India is looking to procure Russian origin coal, leveraging the steep discounts offered by the latter compared to the Australian and the South African origin material amid a decline in stockpiles at domestic power plants, market sources told S&P Global Commodity Insights April 18.
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Sources said that India bought 5,500 kcal/kg NAR coal from Russia at $160-$165/mt CFR India for an April-loading Capesize ship in the week ended April 16, adding that the freight between Russia and West coast India was at around $35-$36/mt.
This implies a deep discount to the price that Indian buyers are offered compared to coal from other origins. Traders said that the 5,500 kcal/kg NAR Russian coal was generally being offered at around $60-$65/mt discount to the Newcastle 5,500 kcal/kg NAR coal.
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According to FOB price indications from market sources, Russian 5,500 kcal/kg NAR coal was heard at around $10/mt discount to Australian 5,500 kcal/kg NAR at the end of 2021.
The Newcastle 5,500 kcal/kg NAR coal with 23% ash was assessed at $195/mt FOB on April 14, while the Richards Bay 5,500 kcal/kg NAR coal price was assessed at $272.65/mt on the same day, according to data by S&P Global.
Indian traders have been looking for lucrative offers for Russian coal after Russia offered a discount on coal following sanctions by several countries on Russian coal in the aftermath of its invasion of Ukraine. The EU and Japan announced bans on Russian origin coal in the week ended April 8.
However, discussions on payment mechanism and timing of the payment and deliveries remained sticking points, sources said.
S&P Global assessed the 6,300 kcal/kg GAR Russia Pacific price at $170/mt FOB on April 14.
India's low stockpiles
Stockpiles at Indian power plants were at 23.17 million mt as of April 13, sufficient for little over eight days of coal burn, according to latest data by Central Electricity Authority, or CEA. The stockpiles were at 25.43 million mt on April 1.
Several states in India are likely to see a power shortage in the coming weeks as power plants struggle to find optimum amounts of thermal coal amid rising summer demand, higher import costs and the resultant supply tightness, S&P Global reported April 12.
The coal stockpiles in India have been low since 2021, when imports fell due to high seaborne coal prices and it has since relied largely on domestic production. The stockpiles at power plants were at 28.66 million mt, sufficient for 15 days as on April 1, 2021, according to the CEA data.
The Indian government's focus has increasingly been to boost production by state-owned entities and auction of coal blocks to private companies to add to production capacities and reduce dependence on imports. India aims to reduce coal imports to zero by 2030.
S&P Global reported on April 13 that the Indian government has asked state governments to step up imports before the onset of the monsoon season.
Price sensitive demand
Indian buyers had been on the sidelines for a large part of 2022 due to the numerous supply disruptions such as Indonesia's export ban in January and when seaborne prices surged after Russia's invasion of Ukraine.
Market participants expect an increase in demand for Russian coal from Indian buyers if the price continues to be competitive compared with other origins.
Demand from countries that are trying to replace Russian coal has led to a surge in coal prices in Australia, South Africa, the US and Indonesia.
"This year if Indian banks find some payment solution to import coal from Russia then it is easy to import but otherwise it is difficult," an India-based trader said. "Not every entity is able to find a payment structure to get Russian coal. For crude oil, the number of entities involved in importing were limited."
Traders said that only large buyers at this point were considering importing Russian coal as smaller entities could not access offshore banking facilities and procuring letter of credit from Indian banks remained difficult.
India imported 1.76 million mt coal from Russia in 2021, according to data by Iman Resources.