Dry bulk: Indian coal imports roars back in September

03/10/17

A month ago, we highlighted the fundamentals impacting Indian coal imports looked more promising. At that time trade flow data indicated imports in August of about 15Mt. The same data today indicate only 12Mt of imports in August, while imports in September is estimated to have roared up to 18Mt, which would be an all-time high for the month of September.

Some of the 6Mt delta between the 2 months can be attributed to congestion/delays at discharge ports which was not accounted for in the trade flow data. A quick sampling of the data showed several vessels arriving anchorages in India in mid-August but only completing discharging in early September. We estimate that imports in August and September averaged about 14.6Mt which would be down 2% from the same period last year.

Preliminary numbers show Coal India’s production increasing strongly in August with a 16% YoY growth to 38Mt (+5Mt) while the growth from the previous month was a more modest 3%. However, the off take of about 44Mt led to a further 6Mt destocking of pithead stocks which now are at the lowest level in at least 3 years. It is only 6 months since pithead stocks was at all time high levels. The days’ worth of inventory at 111 thermal power stations monitored by India’s Central Electricity Authority has decreased further and is now at 6 days on average, down from 11 days a month ago. The supply/demand balance for coal has thus tightened even further. In the top right graph, we have combined the pithead stocks with the power station stocks and expressed it in days’ worth of total inventories by grossing up the days’ worth of inventories at the thermal coal plants. The graph clearly illustrates how tight the coal chain in India is now.

We estimate that thermal generation recorded a growth in August and September of 15% and 7% respectively. The general activity level in India took a hit from the demonetization introduced at the start of November last year. If we use the data for Indian cement production as a proxy for the activity level we can clearly see the negative effect between November and March. It now looks like the growth is normalizing and we thus expect Indian coal demand to pick up further after the monsoon season. We think the imports will continue at a strong pace going forward as the fundamentals looks even more promising today than they did a month ago.

Source: Klaveness