13/05/2020, CA Pankaj Nyati.

Author is having specialization of Coal Business and directly linked with Coal market since last 11 years and understands Global & Indian coal market.

In his research paper (paper) he wrote about the current pandemic, Global & Indian coal trade and its future and opportunities.

Current pandemic COVID-19: Such type of pandemic comes in centuries, also about history of various pandemic attacked in past mentioned with the paper.

Global Coal Market: At the beginning of 2019 world is having proven coal reserve is around 1055 Billion tonnes and current production is around 6.5 Billion tonnes every year, out of total production around 1 billion tonne is globally traded and remaining consumed by producing countries internally.

The paper is also given detail data of top countries who is having coal reserves, Top 10 consuming countries, producing countries and importing countries with their share out of total.

Future of Global coal Trade - Developed countries mainly American and European are now diverting from thermal power generation to renewable energy/ clean energy, it is because of CO2 carbon emission by thermal power generation and hence their coal consumption/ requirements are in reducing trend in such regions.

But developing and highly populated countries like India, China and other developing countries will be dependent on thermal coal for power generation for many more years and in fact growth of the coal consumption will accelerate with their incremental growth of population and development phase.

According to a study of 2018, it shows average of Primary energy consumption per capita of world in 2018 is 76 Gigajoules per capita and if we see in detail, the highest is of Canada i.e. around 390 Gigajoules per capita, and average of European region is 127 and similarly for India it is 25 and for China it is 97.

Due to Pandemic COVID-19 there is an unexpected lockdown in many countries for an unknown period, Industries other than essential goods are either not working or working at minimum capacity, hence the worldwide coal requirement is negatively affected since last 3 months and it looks it will be continuously affected for the whole FY 2020-21. Due to the low demand of coal in current situation the Index/price of various types and origin coal is dropped around 20-40% from the Index/price of 52 weeks ago.

Since coal is a primary energy source, the demand of coal worldwide after recovery phase from the current pandemic, will be in incremental trend.

impact of COVID-19 on global Coal Indexes/tentative prices which are compiled and tabulated in 52 weeks ago, before impact of COVID-19 i.e. First half Jan’2020 and beginning of April and May’2020,

Opportunities in Global Coal Trade: China and India will be the major market but other than these countries, developing countries like Thailand, Vietnam, Bangladesh, Malaysia and many more countries which are on the path of development, hence their demand for coal will growing and these could be the potential market for coal trade business.

Also the growing demand of electricity in several developing countries and the fast pace of industrialization in these nations are the key growth drivers for the global coal market. The exponential rise in the global population is expected to create several lucrative opportunities for the overall market in the coming year.

Indian Coal Market: India is having large size of Coal reserves. As per the data of ministry of Coal total of 319.02 Billion tonnes of Geological Resources of Coal have so far been estimated in the country as on 1st April’2018. Out of that 148 Billion tonnes are proved, 139 Billion tonnes are indicated and 31 Billion tonnes are inferred.

Currently India is producing around 700 Mt (0.7 Bt) coal and India’s total requirement of coal is 950 Mt (0.95 Bt) difference are fulfilled by importing around 250 Mt (0.25 Bt).

India is also exporting coal in very small volume, in FY 2019-20 India exported total 1.31 Mt to Nepal 0.86 Mt and to Bangladesh 0.37 Mt.

Paper also shows in detail tabular form about India’s yearly coal production and Import, also given the list of countries from where India import coal and list of ports of India where coal is imported with share of the total.

Power sector is major consumer of coal, it share almost 60% of total coal consumption of India. And the role of coal in Power generation capacity in India is also having almost 60% share.

Details of sector wise coal consumption and bifurcation of India’s total power generation capacity as on 31st March’ 2020 - 370,106 MW is listed.

Future of Indian Coal Trade

Coal plays major role to generate electricity in India and as per above data India is far away at 25 level from the average of 76 Gigajoules per capita consumption of primary energy of worldwide hence considering the table of "Power Generation Capacity in India" clearly shows that Coal will play a major role in India’s power generation in long future.

Due to various geopolitical reasons India might become manufacturing hub and many global business houses are looking to enter India, and if all it happens positively than demand of coal in India after coming out from the current pandemic, from year 2021-22 onward will increase rapidly.

India is having two sources of coal one is production from own reserve and other is Import, Recently Government of India decided to increase production from our own sources to reduce the Import that will eventually reduce the foreign trade deficit. To do that recently Parliament passed a bill that will remove end-use restrictions for participating in coal mine auctions and open up the coal sector fully for commercial mining by domestic and global companies.

In a statement, the coal ministry said Parliament passed "The Mineral Laws (Amendment) Bill, 2020 for amendments in Mines & Mineral (Development and Regulation) Act 1957 and The Coal Mines (Special Provisions) Act, 2015. The coal minister said the bill was important as India should be using its own natural reserves, instead of importing coal worth Rs 1.71 lakh crore (USD 24 Billion).

The above changes in Indian Government policy lead to increase in coal production within India and decrease in Coal Import. But author mentioned in this paper about many reasons with practical approach why the import of coal will be continued and may be in growing trend.

Role of Exchange Rate of USD to INR in India’s Coal Import: Paper shows how it impact and given best example to understand about it.

Role of Shipping Freight in Coal Import in India: Shipping is very vast subject itself, it plays very important role in Coal Import. Ship freight having two variable major cost component one is Time Charter (TC) Rate and second is Bunker/Fuel cost. Paper given short brief about the shipping and in layman terms given best example of impacts of current volatility in shipping freight.

Reasons India is an emerging powerful nation: Author mentioned many reasons and shows that it will eventually help in the growth of coal market

Opportunities in Indian Coal Trade: As demand of coal will definitely increase of coal in India, An entrepreneur can find a lot of business opportunities in it:

(I)   Business of Coal Import: India imported 235.24 million tonnes of coal in 2018-19 valued at Rs. 1.71 lakh crore (USD 24 Billion) which plays an important role in Indian economy. Trading, shipping, logistics & marketing are the existing opportunities available.

(II)  Business of Coal Mining in India: India's long awaited bill, passed by Indian government in parliament that will remove end-use restrictions for participating in coal mine auctions and open up the coal sector fully for commercial mining by domestic as well as global companies.

Hence opportunities can arise either

(a)  Directly acquiring coal mine through participation of upcoming coal mining auctions &/or

(b)  Indirectly by providing various type of services required by coal mining companies.

Many opportunities are mentioned by author in the detail paper.