India’s coal industry celebrated the return of its flagship conference after a three-year pandemic hiatus by projecting demand, rising supplies from new mines and strong import demand.
“King coal is coming back and with a big bang,” Jindal Power Ltd Chairman Anil Kumar Jha said at the Coaltrans India conference, held this week for the first time since February 2020.
Nearly every speaker at the event echoed this sentiment, although there was wide variation on how successful India would be at ramping up domestic coal production, and how quickly it could replace imports.
The industry’s belief in a long and prosperous future for itself runs counter to India’s commitment to “phasing out” coal-fired power generation and achieving net zero carbon emissions by 2070.
There was no talk of phasing out coal at the event, rather the debate focused on how much India’s coal demand would grow, with the consensus reaching around 1.4 billion tonnes per year by 2030. about 1 billion tons currently.
As is always the case, the trick is separating hype from reality, and also differentiating between short-term market dynamics and long-term trends.
increased production
The reality is that India has successfully ramped up domestic coal production, with official government data released last week showing production in the first 10 months of the fiscal year that began in April 2022. reached 698.25 million tonnesup 16% over the same period a year ago.
It is likely that India’s full-year production will hit a record high in the 2022-23 financial year, though still short of the target of 900 million tonnes.
The question is whether state-controlled miner Coal India, which accounts for about 80% of the country’s output, can continue to post double-digit annual growth rates.
And even if Coal India can achieve what it has never been able to do before, can the railway and port systems keep up with the increased production?
India is also betting that private mining companies will start making a bigger contribution to domestic production as they start bringing mines into production.
Overall, the trend appears to be for increasing domestic production, but if history is any guide, it is also likely that India will fall short of its long-term targets.
The question is how much, and whether the country will be able to import enough at a price its utilities can afford.
Importing
In the short term, India’s marine thermal coal imports are likely to accelerate, especially since the government last week implemented emergency measures requiring power plants to potentially shut down when summer demand peaks. To make up for the power shortage, imported fuel is used. ,
Coal arrivals in India are already on the rise, with thermal coal imports rising to 10.19 million tonnes in February from 9.71 million tonnes in January and the highest since November, according to data from commodity analyst Kepler.
In the longer term, the pace of imports will depend on how successful India is at ramping up domestic coal production, and changes in volume across the country.
There is a possibility that thermal coal imports could decline in the coming years, but predictions of this trade being exhausted by 2030 are ambitious.
Where India will see an increase in coal imports is in high-grade metallurgical coal, which is mainly used to make steel.
India produces only a small amount of this grade of coal, also known as coking coal, and given the expected growth in steel production, it is expected that coking coal imports will currently be around 63 million tonnes. tonnes to about 100 million tonnes by 2030.
Need extra coal?
One question that participants at the Coaltrans India event were likely to linger on was whether this additional coal production the industry expected would actually be needed.
India is increasingly promoting renewable energy such as solar and wind, as well as hydroelectric power generation.
About 15.5 gigawatts (GW) of renewable capacity was installed in the 2021-22 financial year, but only 1.4 GW of new coal-fired generation.
While thermal generation still accounts for 59% of India’s total capacity, the share of renewable energy is rising and stood at 27% in March 2022, according to data from the Institute for Energy Economics and Financial Analysis.
The share of renewable energy is expected to rise to at least 40% by 2030, and could even climb to half of India’s generation capacity.
India is building new coal-fired power plants, with data from the Global Energy Monitor showing that 32 GW are currently being built.
Given that about 3 million tonnes of coal is needed annually for each GW of production, this means that only an additional 100 million tonnes will be needed for the upcoming capacity addition, which is a substantial increase from the 500 million tonnes added. less, which the industry believes it will deliver by 2030.
There are also other coal users, such as cement producers, but it is less likely that they will need new volumes on a large scale.
Overall, it appears that the positive sentiment on India’s coal sector is justified, especially in the near term. But his vision of huge increases in production and demand in the coming decades may still prove overly optimistic.
The views expressed here are those of a Reuters columnist.