October 16, 2019 / 12:00 PM / a month ago

COLUMN-Coal India's woes should boost imports, but steel softness drags: Russell

(Repeats item issued earlier. The opinions expressed here are those of the author, a columnist for Reuters.)

* GRAPHIC: India's coal imports: tmsnrt.rs/33vF3ly

By Clyde Russell

LAUNCESTON, Australia, Oct 16 (Reuters) - India’s coal imports are on track to decline for a third straight month in October, a drop that seems out of kilter with the ongoing struggles of state miner Coal India to boost domestic output.

India’s seaborne imports of both thermal and coking coal are on track to be around 13.3 million tonnes this month, according to vessel-tracking and port data compiled by Refinitiv.

This figure is likely to increase somewhat in coming days as more cargoes are confirmed from Indonesia to India, however, any departures now from South Africa and Australia, won’t arrive before month end.

Even if October imports do exceed the current estimate, it’s likely they will still fall short of the 15.3 million tonnes in September, which was down from 15.9 million in August.

The drop in coal imports looks surprising given Coal India’s recent woes, which include the flooding of a major mine and industrial action at some of its operations.

Coal India, the world’s largest miner of the polluting fuel, said it has lost 13 million tonnes, or 2.1%, of its annual output this financial year because of strikes at the eastern Talcher coalfields.

The Dipka mine in Chhattisgarh state, which produces about 30 million tonnes a year, was closed earlier this month after flooding when a nearby river burst its banks after heavy rain.

While Coal India has managed to restart some production, full output is likely to take longer than a month.

All this makes the company’s target of producing 660 million tonnes of coal in the fiscal year that started on April 1 seem unlikely, especially since output in the first six months of the fiscal year fell 6% from the same period a year ago.

While Coal India may be able to make up some of the lost output, it may be a challenge just to keep production at the same level.

Coal India’s troubles would seem to point to the likelihood of higher coal imports, but the vessel-tracking data isn’t showing this, or at least not yet.

COKING COAL DECLINE

One reason could be softness in India’s steel sector.

A close look at where India, the world’s second-biggest coal importer, is sourcing the material shows that the current weakness in imports appears to be concentrated in coking coal, used for steel-making.

Imports from Australia, which overwhelmingly ships coking coal to India, have been trending lower, with October arrivals slated to be around 2.2 million tonnes.

This is down from 3.2 million in September and 4.4 million in August.

If October arrivals from Australia are in line with the vessel-tracking data, it will be the weakest month since January.

The drop in coking coal imports is likely related to a softer steel sector, with top steel producer JSW Steel reporting an 8% drop in output to 3.84 million tonnes in the second quarter of the fiscal year, compared with the same quarter a year earlier.

Rival Tata Steel performed slightly better, increasing second quarter output to 4.5 million tonnes from 4.3 million a year earlier.

Weaker economic growth is likely crimping demand for Indian steel for manufacturing and construction, meaning the world’s second-biggest steel producer is unlikely to increase demand for coking coal.

THERMAL HOLDS UP

However, India’s thermal coal imports from top supplier Indonesia are showing signs of life, with 5.8 million tonnes scheduled so far to arrive in October, a figure likely to rise in coming days as more cargoes are arranged.

The final October figure is likely to be close to the 6.9 million tonnes of imports in September, which was up from 5.9 million in August.

Shipments from South Africa, another major supplier of India’s thermal coal, are also likely to rise, with October imports estimated at 2.9 million tonnes, up from September’s 2.4 million, although slightly down from August’s 3.2 million.

Overall, the picture that emerges is that India’s imports of coal imports are at risk of increasing in coming months to compensate for domestic output issues, while coking coal imports may struggle until the steel sector regains momentum.

Editing by Richard Pullin

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