What are the most interesting changes happening in the Indian coal market?

Growth and Expansion. India has just become the top importer of Queensland Met Coal taking over China and is expected to grow further with forecast increased demand of 6-12% growth per annum over the short to medium term.

 

We are encouraged by your country’s National Steel Policy 2017, in which India’s crude steel production capacity is projected to reach 300mtpa by 2030-31. Given the BF-BOF route is expected to contribute about 60%-65% of this capacity, India’s demand for coking coal and PCI coal is likely to increase significantly, to around 160mtpa and 30mtpa respectively, by that time.

 

Given the long and close relationship between Queensland and India on metallurgical coal trade, we are committed to continue to be a major and reliable supplier of high quality metallurgical coal to India in the coming decades.

 

I am aware your country’s latest National Electricity Plan, places coal fired power as a prominent component of India’s electricity generation energy mix in addition to a significant effort to increase renewables’ capacity.

 

The modernisation of India’s coal fired power generation facilities means that as a supplier of high quality thermal coal, Queensland is well placed to make a greater contribution to India’s energy future.

 

    What role does coal from Queensland and the rest of Australia have in the Indian import market?

Australia is the largest Met coal contributor on the seaborne market with 154Mt or 48% of total seaborne volume exported from Queensland. Queensland is the price setter for Benchmark Hard Coking Coal and Premium Low Vol PCI. Queensland also exports some 60Mt of high quality thermal coal.

Queensland also holds some of the world’s largest coal inventory with some 63 Bt of coal sitting in Measured and Indicated JORC resources, more than 1/3rd of that in Met Coal specifically and additional targets of 72Bt of thermal coal and 42Bt of Met in the inferred and identified economic discoverable category.

India imported some 34.5Mt of Met Coal from Queensland in 2017 although we saw a drop in thermal coal imports from 18Mt in 2016 to 2.7Mt  in 2017 (2018 figures??)

 

    What is your forecast for production and prices of Queensland coal?

Based on the latest Queensland Treasury forecasts, Queensland’s coal exports are projected to increase from 220 million tonnes in 2017-18 to 245 million tonnes by 2021-22, with growth driven mainly by increased production of metallurgical coal.

 

While a sizeable part of this growth is expected to come from brownfield expansion and improvement in production efficiency, there are several new greenfield projects, such as South32’s Eagle Downs project and Pembroke’s Olive Downs project, in the pipeline.

 

The hard-coking coal contract price over this period is expected to come down from the current level of around US$195/t (as of 21 January), to US$140/t, by 2021-22. Similarly, the thermal coal contract price is also expected to moderate from around US$105/t in 2018-19 to US$80/t by 2021-22.

 

Importantly, the long-term outlook for metallurgical coal, especially premium quality hard coking coal, remains positive. With BF-BOF route continuing to be the dominant method for crude steel making, together with modernisation of blast furnaces in India and China, demand for high quality coking coal is expected to continue to grow in the foreseeable future.

 

While the thermal coal endowment is huge in both existing supply basins and emerging ones, new supply regions such as the Galilee, Eromanga or Surat Basins require significant infrastructure to unlock and timing is uncertain. Nevertheless, stricter guidelines on Chinese coal imports, Indonesia’s domestic coal strategy and rapid expansion on coal-fired power capacity in Southeast Asia will drive demand for higher quality thermal coal from Queensland.

 

    What key drivers for change should we be looking out for? 

War on air pollution and coal to gas or green energy shifts will impact confidence around new thermal coal projects and increase volatility in long term forecast pricing. New Low rank thermal projects are likely to be challenging.

 

    What are you most looking forward to at Coaltrans India 2019?

Being able to showcase Queensland world-class resources and promote the terrific opportunities for investment that Queensland has. Also, to build partnerships and alliances with Indian companies.