India coal shipments fall 7% despite October rebound

Power plants faced critically low inventories as monthly volumes climbed 7% YoY.

Coal shipments to India fell 7% in the first 10 months of the year due to higher import costs, although shipments rose 7% year on year (YoY) in October, according to the Baltic and International Maritime Council (BIMCO).

Its Shipping Number of the Week on 4 November said critically low inventories have likely increased pressure on power plants to secure sufficient coal supplies, whilst power shortages may have further encouraged purchasing.

“Thermal coal demand has remained strong, particularly from the power sector, but domestic mining has not kept pace, forcing power plants to draw down inventories,” said Filipe Gouveia, Shipping Analysis Manager at BIMCO.

Gouveia added that coking coal demand growth has eased following a decline in steel production amidst low margins.

Indian coal demand has firmed this year, driven by an approximate 9% YoY increase in coal-fired electricity generation.

The increase in solar and wind generation has had a minimal impact on coal demand as hydroelectric generation fell due to a weaker monsoon linked to El Niño conditions.

Domestic coal production increased by only around 4% YoY, whilst inventories, rather than imports, have compensated and supported demand growth.

By 1 November, 48% of Indian coal-fired power plants had critically low coal inventories.

The weaker import demand has weighed on the wider shipping market, particularly the Supramax segment, whose coal shipments to India fell 16% YoY.

Panamax volumes fell 4% as the segment increasingly competed with other ship types for coal cargoes.

Higher import costs have been driven by a weaker rupee and higher coal prices.

Coal prices have risen amidst increased demand following disruptions in the Strait of Hormuz, which tightened liquefied natural gas supplies and prompted the European Union, Japan, and South Korea to increase coal-fired electricity generation.

“Looking ahead, the International Energy Agency expects Indian coal demand to only grow by 2.5% in 2027,” Gouveia said.

He added that Indian coal imports are expected to increase only slightly, as growing domestic coal mining may limit import demand, whilst a recovery in hydroelectric generation could also limit gains.