Coal Prices May Rise Again In Second Quarter Of FY24 On China Stocking

India may look at increasing the discounted Russian coal imports in FY24 to balance out impact.

<div class="paragraphs"><p>(Source: Unsplash)</p></div>
(Source: Unsplash)

Global coal prices, which eased to $70.5 per tonne after peaking last year at around $140 per tonne, are likely to peak again from June to September as China starts stocking coal to prepare for winter.

However, India may look at increasing the discounted Russian coal imports in FY24 to balance out the impact.

"India will continue to increase its imports from Russia that it gets at a $15–20 per tonne discount, which was as high as $30 per tonne to start with," Deepak Kannan, global head for coal pricing at S&P Global Commodity Insights Ltd., told BQ Prime at a commodity event in Mumbai.

India imported 18.7 million, or 1.87 crore, tonnes of thermal coal from Russia in FY23. Indonesia still contributes to around 80% of India's total imports of 167 million, or 16.7 crore, tonnes, he said.

India started importing Russian coal after the prices of Indonesian and Australian coal rose following the Russia-Ukraine crisis, and China reopened after the Lunar New Year in March.

Russian coal, like crude oil, was blocked in Europe and then made available to China and India at a discounted rate. "In the event of any volatility, India will increase imports from Russia to balance out the impact," Kannan said.

The demand for coal in India will see a surge, given India's plans to add 40,000 MW of coal-based power capacity in the coming years.

"Despite the green commitments, India and developing economies will continue to depend on coal for growth for the next couple of decades," Kannan said.

In the short term, pricing and imports will depend on how fast the Chinese economy will open up after the removal of strict Covid-19 restrictions.

"We may see global coal prices rise to around $80-85 per tonne in the June-September period of fiscal 2024. However, if the prices rise beyond that, China may stop the purchase," Kannan said.

"China has already imported 23 million tonne of coal in the January-March period, and given the trends in the past decade, this year may see the highest imports in China," said Keith Tan, associate regional director, Asia Metals Pricing, S&P Global Insights.

China banned coal imports from Australia last year after geopolitical issues and shifted focus to Mongolia as an alternative supplier to reduce its dependence on Australia. It has also started imports from Russia. "Since then, it has also allowed three of its companies to import coal from Australia," Tan said.