In the first nine months of 2023, coal shipments to India, the world’s second-largest importer of seaborne coal, plummeted by 9% year-on-year (YoY), according to a report from Bimco, the globe’s most extensive international shipping association. This decline can be attributed to a substantial 12% YoY increase in domestic coal mining, replacing the need for imports.
Despite lower production from hydropower sources, electricity generation in India continued to rise, highlighting the country’s growing energy demands. The report notes that this shift in India’s coal import landscape has significant implications for global coal shipping and reflects the evolving dynamics in the coal market.
Quarterly Fluctuations in Coal Shipments
In the first quarter of 2023, coal shipments to India amounted to nearly 52 million tonnes, which subsequently rose to nearly 65 million tonnes in the second quarter. However, the trend reversed in the third quarter, with shipments dropping sharply to less than 50 million tonnes. This is in stark contrast to the same period in 2022, when coal shipments stood at 55 million tonnes in the first quarter, 72 million tonnes in the second, and approximately 60 million tonnes in the third.
Government Measures Impacting Imports
In 2022, India’s government implemented measures to address low inventories at power plants and combat power shortages. Initially, they required power plants to blend at least 10% of imported coal. However, in 2023, this import request was lowered to 6% between January and September and further reduced to 4% between September and the following March. By the end of September 2023, the number of power plants with critically low coal inventories had decreased by 25% compared to the previous year, as stated in the report.
Changing Trade Partners and Shipping Trends
During the first nine months of 2023, the demand for tonne-mile shipping services declined by 5% YoY, a milder drop compared to the reduction in cargo volumes. Notably, India diversified its coal imports, relying more on Russia, the US, and South Africa, while decreasing imports from its top trading partners, Australia and Indonesia. Coal shipments accounted for 19.1% of India’s coal supply in 2023, a 3.3% decrease from the previous year.
Rising Competition in the Asian Market
India’s preference for affordable thermal coal with low energy content has driven competition in the Asian coal market. The surge in Chinese coal imports, partly due to China lifting its ban on Australian coal, may have compelled India to seek alternative suppliers. This year, capesize shipments to India fell by 30% YoY, making panamax ships the primary carriers of coal to India, a shift likely influenced by lower cargo volumes and higher freight rates for capesize vessels.
Global Impact and Future Prospects
Despite the reduction in coal shipments to India, global coal shipments increased by 3.4% year-to-date, primarily driven by robust volumes to China. Coal remains the second-largest commodity, contributing to nearly 25% of all dry bulk volumes globally. Nonetheless, future coal demand growth is anticipated in emerging economies, particularly in Asia.
Decarbonization efforts and increased domestic mining in both China and India could potentially lower seaborne coal volumes in the coming decade, impacting the growth prospects of the dry bulk sector.
India’s Evolving Energy Landscape
While the Bimco report highlights a decline in coal imports to India, industry experts suggest that the trend might not persist due to India’s ever-increasing power demand. Jagannarayan Padmanabhan, Senior Director and Global Head of Transport, Logistics, and Mobility at CRISIL, emphasized that the Indian government’s efforts to bolster domestic coal production may lead to a decrease in imports in the future, especially with production expanding in the hinterlands.
In summary, the decline in Indian coal imports reflects the changing dynamics in the coal market, driven by increased domestic mining and shifting preferences. It underscores the broader implications for global coal shipping and the ongoing transformation of India’s energy landscape as it strives to meet its growing power needs.
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