India's Thermal Coal Imports Slump Amid Manufacturing Slowdown

India's thermal coal imports have declined for six consecutive months due to a slowdown in manufacturing activity, increased domestic production, and a higher share of renewable energy. This marks the longest decline since early 2022. Despite a potential rise in demand, imports may not increase significantly.

India's imports of thermal coal, primarily used for power generation, have declined for the sixth month in a row, according to ship tracking data from February. This downturn is attributed mainly to a slowdown in manufacturing activities, affecting the pace of coal-fired power generation.

February's decline marks the longest streak of import reduction since making an eight-month decline in 2022. Manufacturing activity in India, the fastest-growing major economy, has slowed to a one-year low, impacting the demand for seaborne coal and contributing to a global dip in thermal coal prices.

Thermal coal imports by India, the world's second-largest consumer of such coal, fell by 15.3% in February to 12.16 million metric tons. Over a six-month period ending in February, imports decreased by 20% to 77.3 million tons. Enhanced domestic production and increased renewable energy have further reduced the need for imports, with flat coal-fired power generation during the year's initial months.

Looking ahead, coal consumption is predicted to rise due to increased electricity demand in the summer months. However, augmented domestic production may negate the need for imported coal, according to a note from India-based coal trading firm I-Energy.

Thermal coal prices have slightly rebounded following last year's lows, yet they remain over 30% higher than the latter half of the previous decade. This consistent reduction in India's thermal coal imports occurs even as China, the top importer, increases its purchases, though future risks remain, as highlighted by analysts and industry experts.

(With inputs from agencies.)