The ongoing conflict between Ukraine and Russia is projected to have an impact on thermal coal supplies, while direct or indirect sanctions from Western countries are also predicted to raise costs.
International coal prices are currently at a lifetime high of over $400 a tonne. “As a result of Russia’s invasion of Ukraine, there is an expectation of reduced coal supply on the worldwide market, which will drive up prices. A spike in the price of alternative fuels such as oil and natural gas could also be a cause,” said Choice Broking’s Rajnath Yadav – a Research Analyst. Around 20% of the world’s thermal coal exports come from Russia.
“At the moment, pan-India incremental coal productions are meeting incremental coal demand, but more growth in production is required to maintain a required level of inventories at power plants and to serve the non-power sector.”
As a result, while increasing international coal prices pose no threat to the electricity sector, the non-power sector is projected to bear the brunt of the impact.
Despite the fact that India does not buy coal from Russia, the worldwide price increase will have a cascading effect on the price discovery front in the countries from whom it imports. India, according to sources, imports high-quality coal from Indonesia, Australia, and South Africa.
Prithvi Finmart’s Manoj Kumar Jain believes that rising worldwide coal prices will boost import costs.
“Higher coal prices are having direct linkage to the inflation as rising energy prices impact industrial and processing costs,” he said.
Coal supply side shortages (mainly due to under-stocking in the pre monsoon months) and price increases are affecting power generation and growth.
Currently trading at $459 per tonne, with all the global economies opening up (sans geo-political worries), coal prices are seen shooting up towards $478-$505 per tonne in the near-term, said N.S. Ramaswamy, Head of Commodities at Ventura Securities.
“An ongoing energy crunch in Europe and Asia has been driving unprecedented demand for shipments of thermal coal from Australia, and (which) has boosted commodity prices to record levels.”
Of all the sectors, India’s MSME industries are facing the brunt due to coal shortage, Ramaswamy said.
