Traffic Movement Update Of Coal At Indian Ports

According to market experts, there has been a noticeable change in coal traffic at Indian ports this year (CY22). The biggest number of vessels for coking coal was recorded at Paradip Port for the year (12.8 million tons), followed by Dhamra (12.02 million tons), and Haldia (12.36 million tons), which saw a 26.5% increase in vessels for the year.

Thermal coal traffic at Paradip Port was 46.10 million tons in CY22, up 65% from 27.7 million tons in CY21. In CY22, the Krishnapatnam Port handled 30.4 million tons, while Ennore handled 21.1 million tons. At Mundra, port throughput dropped by 6.2% to 19.2 million tons. With total traffic (coking and non-coking) reaching 320.15 million tons, it is a 19% increase from 268.34 million tons compared to the year before.

The increase in traffic can be attributed to these key factors:

Growing Demand From Power Sector

The increased traffic in thermal coal has been significantly influenced by the growing demand from the power sector. The government has changed its position on acquiring imported coal in light of the ongoing rise in demand for electricity. The Ministry of Power (MoP) issued a regulation in January 2023 requiring power plants to use imports to meet 6% (by weight) of their demands for blending with domestic coal until September 2023; failure to comply could result in a reduction in domestic supplies.

A similar order with a blending ratio of up to 10% was issued in May 2022 to boost stockpiles at power plants, but it was eased out in the months of August 2022 and September 2022.

Reduced Allocations For Non-power Sector

There has been an increase in demand from industries other than power. To increase supplies for the electricity sector, Coal India Ltd. (CIL) reduced allocations intended for the non-power sector, which caused a jump in bid prices when a single-window auction was introduced in March 2022. This was supported by aggressively bidding clients from a larger group who were participating in these auctions and securing the lowest amount available. In contrast to the 58% recorded in January 2021–December 2021, sales via auctions during January-December 2022 generated an average premium of 266% over the average notified price assessed for the assigned coal volume.

Increased Domestic Coal Production

India’s overall coal production increased significantly by 16.39% from 522.34 million tons from April 21 -December 21 to 607.97 million tons in the same period. CIL has touched new heights of coal production as it breached the production mark of 400 million tons in the shortest time span since its inception. In comparison to the same period in FY22, it increased by 15.82% to 479.05 million tons up to December of FY 23.

Increased Thermal Coal Imports

In addition to the domestic production, India’s thermal coal imports in CY22 also increased by 16.2% y-o-y to 162 million tons, with increased imports from Russia and Indonesia. Indonesian thermal coal prices witnessed a downturn in April 2022 after touching their peak in March 2022 (due to the Russia-Ukraine war). It all happened in the absence of Chinese buying interest due to COVID-19 restrictions resulting in Indian buyers importing more Indonesian coal. Also, India’s imports of Russian coal rose more than three-fold to 8.6 mnt in CY22.

Insight

The government’s new regulations on acquiring imported coal, as well as increased demand from the power sector and other industries, all have contributed to the surge in coal traffic. Additionally, domestic production and imports of thermal coal have also seen a steady rise year-on-year.

Read more: Indonesia’s Coal Production to Reach Record Highs in 2023, According to Ministry of Energy and Mineral Resources