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Monday, 29 June 20
INDIA COAL IMPORT OUTLOOK: WEAK DEMAND, IMPORT SUBSTITUTION, EXPECT 20% YOY DECLINE - GHEE PEH | IEEFA
 For India, the coal demand indicators have clearly turned negative.
According to Argus Media, since the government declared a nationwide lockdown on 25 March, the country’s daily average power output has been 20% lower than the three-year seasonal average. It estimates power sector coal usage may have fallen by as much as 10mt of NAR 5,000 kcal/kg-equivalent coal to 30mt in April. McCloskey Coal reports that India’s coal stockpile is at 165mt and that nearly half (80mt) is at CIL and other mines. This amount represents 30 to 40 days use. Power plant stocks were at 50mt,which is enough for 29 days. Other indicators, such as imports, domestic coal output, and power and steel output, all point to a large year-on-year decline for India’s coal imports.
Industry observers expect a 20%year-on-yearfall in 2020 India’s coal imports. This is in line with our forecast, but we believe there may be further downside risks. As a result of these, IEEFA expects India to import less Indonesian coal, based on our evaluation of the following four key variables:
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Coal imports: After recording year-on-year growth for January, coal imports experienced year-on-year declines for three months, with March and April down 28% and 29%, respectively.
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Domestic coal production: Coal production from CIL, the largest producer, increased 9.5% year-on-year for the first quarter of 2020.
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Power generation: Thermal power generation fell 1.5% year-on-year in the first quarter of 2020 and total power generation was down 32% year-on-year in April.
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Steel output: From January to April, output was down 20% year-on-year, with April declining 65% year-on-year.
Unlike China, where January to April 2020 coal imports rose, Indian coal imports for the same period were down 18% year-on-year. India’s coal imports have recorded year-on-year declines since February as COIVD-19 disrupted consumption and even the logistics of coal. This is despite average monthly coal benchmark prices falling at least 29% year-on-year over the same period.
According to media reports, CIL’s first quarter of 2020coal production increased 9.5% year-on-year. Although this slowed down to a daily rate of 1.3mt for the first 22 days of April, down 11% year-on-year, these strong gains are bad news for coal exporters to India. The Indian Government has announced measures that are similar to the Chinese Government’s coal import quota. In May, CIL was mandated to replace 100mt (40% of CY2019 coal imports) with domestic non-coking coal for the 2020–21 fiscal year.
For the period January to April2020, India’s total power output was down 7.4% year-on-year and its first quarter 2020 thermal power output was down 1.5% year-on-year. We note that total power output recorded an 8.2% year-on-year decline for March and thermal power output fell 12.9% year-on-year. In April, total power output was down 32.4% year-on-year. Data for thermal power output is not yet available but should also be significantly down, in line with total power output.
These falls would be consistent with the year-on-year decline in coal imports since February and the build-up of stockpiles at CIL and power plants.
India’s steel output acts as an indicator of economic activity. Between January and April, February was the only month that recorded a year-on-year rise in steel output, a modest 1.5%. Steel output recorded year-on-year declines of 13.8% in March and 65.2% in April, due to the full month of lockdown that started on 25 March. Against the backdrop of an increase in domestic coal production in the first quarter of 2020, a build-up of coal stockpiles and a fall in power generation, this level of economic activity presents significant downside risks to India coal imports.
The Indian Government has adopted a policy that supports its domestic coal sector, calling for import reductions. In May 2020, CIL was mandated to replace 100mt of coal (40% of CY 2019 coal imports) with domestic non-coking coal for the 2020–21 fiscal year. CIL’s first quarter 2020 output grew 9.5% year-on-year, presenting a significant risk to Indian coal imports. The risk is greater for Indonesia, because it exports mainly thermal coal. We believe India may have to continue importing coking coal for steel making because its domestic producers mainly supply thermal coal. Industry observers have estimated a 20% year-on-year decline in India’s coal imports. We agree, but also warn that there is a risk of a larger fall.
About IEEFA
The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. www.ieefa.org
About the Author Ghee Peh
Financial Analyst
Ghee Peh has worked in investment research since 1995, including at Jefferies, BNP Paribas, and UBS. He has covered Asian coal, cement and metal companies.
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Saturday, 01 August 20
SHIP SHAPE - OUCH: FIS
Thursday afternoon saw a report that US GDP in Q2 shrank by 32.9%. Now this may have beaten expectations, but it’s a bit like saying that you ...
Saturday, 01 August 20
ASIA HOPE FOR LONG-TERM OIL DEMAND - BALTIC BRIEFING
Oil demand in Asia Pacific might be expected to plunge 1.8m barrels per day (bpd) this year, but there are still strong prospects for growth over t ...
Friday, 31 July 20
SHORT-TERM IMPACT ON THE CHEMICAL SHIPPING MARKET IF THE INDIA-CHINA DISPUTE ESCALATES - DREWRY
Due to the India-China dispute, the threat of deteriorating trade relations between the two countries has become real. Meanwhile, we expect freight ...
Friday, 31 July 20
PANAMAX: THE PERIOD MARKET REMAINS QUIET WITH FEW FIXTURES REPORTED - FEARNLEYS
Capesize
After weeks of dropping rates, there are finally some resistance for the Capes. Pacific rounds improving to upper15,000s by the middle ...
Friday, 31 July 20
PANDEMIC SENDING SOUTH AFRICAN COAL INDUSTRY TO EARLIER GRAVE - IEEFA
Could South Africa’s coal export industry, one of the largest in the world, be about to take a severe hit from the coronavirus?
...
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- Sarangani Energy Corporation, Philippines
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- Bhushan Steel Limited - India
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- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- Rio Tinto Coal - Australia
- CIMB Investment Bank - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- International Coal Ventures Pvt Ltd - India
- Indian Energy Exchange, India
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- Siam City Cement - Thailand
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- SMC Global Power, Philippines
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- SMG Consultants - Indonesia
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- Marubeni Corporation - India
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- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
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- Planning Commission, India
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- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- Coalindo Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Economic Council, Georgia
- Ambuja Cements Ltd - India
- Romanian Commodities Exchange
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
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- Coal and Oil Company - UAE
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- Larsen & Toubro Limited - India
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- Bukit Baiduri Energy - Indonesia
- Vedanta Resources Plc - India
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- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Mercator Lines Limited - India
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
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- Vizag Seaport Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
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- IEA Clean Coal Centre - UK
- Parliament of New Zealand
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- GAC Shipping (India) Pvt Ltd
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Sakthi Sugars Limited - India
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- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- Commonwealth Bank - Australia
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Port Waratah Coal Services - Australia
- Singapore Mercantile Exchange
- CNBM International Corporation - China
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- Energy Development Corp, Philippines
- Cement Manufacturers Association - India
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- Thiess Contractors Indonesia
- Posco Energy - South Korea
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Banpu Public Company Limited - Thailand
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
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- Asmin Koalindo Tuhup - Indonesia
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kumho Petrochemical, South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
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