India, most appealing thermal coal market for Australia

India, the world’s third-largest coal consumer, is one of the most appealing markets for Australia’s thermal coal to meet its increasing energy requirements, according to a new report.

According to 'The Coal in India 2019'' report, prepared by Australia's Office of the Chief Economist, Australia is not a significant supplier of thermal coal to India despite India’s imports growing by 84 million tonnes in the past five years.

The report said that India was the world’s third-largest coal consumer behind China and the United States, and the share of coal in India’s electricity mix was rising.

Indonesia was the main supplier for India for thermal coal while Australian exports were going to China, Japan, and South Korea, the report said,

"The growth in Australia’s coal exports to India has coincided with the substantial rise in Indian coal imports, only exports of metallurgical coal to India have risen substantially," it said.

It said that there was a range of factors that had led to limited Australia’s thermal coal exports to India, particularly in the past five years including the Australian price which exceeded the level that Indian electricity companies, who were subjected to regulated prices, could profitably pay.

"Subsequently, India’s coal importers have sourced supplies from the low-cost producers in Indonesia that supply lower energy content coal and have lower shipping costs for delivery to India.

"However, the energy content premium that Australia’s coal typically attracts is getting smaller and key benchmark prices for Australian and Indonesia coal are getting closer,'' the report added.

It highlighted India's energy giant Adani's 16.5 billion dollar Carmichael coal mine and rail project in Queensland which was the most advanced project could help India. At its full capacity, it could produce up to 60 million tonnes of thermal coal a year.

"Most of the coal produced from these projects is expected to be destined for export markets, primarily India, although the potential to supply the domestic market is also being considered," the report noted.

The report further noted that Adani’s Carmichael mine and GVK’s Alpha mine were two advanced projects could provide long term reliable supplies of coal to meet the growing energy needs of India.

"India’s desire to improve the productivity of domestic coal mines through advanced technology may present an opportunity for Australia’s Mining Equipment, Technology and Services Sector (METS)," the report said.

"METS and oil, gas and energy resources (which includes coal) have been identified as two of the five industry growth centres by the Australian Government as part of its Industry Innovation and Competitiveness Agenda,'' it said.

The report also identified India's interest in Australia stating that Coal India Ltd (CIL) was already interested in working with Australian companies to upgrade the technology employed in their coal sector.

The report was welcomed by Australian Resources Minister Matt Canavan who is currently visiting India and Singapore to build ties with the region.

On his three-day-long trip to India starting Monday, Canavan is expected to focus on coal, Liquefied Natural Gas (LNG) and minerals.

"As the world's fastest-growing major economy, India's projected growth will keep resources trade high, which makes our economic relationship extremely important," he said.

"India is Australia’s fourth-largest export market and a key destination for Australian coal and copper. There is enormous potential for Australia to grow its resource exports to India, particularly thermal coal," Canavan said.

“As the world’s fastest-growing major economy, India’s projected growth will keep resources trade high, which makes our economic relationship extremely important."

He will also emphasize Australia’s reputation as a reliable supplier of LNG and high quality thermal and metallurgical coal, and explore emerging opportunities to support India’s need for minerals critical to their economic, defense and space capabilities.

Canavan said the report provided a detailed examination of recent developments in India’s energy, electricity, and mining policies and how they could impact on its future demand for thermal coal.

Canavan said the report found India’s coal consumption was likely to continue increasing over the next decade, and possibly beyond, to meet India’s growing energy needs.

"India is a large coal producer and its domestic production is growing. Australian coal is a perfect complement, not a replacement, for Indian coal. We specialise in high-quality coal that can be easily blended with Indian coal to produce better outcomes for all," he said.

"In 2018, Australia exported 5 million tonnes of thermal coal to India, which was 2.3 percent of our thermal coal exports, and only 4.5 percent of India’s thermal coal imports. We can do better than this.

"The recent approval of the Adani Carmichael mine could just be the start of a new trade that can bring wealth and jobs to Australia," he said.