China’s extreme shortages of coal, which powers around 70% of the national grid, have been making plenty of headlines in recent weeks. The same story is unfolding in neighbouring India, a country with a similarly high reliance on coal for its power generation. The severe shortages in India are expected to push up dry bulk’s ton-mile scenario dramatically in the coming weeks as New Delhi sources coal from further and further away to keep the lights on.
According to the government’s Central Electricity Authority (CEA), out of the 135 thermal power stations in the country, 104 of them are at either ‘critical’ or ‘super critical’ levels of coal inventory.
Out of these 104 plants, 68 have been listed as ‘super critical’, according to the CEA’s most recent coal report, indicating less than three days’ worth of supply as torrential rain has hit domestic production.
In terms of capacity, 77% of coal-fired plants, or 126.8 MW, are now at risk of halted production if days without an increased supply of coal persist.
India’s power minister, R.K. Singh, told the local Indian Express newspaper today that electricity demand would be “touch and go” in the coming months.
The Indian government has been in negotiations for what it described as priority cooperation with Australia to secure stable inflows of the country’s coal.
“If realised, the country’s proposal to Australia would be positive for freight, given the longer voyage from West Australia,” Braemar ACM noted in an update to clients.
Historically, India has relied on Indonesia for thermal coal supply, accounting for 60.2% of monthly shipments on average over the last five years, Braemar ACM data shows.
Spot prices for Australian thermal coal surpassed $200 per ton as of early October, smashing the previous record of $185 set in July 2008.
“Imports remain the only option to meet demand” in the near term, Indian credit rating agency Crisil, part of the S&P Global group, wrote in a recent report. “In our view, coal inventory at thermal plants will improve only gradually by next March.”
Meanwhile, in China, where power cuts and limitations have been reported since the middle of September, reports have emerged of a partial lifting of the country’s more than a year-long ban on Australian coal. Braemar ACM has detected around 450,000 tonnes of Australian coal has been allowed to be offloaded at Chinese ports over the past month. However, analysts remain unconvinced whether Beijing will make a wholesale U-turn on its Australian coal ban.
Coal shortages elsewhere are being reported on a daily basis. Last week, for example, Steag closed its Bergkamen-A plant in the western part of Germany, citing shortages of the commodity.