Indonesia and South Africa, two of the world’s top coal exporters, are vying for a bigger share of India’s thermal coal imports, as they seek to recover from the losses caused by geopolitical shifts and changing trade patterns.
India’s Growing Coal Demand
India is the second-largest importer of coal in the world, after China, and relies heavily on the fossil fuel for its power generation and steel production. According to the International Energy Agency, India’s coal demand is expected to grow by 4.6% per year until 2025, driven by its economic recovery and industrial expansion.
However, the Indian coal market has become more competitive and diversified in recent years, as new suppliers have emerged to challenge the traditional dominance of Indonesia and South Africa. The United States, Russia, and Australia have increased their coal exports to India, taking advantage of lower prices, higher quality, and shorter shipping routes.
Indonesia and South Africa’s Strategies
Indonesia and South Africa have also faced challenges from their own domestic markets, where coal consumption has declined due to environmental regulations, renewable energy development, and the COVID-19 pandemic. Both countries have seen their coal output and exports drop significantly in 2023, according to data from the World Coal Association.
To regain their lost ground in India, Indonesia and South Africa are banking on their low-sulfur, high-calorific value coal, which is suitable for India’s steel sector and power plants. They are also offering competitive prices and flexible contracts to attract Indian buyers.
“We see our low-sulfur, high-calorific value coal as a big advantage to supply to the Indian market. India’s steel production is expected to do well and it’s good for South Africa,” Kgabi Masia, chief coal operations officer at Exxaro Resources, said at the Coaltrans India conference.
Exxaro Resources is one of the largest coal producers in South Africa, which supplied 16% of India’s thermal coal imports in 2023, down from an average of 22% in the previous three years. Masia said the company plans to supply 60 million metric tons of coal from South Africa in the year ending March 2025, which means it will be able to increase its share in India.
Indonesia, the world’s largest coal exporter, supplied 58% of India’s thermal coal imports in 2023, down from 65% in 2022. The country is targeting a record output of 710 million tons of coal this year, of which 110 million tons are expected to go to India, according to Ardian Rosadi Budiman, senior manager of international marketing at Adaro Energy.
“Despite additional domestic demand, we still expect Indian demand for Indonesian coal to be strong,” Budiman said.
The Future of the Indian Coal Market
The competition for the Indian coal market is likely to intensify in the coming years, as India aims to reduce its dependence on coal imports and boost its domestic production. Also, the Indian government has set a target of producing one billion tons of coal by 2025, and has opened up the coal sector to private and foreign investors.
However, some analysts believe that India will still need to import coal to meet its growing energy needs, especially as it faces challenges such as land acquisition, environmental clearance, and coal quality. This means that Indonesia and South Africa will have to continue to innovate and adapt to maintain their edge in the Indian coal market.
Source: Reuters
