India is taking steps to cover any disruption in coal imports from Russia, as increased sanctions on Moscow after the invasion of Ukraine threaten to curtail key energy exports.
India's federal coal ministry is assessing the "effect of potential zero imports" from Russia, a senior government official said. The exercise is part of a broader assessment initiated by the office of prime minister Narendra Modi to evaluate the impact of a sharp drop in overall imports from Russia on the Indian economy. Several ministries — including coal, petroleum and natural gas, commerce and steel — are expected to suggest ways to minimise the impact of a potential squeeze in shipments from Russia.
Higher domestic output and some increase in imports from other origins can "fill the gap," the official said, adding that India's thermal coal imports from Russia are relatively small. Russian thermal coal accounted for just 3mn t or 2.3pc of the 133mn t India imported in 2021, according to shipbroker Interocean.
Russian coal supply concerns were exacerbated after several countries in Europe, North America and Asia-Pacific decided to exclude some Russian banks from global financial messenger service provider Swift. The US and EU sanctions announced to date do not target Russian energy exports and the general intent is to preserve this exemption. But disconnecting banks from Swift may render previously issued energy trade carve-outs null, a senior US official said late last week.
"Loading of Russian coal has almost stopped at the moment because of uncertainty over payments given the sanctions," a market participant said, adding that overall freight costs will also increase after adding on war premiums for any shipments from Russia.
Higher domestic supplies
India aims to boost domestic output and supplies and is working on a mid- to long-term plan to slash imports from all origins, including Russia.
Domestic supplies to Indian utilities, the main thermal coal consumers, rose by about 23pc from a year earlier to 63.22mn t in January. The coal ministry has been working to raise output from captive blocks allotted to industries, in addition to boosting supplies through state-controlled Coal India and Singareni Collieries.
India's thermal coal imports in January fell to the lowest level since June 2019, weighed down by increased domestic supplies, a ban on Indonesian coal exports for January and uncertainty about the price outlook in the international market exacerbated by Russia's invasion of Ukraine.
Several Indian buyers have taken to the market sidelines given the recent price volatility. Argus last assessed Indonesian GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) coal on 25 February at $78.74/t fob Kalimantan. The price hit a historic high of $154.21/t fob Kalimantan on 22 October 2021, up from an historic low of $22.40/t on 11 September 2020.
