India to Eclipse China as World’s Coal Power, Buoying BHP
India is burning coal in power plants at the fastest pace in 31 years.
At the same time, domestic supplies of natural gas that are the main alternative are falling at the quickest rate in Asia, data from 2012 compiled by BP Plc (BP/) show. Both trends run counter to those in most major economies and give India clout over global coal prices.
India’s growing appetite for imported coal should benefit suppliers in the $69 billion global coal trade such as BHP Billiton Ltd. (BHP) (BHP) and Indonesia’s PT Adaro Energy (ADRO). India is set to eclipse China as the top importer of power station coal by 2014, as China burned the fuel in 2012 at the slowest pace since 2008, and U.S. demand fell for a second year, according to Energy Aspects Ltd.
“India is increasingly becoming an important swing factor in the coal markets and exporters will look there for price support as Chinese imports slow,” said Michael Parker, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “Chinese imports will start to fall as they use more of their own coal.”
As Asia’s second-biggest energy consumer, with an economy expanding 5 percent last year, India used 10.2 percent more coal from a year earlier. That was the sharpest rise since 1981 and reversed three years of slower gains, according to this month’s BP Statistical Review 2013.
Other large economies are increasingly using more cleaner-burning natural gas to produce electricity and reduce carbon emissions. While China remains the biggest coal user, growth in use of the fuel is slowing as the government tackles pollution that’s choking Beijing and other cities.
China will have a coal-production capacity of 4.3 billion metric tons by the end of this year, compared with estimated consumption of 4.1 billion tons, Bernstein said in a May 30 report. The nation bought 142 million tons of thermal coal from overseas in 2012, 39 percent higher than a year earlier, said Trevor Sikorski, an analyst at Energy Aspects in London.
India imported 20 percent of its coal requirements in the year ended March 31, according to the state Planning Commission. Imports may rise to more than 23 percent of supply by 2017.
Adani Enterprises Ltd. (ADE) and the Tata Group were among buyers of 15.6 million metric tons of the fuel in April, according to Interocean Group, a New Delhi-based shipper. The purchases drove up imports by 51 percent from a year earlier owing to lower prices ahead of summer when demand for electricity increases.
Power-station coal at Australia’s Newcastle, the Asian benchmark price, has dropped 10 percent in 2013, extending a 19 percent slump last year, according to IHS McCloskey, a Petersfield, England-based data provider. Prices fell 2.1 percent to $81.20 a ton in the week ended June 21, the fourth weekly decline.
Gas output at India’s fields has dropped every month since November 2010, according to oil ministry data. Billionaire Mukesh Ambani-controlled Reliance Industries Ltd. (RIL) has been attempting to reverse an almost three-year decline in output from the nation’s biggest field, while Oil & Natural Gas Corp. (ONGC), the country’s biggest explorer, is struggling with fields that are more than four decades old.
Coal-fired power stations provide about 59 percent of India’s electricity. State-owned Coal India Ltd. (COAL), which supplies more than 80 percent of the nation’s needs, has been unable to meet demand that is forecast to climb 43 percent to 730 million tons by 2017 from last year’s levels. Supplies from local coal mines may gain 38 percent in the period, the nation’s Planning Commission said last year.
India’s natural gas production declined at the fastest pace in Asia last year, according to the BP Statistical Review. The government estimates the share of gas-based power capacity to fall to 6 percent in 2017 and 3 percent in 2030 from 9 percent last year, said Ashish Sethia, Bloomberg New Energy Finance’s India country manager.
“In India, gas is not expected to be a major challenger to coal for power generation any time soon,” Sethia said. “Falling gas production in India makes availability uncertain and mutes the gas play in favor of coal.”
In contrast, natural gas production increased 9.9 percent in China last year, the BP data showed. The pace of growth in the U.S., the world’s largest producer, was 4.1 percent, the highest in two years.
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