India’s demand growth of coal imports in 2019 to be lower than 2018 levels: WoodMac

28-Jan-2019

India’s demand growth of coking and thermal coal imports in 2019 will be lower than 2018 on the back of business reforms and high industrial activity but could still fall below the highs witnessed last year, according to global consultancy Wood Mackenzie.

Commenting on the outlook for coking coal demand in India, the agency said in a statement: “On the positive side of the ledger, the government business reforms of the last three years seem to be having a positive impact on the sentiment of investors, and superficially at least, construction activity and government tendering of infrastructure and construction projects is still very high.”

This activity suggests another positive year for steel demand, it said. Direct support for imported coal demand will come from improved performance at Essar’s Hazira complex, and higher utilisation at recent brownfield expansions at Dolvi (JSW), and Angul (JSPL).

But it is a bit much to expect a repeat of 2018 growth, according to WoodMac. “The election due in H1 2019 could see the ruling coalition re-elected, but there is no certainty that Modi’s party will maintain control. Priorities will shift in the lead up to voting, with a likely hiatus in nation-building policies, in favour of more populist.

The added impact of a cyclically weaker global steel market should limit Indian steel demand growth to just over 5 per cent this year, well down on 2018. Also, India will need to start adding more greenfield capacity in order to maintain growth rates, and project development delays are still a major stumbling block, the agency said.

“The reallocation of land from POSCO’s proposed project in Odisha, to JSW and Tata, is a positive development but will of course not be a benefit to coal demand until next decade. Project development rates will be an area to watch this year,” the statement said.

The research firm also said the Indian government has big plans to increase steel-making capacity but to date there has been little, if any, concrete policy addressing the impact of growth on emissions.

On thermal coal side, WoodMac believes Indian seaborne imports are expected to grow, although at a slower pace compared with 2018. GDP and industrial growth will drive electricity generation growth at 5 per cent year-on-year in 2019 but domestic supply continues to face challenges in meeting demand growth, it said.

“Stock levels at power plants fell to a decade low in Q4 2018, as coal companies struggled to increase supply due to land acquisition issues, operational inefficiency and declining profitability in the near term. Despite having Coal India Limited (CIL) allocate 25 per cent of its production to the sector, non-power coal consumers will remain active buyers of seaborne imports in 2019 given the difficulties in ramping up domestic supply,” the firm said.

Some of the high-energy thermal coal imports that contributed to the significant increase in 2018 could be substituted by more pet coke imports this year because pet coke prices are expected to soften in 2019.

Source: ET ENERGYWORLD