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India-bound imported coal prices fell 30 per cent in 2015 and are expected to slide more.
Platts, the global observer of energy prices and trends, says their daily spot price assessment (CFR West Coast India 5,500 kcal/kg) for thermal coal, on January 1, 2015, was $67.35 tonne and $46.85 a tonne last Wednesday.
Gareth Carpenter, Platts’ editorial director, coal, says the fall has been “mainly due to surplus supply in the global seaborne market, slowing growth in emerging economies, a bleak macro economic backdrop and local demand for dollar-denominated coal somewhat restricted by the weaker rupee”.
The rupee continues to slide, being not far from an all-time low against the dollar. Historically, this has impacted short-term buying trends in the sector. Stocks at power plants are also at high levels and, hence, rising cost due to lower currency will impact the stocking demand. As of end-September, the stock at power houses was a combined 26 million tonnes or 22 days’ stock. It was 8.6 mt or five days stock on end-September, 2014. The reasons are higher production from Coal India, diversion of e-auction coal to the power sector and tepid demand from utilities.
Coal price slump to continue “However, in the long term, there are reasons to expect at least a consolidation of Indian thermal coal prices,” said Carpenter. The Indian market remains a harbinger of demand-side hope for imported coal from Indonesia, South Africa and, to a limited extent, Australia, amid the fallout from China’s economic slowdown.
Platts Analytics forecasts a 48 per cent increase in coal capacity buildout by the end of 2018 and due to an expected reversal of the decline in load factor in the medium term, average Indian consumption is likely to go up significantly. Coal india produces 81 per cent of all Indian output and says they produced 494.2 mt in 2014-15. In 2015-16, it aims at 550 mt.
Platts believes, “Assuming Coal India meets its production targets, Indian private sector production growth still needs to average 32 per cent a year if India is to cut its coal imports to 100 mt by FY18/19. This is unlikely, despite the reforms in the mining sector.” The government estimates import in 2015-16 of 210 mt.
Says Andrew Leyland, director, me
It is similarly so with coking coal. The steel industry, the major consumer, is passing through a bad phase. Coking coal prices hit a 11-year low this year, $75/mt FOB Australia (as of last Thursday) for the benchmark Premium Low Vol FOB Australia. Spot prices have dropped 32 per cent since the beginning of the year, due to rapidly declining Chinese demand in an oversupplied market. China, which was the world’s largest spot buyer for met coal, saw its imported met coal volume shrink 24 per cent year-on-year, after annualising for January-October’s import volumes.
Edwin Yeo, Platts’ managing editor, coking coal, says: “In terms of recovery, most sources indicated that it would be important to tide through the next few years as the commodities market appears to be experiencing a downturn. Participants were hoping India could grow fast enough to fill the vacuum left by a slowing China, though they were also sceptical as to whether it will manage to raise steel production amid an onslaught of competitively priced Chinese exports.”
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