager, Shaangu Group from China, will share his insights.

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  • Global coking coal trade volumes rise nearly 8% in 2022. Know why?

    Global coking coal trade volumes rise nearly 8% in 2022. Know why?

    Despite the slump in world crude steel production in 2022, global seaborne trade in coking coal remained strong with imports of Coking coal and PCI increasing by 8% y-o-y to around 319 million tonnes (mnt) from 295 mnt in 2021, as per provisional data maintained with CoalMint.

    Leading importers

    India was the leading coking coal importer at 69 mnt in 2022, accounting for 22% of total global imports. India’s imports were almost stable y-o-y compared to 2021 China was the second-largest importer at 63 mnt. Imports by China rose 17% y-o-y, although crude steel production fell around 2%. Imports by Japan and South Korea remained largely stable y-o-y at 57 mnt and 22 mnt, respectively. Sentiments remained bearish on a gloomy global steel export outlook amid high inflation, supply chain problems in the auto industry and natural disasters. Europe’s coking coal imports fell by 15% y-o-y due to high energy inflation affecting steel production and demand following the outbreak of the Russia-Ukraine conflict. After Europe imposed a complete ban on Russian coal imports from 10 August global trade flows altered. The EU traditionally sourced 55-60% of its coking coal requirement from Russia and Australian and US coking coal made their way into the continent.

    Top exporters

    Australia was the largest coking coal exporter in CY22, although its share in global exports fell by 8% compared to 2021 due to bad weather. The La Nina event in the country led to heavy rains in the mining regions which affected operations, leading to supply disruptions. In addition, strikes by mine workers and unavailability of labour weighed on production. The US and Canada emerged as an alternative to Australian coal due to supply disruptions. Russia emerged as the second largest exporter with 47 mnt, an increase of 48% y-o-y. The war between Russia and Ukraine affected seaborne trade dynamics of coking coal. As more Russian coal found its way into China and India, Japan and South Korea reduced sourcing of Russian coal in response to Western sanctions.

    Why trade volumes increased?

    1. India’s crude steel production increased by around 6% y-o-y to over 124 mnt. Similarly, hot metal production also increased by 4% to 80 mnt from 77 mnt in 2021. For Indian importers of coking coal there was no major change in the demand scenario. Demand did not fluctuate much since the steel export duty fiasco but remained generally steady.

    2. The war with Ukraine took a toll on Russia’s steel production as well as exports. Data show that hot metal production in 2022 decreased by over 7% y-o-y to 50 mnt from 54 mnt in 2021. This left Russian miners with higher volumes for exports. After sanctions were imposed by the European countries on Russia following its invasion of Ukraine, the country started exporting coal at cheaper prices to Asian countries like China and India, resulting in a hike in export volumes. It may be mentioned that India imported 9.7 mnt of Russian coking coal in 2022, up 154% on-year, while China imported 21 mnt, an increase of 90% y-o-y.

    3. Global energy inflation drove steam coal prices to record highs across the globe, while steel production in many parts of the world suffered owing to high inflation and currency volatility. So, thermal coal prices soared way above coking coal prices globally forcing thermal coal users to switch to coking coal in many cases. This, in part, contributed to higher coking coal trade volumes.

    4. Although China’s crude steel production declined 2% 2022, domestic production of coking coal also fell marginally, thereby creating room for exports. Moreover, pandemic restrictions impeded the movement of domestic scrap for steelmaking, impacting EAF steel production. Higher shipments by Russia and Mongolia also account for higher imports by China. Mongolian shipments doubled y-o-y in 2022 as COVID-related restrictions were eased enabling truck movement across the border, while Russian cargoes were available at much cheaper rates since sanctions against Russia came into force in August.

    Outlook

    WSA has predicted steel demand to increase by 1% in 2023 to over 1.8 billion tonnes. Steel markets are expected to normalise in 2023, excluding China. Fitch expects global steel consumption to shrink by 60-65 mnt in 2022, with capacity utilisation dropping from 80% to 77%. China’s targeted reduction of steel production will account for 20-30 mnt of this, with the rest coming from demand destruction outside China. Incremental growth in steel consumption in 2023 is expected in India, Southeast Asia and the US.
    Therefore, coking coal demand will remain stable. Coking coal imports by India from Australia are also expected to remain stable in 2023, with the FTA between the countries leading to duty-free inflow of coal. Prices remained strong after a bumper 2022, driven largely by global energy prices and shortages cause by the Russia-Ukraine war. The other big-ticket item in January was the news that China is set to end its unofficial ban on importing coal from Australia, which is largely positive for global coking coal prices.

    Three central government-backed utilities and China’s top steelmaker would be allowed to resume imports. A recent report in the Australian Financial Review also indicates that Australian coking coal imports might displace lower quality and higher cost Chinese domestic or US coking coal, particularly for Chinese steelmakers in the southern region. Note that China’s proposed import duty on coal leaves Australia and Indonesia unaffected.

    Australia had diversified its coal exports to non-traditional buyers and ramped up supplies to traditional ones in the absence of China from the seaborne market. But now Chinese inquiries are expected to rise which may push prices higher. However, the continuing recovery of supplies from Australia will lead to an eventual correction, even if not significantly.

    Interestingly, Mongolia’s recent move to auction coal through the country’s stock exchange instead of direct sale by producers and traders at the border will directly impact Chinese buyers of Mongolian coking coal. We have to wait to see whether auction sales by Mongolia result in rationalisation of prices. Also, easing coal supplies via road from Mongolia after the withdrawal of pandemic restrictions and new investments in railway infrastructure are expected to reduce logistics costs and, therefore, coal prices.

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  • Analysis: Sponge iron producers switch to alternate coal blends amid shrinking margins, resilient import prices

    Analysis: Sponge iron producers switch to alternate coal blends amid shrinking margins, resilient import prices

    Depressed sponge iron demand in the Indian domestic market, coupled with elevated South African coal prices and limited availability of domestic coal for the non-power sector, has compelled Indian DRI producers to experiment with coal from Mozambique, Russia, and even Australia.

    In fact, diversion of high-grade South African coal to Europe have already pushed sponge iron units in India to switch from the most popular RB2 (5500 kcal/kg NAR) grade coal from the country to low-CV RB3 (4800 kcal/kg NAR) since the past few months.

    As 4800 NAR has lower fixed carbon content vis-a-vis 5500 NAR, a higher quantity of the former is required to produce one tonne of DRI.

    Shrinking margins of DRI producers due to high South African coal prices have compelled them to look for alternate blends. Although sponge iron prices have picked up since the sharp decline following the government’s introduction of an export duty on steel, any major fall in coal prices has remained limited due to elevated global prices.

    CoalMint learnt from various mill sources that DRI producers are experimenting with various blends of Russian, Mozambican and Australian coal; any blend that fits the bill should have to be one that helps manufacturers tide over sluggish domestic demand and optimise costs of production that have more than doubled in one year.

    Mozambican coal: Steelmaker JSPL, after some initial experiments, has come up with certain findings pertaining to Mozambican VT 1 grade coal (from Vulcan Energy), which is a suitable alternative to South African RB2. About 0.8 t of this coal will be required to produce 1 tonne of sponge iron.

    However, some sponge iron producers in Chhattisgarh informed that while Mozambican coal seems a suitable alternative for DRI, it is low in volatile matter as compared to South African coal, which fails to make it an exact replacement for the latter. In fact, a blend of the two might give sponge iron units the desired results, sources informed. Very low-VM coal affects sponge metallisation rate.

    Russian coal: High-CV Russian thermal coal that is making its way to India at quite cheaper rates has also attracted the attention of sponge iron manufacturers. Although not used widely, experiments by a few indicate that it has South African RB1 grade coal qualities and its good FC and low sulphur content would make it an ideal choice for sponge producers. However, users are not very sure of the exact results and are of the opinion that a blend of South African and Russian coals could give desired outcomes.

    Australian coal: Interestingly, Australian thermal coal, not usually preferred by sponge iron plants because of its very high VM, is now being experimented with by few sponge iron units in south India as they are completely import-dependent.

    While Australian thermal coal is not coming into India in huge volumes since the past few months, a reputed importer, having its own mine in Australia, is heard to be bringing 4400-4600 NAR grade coal with low VM and FC, which is being used in a ratio of 70:30 (5500 NAR S. African: 4600 NAR Australian) for one tonne of sponge iron.

    Concerns persist

    While various blends are a ray of hope for the sponge iron sector, market participants have also highlighted a key concern that these blends make sense against the backdrop of sluggish demand in which plants do not have to function at full capacity and lower yield is expected.

    However, it would be interesting to see if any of these coals or blends can give higher yields during a period of buoyant demand. If successful, this could be a game changer for the sector as better realisations coupled with lower cost of production would help producers improve margins in the long run.

  • South Africa: Thermal coal exports to India falls 31% in June, overall exports rise marginally

    South Africa: Thermal coal exports to India falls 31% in June, overall exports rise marginally

    South African thermal coal exports to India have recorded a steep decline of 30% m-o-m to 1.5 mnt in June, CoalMint vessel line-up data revealed.

    This fall in exports came as the demand from its top consuming sector, sponge iron had turned sluggish after the Indian government announced its decision to impose a hike in export duty on steel in the last week of May.

    While this decision has come with an intention to curb inflationary pressure in the domestic market, the same has made Indian steel less competitive in the export market.

    The domestic sponge iron prices in India, since then have eased by INR 3,000/t and again recovered and are currently assessed at INR 33,300/t exw-Raipur.

    The country’s overall thermal coal exports, however, rose marginally by 2% m-o-m to 5.3 mnt last month as increased demand from Europe offset lower exports to the Asian market.

    Shipments to the European market

    *Qty in mnt

    With the approaching deadline for Russian sanctions to come into effect on Aug 10, European countries have increased their usage of thermal coal wherein South Africa forms a major destination for imports.

    Shipments from the country to Europe have seen a significant rise as exports to The Netherlands have risen by 23%, while that to France by a whopping 180%.

    Shipments to the Asian markets

    *Qty in mnt

    South African coal exports to most Asian markets have remained under pressure over its elevated coal prices.

    Shipments to South Korea fell sharply by 28% last month, while there were no exports to China last month. The strong demand for Russian coal in the Chinese market has led to the decline in imports from other origins.

    Exports to Pakistan recorded a slight rise of 5%. However, a major rise was capped as its local industry focused on importing coal from its neighboring country, Afghanistan.

    Shipments to Taiwan, however, rose by 12% due to their rising demand for coal following Russian sanctions.

    Short-term outlook

    Low-CV (4800 nar) South African coal demand has emerged strongly in the Indian market owing to its competitive prices over mid-to-high CV grades (5500 NAR) that may result in increased vessel arrival in the country in July.

    European demand, on the other hand, remains strong as several countries within the bloc including Germany, Austria, and The Netherlands have announced their plans to increase their coal usage for power generation. This may lead to an increase in South African total coal exports in the near-term.

    To know more about South African coal demand in India and its overall coal export trajecotry for the second half of the year join us at India Coal Outlook Conference. CoalMint will be hosting the India Coal Outlook Conference on 3-4 August 2022 at The Lalit, New Delhi, to discuss the key issues pertaining to domestic coal production and supply, the government’s objective of controlling imports and domestic supply gap affecting many industries, the need to increase the purchasing power of Indian steel companies in the volatile global coking coal market as well as issues related to decarbonization of the coal value chain.