There is little doubt that the major contributing factor to the slump in coal imports has been the lockdown of much of India's economy, which started in March and has now been extended in certain areas until the end of June.
India's cases of the novel coronavirus have surged past 180,000 and the associated COVID-19 disease has claimed more than 5,000 lives.
The economy has been hit, with March quarter growth dropping to 3.1%, the weakest in eight years amid expectations that the June quarter may see a reduction as large as 20%.
The slump in economic growth has curbed power demand, which has fallen an estimated 25% during the lockdown.
The drop in demand has been most pronounced in coal-fired generation, which plunged 32.3% in April, while that for solar generation rose 16.9%, according to an analysis of government data.
In these circumstances it's not surprising that coal imports have suffered, and a breakdown by country of origin underscores that it's largely coal-fired generation that has taken the hit.
India's imports from top supplier Indonesia, which typically ships lower-energy coal used for power generation, dropped to 3.6 million tonnes in May, down from 5.24 million in April and 8.34 million in May 2019, according to Refinitiv.
However, imports from Australia, which supplies mainly high energy coal for steel-making to India, were 2.42 million tonnes in May, down modestly from 2.78 million in April, although the decline from last May's 4.38 million was steeper.
It's also interesting to note that imports from South Africa virtually collapsed in May, plummeting to just 695,000 tonnes from 2.44 million in April and 5.02 million in May last year.
While South African coal is used for power generation, it is also widely used in industries, such as cement-making and ceramics, and the collapse in demand fits in with the loss of economic activity during India's lockdown.
COAL DECLINE STRUCTURAL
As India starts to re-open its economy, it would be logical to expect that coal demand will once again pick up, but it's also possible that India's imports are shifting structurally lower.
It's no secret that the government wants to see lower imports in order to save on foreign exchange as well as promote the domestic mining industry.
The latest move in that direction saw India's environment ministry reverse a 2014 decision that placed limits on the amount of ash in coal at some plants.
This meant that domestic coal, which is mainly high in ash, had to be washed in order to lower its ash content, or that imported coal with low ash, such as from Indonesia, was used as a substitute.
By allowing more coal-fired plants to use high ash coal, India will most likely increase demand for domestic coal while trimming that for imported fuel.
Another factor to consider is the increasing availability of renewables such as solar at prices lower than for electricity generated by coal.
This means investment is likely to flow into renewables at a far greater pace than for coal, and it's unlikely that new coal-fired plants based on using imported fuel would be economically viable.
The price of seaborne coal supplied to India therefore may continue to struggle, as can be seen by the decline in Indonesian coal with an energy rating of 4,200 kilocalories per kilogram.
The weekly index for this coal, as assessed by commodity price reporting agency Argus, lost 34% from its peak so far this year of $36.67 a tonne on Feb. 14 to its low of $24.15 on May 8. It has since recovered somewhat to $29.37 in the week ended May 29.
(Editing by Richard Pullin) ((email@example.com)(+61 437 622 448)(Reuters Messaging: firstname.lastname@example.org))