Dealing a further blow to any hopes of a recovery in the global coal market India’s coal imports fell 15 per cent to 132.3 million tonnes during the first nine months of the current fiscal year, according to local media reports.
The Institute for Energy Economics and Financial Analysis (IEEFA) think tank said a closer look at the figures revealed Indian imports fell 34 per cent year-on-year in December, following a record 49 per cent year-on-year decline in November.
It added that the performance was contrary to both International Energy Agency (IEA) forecasts and global market sentiment that the Indian economy would drive demand for seaborne thermal coal for the foreseeable future.
“India was essentially the last flame of hope for the beleaguered seaborne thermal coal industry. December’s import data confirms the last flicker has been snuffed out, not least for Australia’s Galilee Basin,” said Tim Buckley, director of energy finance studies at the IEEFA, in a statement.
“Indian thermal coal imports look to have peaked in mid-2015, and are now set to permanently and rapidly decline.
“The IEA’s forecast of sustained thermal coal import growth into India looks outdated even as the latest 2015 report was printed.”
The data follows similar indications from China that coal demand may have peaked as a consequence of the government’s ambitious clean energy programs and moves to shut the dirtiest coal plants.
The decline in India’s coal imports is being countered by an increase in domestic coal production, with Coal India reporting a 9.1 per cent increase in production over the first nine months of the year.
However, IEEFA argued there was evidence India’s still expanding fleet of coal power plants was already “overbuilt”.
“Coal-plant utilisation rates continue to fall,” it said in a statement.
“Having peaked in 2011/12 at 74 per cent, average coal-plant utilisation rates across India fell to 66 per cent in 2012/13, 61.9 per cent in 2013/14, 61.1 per cent in 2014/15 and IEEFA forecasts only 58.1 per cent in 2015/16.
“This trend parallels the five-year decline evident in China, which hit a record low in CY2015 estimated at 49.7 per cent.”
The British environmental news website BusinessGreen reports Mr Buckley said there were signs the Indian coal market was being impacted by the government’s ambitious renewable energy plans, with tender tariffs for new solar projects falling by a fifth in the past year.
“These tariffs are now significantly lower than the cost of imported thermal coal and the deflationary nature of these 25 year fixed-priced solar tariffs will significantly assist Indian consumers,” he said.
“With global firms like SoftBank, SunEdison, SkyPower, NTPC, ENEL, ENGIE, Trina, Longi of China and the Adani Group all bringing significant access to global debt and equity capital, there is a growing acceptance that the Indian government’s 175 gigawatt renewable energy target by 2021/22 is looking achievable.”
The trend could also have a major impact on coal exporters, such as Australia.
“The Australia government’s Office of the Chief Economist’s (OCE) failure to fairly review the acceleration of coal dispatches over 2014 and again in 2015 mean the report’s key conclusion of stronger thermal coal imports looks increasingly unrealistic,” Mr Buckley said.
“This has serious implications because Australian coal mine plus associated rail and port infrastructure expansions are premised on forecasts proving to-date to be entirely wrong, resulting in increased stranded asset risk.”
Thermal coal export prices have fallen steadily over the past five years, as a combination of tightening environmental regulations and increased competition from gas and renewable energy has undermined the market.