NEW DELHI: China’s thermal coal imports could soar to one billion tonnes in 2030 from just 175 million in 2011 , while India’s imports will be at least 400 million tonnes in that same year, five times last year’s levels, research consultants Wood Mackenzie said.
Imports will rise as surging growth boosts demand for electricity in two of Asia’s largest economies, which rely heavily on coal for power generation, Wood Mackenzie’s coal market analyst Prakash Sharma told Reuters.
India’s imports could “substantially” increase, “probably by next year,” if the biggest supplier, Coal India, raises domestic prices closer to global levels soon, he said.
“If domestic coal prices rise and become at import parity for Indian consumers then probably coastal-based power plants and distant power plants … will prefer imported coal over domestic coal,” Sharma said on the sidelines of the Coaltrans conference in New Delhi.
Wood Mackenzie expects India’s thermal coal imports to rise to 95 million tonnes this year from 80 million tonnes in 2011 and they are likely to climb to 165 million tonnes in 2015.
Imports could rise to “something like 400 million tonnes by 2030 … and could be even more,” Sharma said, if domestic prices were on a par with international.
State-run Coal India, which accounts for about 80 percent of the country’s output, wants to raise domestic prices by linking them to global benchmarks but the government has forced it to put the hike on hold until at least April.
India’s domestic prices are currently at least 40 percent below international levels as the government tries to contain the cost of electricity and reduce massive power shortages in Asia’s third-largest economy.
India claims 350 billion tonnes in potential coal reserves, ranking it fourth among the world’s coal-rich countries. But Wood Mackenzie pegs marketing reserves — total future marketable production to 2030 — at just 18 billion tonnes.
Coal India has difficulties getting swift regulatory clearances for its mines and production is bogged down by state controls over mining rights and land acquisitions.
Coal India aims to produce 464 million tonnes of coal in 2012/13 from 440 million tonnes in 2011/12.
The Indian government could increase domestic supplies through encouraging foreign investment in the sector.
“That will bring in competition, that will bring in technology, that will bring in skilled manpower, reputed mining contractors from other countries. That is something that is likely to increase production,” Sharma said.
With demand from India and China rising, Australia and Indonesia will continue to be major suppliers but new sellers to the area such as Russia, Colombia and the Powder River Basin on in the United States, will become marginal suppliers.
“Australia and Indonesia will ramp up supply greatly but … around 2022 that supply cannot meet the rise in demand, so that’s when you need regular supply support from distant suppliers like Russia, Colombia and the U.S.,” Sharma said.
“Early next decade we see Australia becoming the No. 1 supplier … because Indonesia has its domestic demand to meet.”
Aside from Colombia and Russia, other areas making up the supply gap could be Mozambique and Mongolia, while South Africa is unlikely to see “any major increase in export capacity.”
Despite increased supplies, however, Wood Mackenzie expects prices to stay at high levels because of higher production costs, more taxes and infrastructure bottlenecks.
“As the demand environment long-term is strong and you need those distant suppliers to meet long-term demand so it puts upward pressure on prices, so our view is prices will continue to stay high,” he said.
Wood Mackenzie expects the benchmark Newcastle coal price to stay above $120 per tonne free on board (FOB) in 2011 real dollar terms in the long term.
Australian Newcastle coal closed at $104.43 per tonne on Tuesday while coal from South Africa’s Richard’s Bay closed at $103.21 on the globalCOAL index.