Australia might have been hurt badly after China shut doors to it coal, but India has emerged as a saviour buying a lot more than it did from Canberra earlier as demand in Asia’s third-largest economy rises.
India and China have been the largest consumers of Australian coking coal, buying about 25 per cent and 24 per cent respectively of Australia’s total metallurgical coal exports.
With trade relations with China compromised, Australian coal exporters have made heavy inroads into India.
In the last seven months, imports from Australia have hit a record high of 6.75 million tonnes in January 2021 of the 17.56 million tonnes of thermal and coking coal imported totally, according to vessel-tracking and port data compiled by Refinitiv.
Australia’s coking coal advantage
India is the world’s second-largest coal importer after China, and has traditionally bought coking coal from Australia given its limited domestic reserves of this higher-energy grade.
As the largest seaborne exporter of “best in class” steel-making coal, Australia will continue to be a strong supplier of steel-making (metallurgical) coal over the next couple of decades, says a recent report by the Minerals Council of Australia (MCA).
Metallurgical coal is a critical component for steel making and Australia’s high-quality coal has many takers including India, China, Japan, South Korea, and Taiwan, and EU.
Over 96 per cent of Australia’s metallurgical coal production is exported.
Further, Australian metallurgical coal helps in reducing emissions while maximising productivity for blast furnace operators.
This is a plus for Australian coal exporters as the world over there is an accelerated deployment of low emissions technologies to ensure that the world achieves the emissions reduction goals of the Paris Agreement.
Already, in 2019, Australia exported 184 million tonnes of metallurgical coal much higher than North America (50 million tonnes), followed by Russia (39 million tonnes) and Canada (35 million tonnes).
China and India account for 65 per cent of global coal demand. With Japan, Korea, Taiwan, and Southeast Asia included, that share rises to 75 percent. The MCA report indicates the Indian market for steel-making coal is expected to substantially grow as steel production in South Asian nation grows over the next 20 years.
India benefits from China’s ban on Australian coal imports
India and Indonesia have emerged as key beneficiaries of the Chinese ban on Australia’s coal exports as it got cheaper which is expected to further shift global trade in the fuel used for power generation and steelmaking in 2021.
Coal traders and buyers expect India’s buying spree of Australian coal to last into next year due to its price and quality.
Apart from steel and power companies, Kirit C Gandhi, joint president of Shree Cement said, “Indian cement companies in 2020 also started snapping up cargoes of Australian coal that were being offered at steep discounts after being turned away from China ”.
In recent months, India has also become the second-biggest buyer of Australian thermal coal, according to data from consultancy Lavi Coal Info, as it bought less coal from its traditional suppliers Indonesia and South Africa.
As per data available, Australia accounted for around 20 per cent of India’s thermal coal imports in the first two months of 2021, up from a little over 4 per cent on an average in 2020.