Coal is the largest and one of the most widespread fossil fuel resources, which provides 23% of the world’s energy. Thermal coals or steaming coals and metallurgical coals or coking coals, the two main types of coal, have different commercial markets and industrial uses. Thermal coal is burned for steam to run turbines for generating electricity. Metallurgical coal is used in the process of creating coke which is a necessary component to make iron and steel. Metallurgical coal accounts for 10-15% of global coal demand. Metallurgical coal pricing is usually related to the global economic growth process as its use is integrally related to the processes of construction and industrialisation. The demand for metallurgical coal is also innately related to the market for steel and gets positively influenced when the demand for steel increases. The major producers and exporters of metallurgical coal are Australia, Canada, and the United States. China, Japan, India, and South Korea have been the major importers in the 2017-2018 fiscal. India imports around 75-80% of its total coal from Australia, Indonesia, and South Africa.
Demand in India
Coal production in India touched 688.4 million tonnes (MT) in FY 2017-18, showing a 2.5% increase over last year’s production. The total volume of imported coal has witnessed a sharp growth by 8.1% in FY 2017-18. Total coal import in India during FY 2017-18 stood at 213 MT, which was 195 MT during FY 2016-17. Increasing demands from the steel sector for coking coal and a secured demand from the power and cement industry have helped this progress.
Globally, India is the second largest metallurgical coal consumer. At the 12th Indian Coal Markets Conference themed “Indian Coal: The Return of Shortage” N. C. Jha, Adviser, SAIL and former Chairman, Coal India Limited (CIL), said, “Mammoth plan, under National Steel Policy 2017 set up a mark to increase steel production in India, giving a big challenge to availability of coking coal. Demand of coking coal is expected to be 161 million tonnes per annum (MTPA) in the next year. For the production of steel, the current dependence on imported coal is about 85%. As per the National Steel Policy, it will have to bring that down to 65% by 2030-31. This is a great challenge for both the steel producers and the coal producers in the country.”
Indian domestic coking coals have low washability. Total installed capacity of the coking coal washeries in India is about 31 MTPA, operating at 20-30% capacity utilisation. The current washing capacity of Coal India for coking coals is 23.3 MTPA. CIL has identified to set up 18 new coking coal washeries with total throughput capacity of 48.2 MTPA. One new coking coal washery with a throughput capacity of 3.5 MTPA is planned to be set up at Tasra project by Steel Authority India Limited (SAIL). New washeries are planned to wash at 18-19% ash content.
The rise in imports can be linked to domestic coal shortages and an increasing demand of coking coal to produce steel for urbanisation and industrialisation.
According to ‘Resources and Energy Quarterly: March 2018’, India is estimated to become the world’s largest metallurgical coal importer by 2020. At the 12th Indian Coal Markets Conference, mjunction CEO, Vinaya Varma informed, “India’s coal imports rose by 7.9% to 134.46 million tonnes (MT) in the first seven months of the current fiscal. The country imported 124.57 million tonnes coal in the corresponding period of previous fiscal.” Varma added, “Overall coal and coke imports during the first half of the current fiscal increased by 13.9% to 119.42 MT, which was 104.81 MT in the April-September period of previous fiscal.”
Worldwide market of metallurgical coal
In the global market, the demand and prices of metallurgical coal reached record price levels throughout the last decade. A report titled ‘Coal: Sector Update and Outlook’ by Care Ratings informs that during the last 12 months, average global coal prices have been in the range of $ 70-106 with prices hitting the peak in January 2018 after having bottomed out at $72.5 per tonne in May 2017. It grew mainly because of China’s increase in production of steel during these years. Indian steel mills were also driving the demand for the same. A digital journal, Wiseguyreports.Com in its research database titled “Coking Coal Market - Market Demand, Growth, Opportunities, Analysis of Top Key Players and Forecast to 2025” informs that China has dominated the global metallurgical coal market till 2016. The same report explains, “Falling demand of metallurgical coal since 2012 till 2014 has resulted in the drop in its prices. As a result, in February, 2015, the Government of China implemented a top-down approach to decrease the congestion in the domestic coal mining industry.”