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India shows potential for catching up with China in long term coal consumption dynamics

China and India have driven the coal demand in the past years particularly in the seaborne market. Asian coal demand, which has doubled over the past 10 years, accounts for the global growth in demand.

“Even though the market is currently oversupplied, this will not be the case for long, as Asian import demand for thermal coal will more than double to 2030”, predicts Mark Gresswell, Chief Analyst at Salva Report. The audience polling results at this year’s 20th Anniversary Coaltrans World Coal Conference showed that 43.2% respondents expect this demand to be supplied from Indonesia, 24.3% - from Australia, and some 32.4% placed their predition on Mozambique and South Africa. James O’Connell, Editorial Director at Platts, pointed out that Russia should also be listed among prospective sources.

“Chinese consumption has increased by a factor of 2.6 over 2002-2012, approaching 4bn tons per year, which is 50% of the global total. Indian consumption amounts to 700m tons”, says Mark Gresswell. He remarks that India’s growth and that of the rest of the region is overshadowed by massive coal consumption in China.

The factors which drove coal demand growth originally are still here: we still have low electricity consumption per capita, urbanization-driven economic growth at 4-8%, and population growth. Due to its current low price, coal is likely to remain the key energy source in Asia, although it is predicted to lose some ground in China (from 80% to 70% in total energy mix) and India (from 75% to 73%,) by 2030.

India is the world’s 4th largest energy consumer and one of the top coal consumers with 57% of electricity demand supplied by coal-fired power stations. Its increasing domestic demand is generated by both economic and population growth. Some 85-87% of India’s imported coal come from Indonesia and 10% from South Africa, says Jim Nicholson, Senior Vice President Asia at Argus Media.

Over 80% of the audience respondents expect Indian imports to continue growing boosted by high demand and unsatisfactory domestic coal supply logistics. Internal production has been missing its targets due to failure of adequate railway infrastructure.

“The gap between the demand and domestic supply was 135m tons at the end of 2013”, estimates Jim Nicholson.

With environmental issues further complicating the production inefficiency, India’s new government is facing the need for reforms in the coal and power field. Some 35% of audience respondents don’t expect India to overtake China as a coal importer before 2035 as the imminent economic reform will take time to implement.

India’s role as a game changer might eventually be helped by competition from renewables and nuclear power in China (according to 40% of respondents) and also the China-Russia gas deal from 2018, though 59% believe the deal was sealed due to political reasons and demand for coal will remain strong in China.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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