After buying Russia’s discounted oil, India looks to buy its coal
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India has been pursuing Russian coal even as the rest of the world avoids Russian products. According to Kpler, a commodity intelligence company Kpler, India’s imports of Russian coal rose to new highs in March 2022.
Ritesh Shukla | Getty Images News | Getty Images
India is becoming more hungry for coal. Even as the world shuns Russian goods, the Asian giant is setting its sights on Russian coal – after already buying up its discounted oil.
The European Commission last week proposed banning Russian coal as part of a new round of sanctions against Moscow for its invasion of Ukraine.
However, India’s coal imports to Russia increased in March to levels that have not been seen in over two years according to Kpler, a commodity intelligence company.
According to Kpler’s lead dry bulk analyst Matthew Boyle (CNBC), Russia had imported 1.04 million tonnes of coal in March, which was the highest since January 2020. Two-thirds (or more) of the March volume was likely to have come from Russia’s Far East port, most likely since February’s war.
Vivek Dahar, the director of energy commodities and mining research at Commonwealth Bank of Australia said that the markets believe India and China will increase coal imports from Russia. He also stated in a note last Wednesday.
The week before, India said it planned to double imports of Russian coking coal,This is used to create steel.
Rystad Energy wrote in a note, “The EU bans Russian coal imports at a moment when the international market for coal is already very tight with correspondingly high costs.” The rise in Asia coal demand, which is a result of countries trying to limit imports expensive natural gas, has caused coal prices to soar in the last year.
The main benchmark for coal imported into Europe — the API 2 — saw May prices surge to $300 per tonne last Tuesday, compared to $70 per tonne a year ago, according to Rystad Energy.
A mega trade agreement will be a boon for India’s coal shortage signed with Australia on April 2If the commodity meets the criteria for exemption from tariffs
More than 85% of Australian exports to India will be exempted from tariffs However, this policy will be subject to limitations because Australia isn’t equipped with enough coal to support India’s ever-growing needs.
Despite Western warnings, India is still relying on Russia’s supply chain for resources such as oil and coal, despite being warned by the West.
Samir N. Kapadia
Vogel Group, head of trade
Around 70% of India’s electricity is generated by coal. according to the International Energy Agency’s 2021 India energy outlook report.China is China’s largest importer and consumer of coal. The United States is second in the world.
Russia is sixth in coal production. According to U.S. Energy Information Administration, 54% went to Asia in 2020 and 31% to Organisation for Economic Co-operation and Development (OECD) countries in Europe.
Even though U.S. warnings, Doubling Down
India had very few coal imports from Russia prior to the start of World War II. In fact, Russia accounted only for 2% in India’s total 2021 imports.
Indian Steel Minister Ramchandra Prasad Singh said at New Delhi’s conference, “We are moving toward importing coal from Russia,” according to Reuters. He stated that the country has imported approximately 4.5 million tonnes from Russia for coking coal, but did no indicate when.
“Despite warnings from the West, India continues to lean into their supply chain relationship with Russia for natural resources like oil and coal,” said Samir N. Kapadia, head of trade at government relations consulting firm Vogel Group.
Kapadia stated that it will depend on a currency swap arrangement “to avoid some of the financing problems in the market.” The currency swap agreement is a deal between two central banks to convert currencies. This arrangement was created to increase liquidity and to offer foreign currency funding for domestic banks when there are periods of market stress.
Such a mechanism would allow India to buy Russian energy exports and other goods — even with Western sanctions restricting international payment mechanisms.
Numerous Russian banks already have this ability. SWIFT is an international system connecting over 11,000 members banks in more than 200 countries and regions around the world.
India’s growing coal dependency
According to CBA’s Dhar, India’s dependence on coking coal has increased to around 85 percent.
Although some relief may come from the massive trade agreement that it has signed with Australia earlier this month, even that may not be enough.
Dhar stated that Australia will not be able to provide India with the extra coking coal tonnes required for India’s growing steel production fleet. This is because of limited supply growth.
Last year, India was hit by a coal shortageAs its energy demand rose.
The only way is for Australia’s coking coal exports to shift away from other countries so that India can claim a bigger share — but that’s unlikely given that countries are now considering moving away from Russian coal, according to Dhar.
Dhar stated that “Given the fact that South Korea and Japan are seeking to diversify away Russia (10% global coking coal exports), it is even more difficult to make the case for Australian coal being a significant buyer in the future.”
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