When coal prices for Australian coal surged up to through $250 per ton in October last year, there was a marked reluctance from Indian power stations to face such inflated prices. Thus, coal inventories fell to dangerously low levels, leading to prices dropping $100 in less than a month and increased international imports. But in recent days, they have risen again to around $260 ton basis Newcastle FOB.

However, unlike October, demand for energy in India seems so underpinned at present that in the past couple of weeks, strong Indian coal demand on the market, from principally Australia but also from Indonesia and South Africa has been a key factor in the sharp increase in rates in February across sub-capes, but particularly in the Supramax sector where this additional demand has sparked some of the rises in the Pacific.

In its most recent report, the IMF has projected the Indian economy to expand by 7.1% in the 2022-23 fiscal year (starting April), the highest growth rate for any major economy. This is potentially positive news for dry bulk as India relies heavily on coal for roughly three-quarters of its energy production. Fluctuations in demand as India wrestled with the pandemic has seen coal imports fall from a high 240 MMT in 2019 to around just 192 MMT last year. Most notable in import patterns has been a move away from Indonesia as the main supplier where imports have dropped from 122 MMT in 2019 to 72 MMT in 2021 , as China due to its continued embargo on Australian coal now takes the lion’s share (198 MMT in 2021) of Indonesian production. Instead, India has turned towards more readily available Australian met and thermal coal with imports in 2021 at around 72 MMT up from 50 MMT in 2019. In the current political climate, it is likely India increase coal imports from Australia which in turn is positive for tonne-mile demand. Another factor when assessing the 2022 coal mix will be how much coal may be mined internally? Coal India’s domestic production sharply increased to 763 MMT last year (with coastal coal now running at close to 40 MMT also given a boost) but forecasts for domestic output are much more modest this year leaving increased imports to probably fill any potential shortfall.