Coal prices volatile as China bans Australian import: Ind-Ra
Dec 29, 2020
Mumbai (Maharashtra) [India], December 29 : The indefinite Chinese ban on Australian coal imports will keep import prices for India volatile over the near term, according to India Ratings and Research (Ind-Ra).
Australia-origin coking coal import (comprising 67 per cent share in FY20) prices have remained subdued up to mid-December, providing respite to the spreads for domestic steel players while iron ore prices are soaring.
The import prices of non-coking coal from South Africa and Indonesia (comprising 85 per cent share in FY20) have seen a strong momentum up to mid-December, making imported coal more expensive and thus, hitting the margins of domestic power sector participants dependent on imported coal.
Ind-Ra said coal offtake continued to improve in November to 56 million tonnes, higher 2.6 per cent month-on-month and 6.2 per cent year-on-year, driven by an improving domestic power demand by 3.7 per cent y-o-y.
Accordingly, domestic coal production continued to improve to 56.6 million tonnes, higher 11.6 per cent m-o-m and 2.2 per cent y-o-y.
The output in 2H FY21 is likely to be supported by about 7 per cent y-o-y higher overburden removed in 1H FY21 from open cast mines (around 94 per cent of total production) due to a lower coal demand over 1H FY21, said Ind-Ra.
With the formalised ban imposed by China on Australian coal imports, coking coal import prices declined by 24 per cent up to mid-December since early-October after the imposition of verbal ban.
This was in anticipation of an oversupply in the global market, post China ban of Australian coal imports, in the medium term while Australian miners were identifying other avenues to offload coking coal.
Since October-end, said Ind-Ra, non-coking coal import prices (South Africa and Indonesia origin) have spurred up by 32 to 39 per cent up to mid-December.
The increase in prices may also provide Coal India Ltd to push domestic coal over imported coal in India, subject to an improvement in price competitiveness considering the gross calorific value and applicable freight costs.
