The recently released Coal in India 2019 report, prepared by the Office of the Chief Economist, outlines that India’s rapidly growing demand for energy presents a golden opportunity for Australia to increase its thermal coal exports to the country.
The report examines the future of thermal coal (also known as steam coal) in India, India’s future import requirements and the implications for Australian exporters.
It also provides an update to a 2015 report on the subject. Since then, India has become the world’s second-largest coal producer and consumer.
As the world’s third-largest energy consumer and second-largest thermal coal importer, India’s energy future is forecast to help shape seaborne thermal coal markets for decades to come.
Minister for Resources and Northern Australia, Matt Canavan, welcomed the release of the report.
“As the highly respected author of the India Economic Strategy to 2035 Peter Varghese AO said this week, there is no market in the world that has as much potential for increased trade with Australia as India. This report clearly illustrates that potential,” Minister Canavan said.
“Australia is already a strong and reliable energy partner for India as it continues its rapid development trajectory and brings its people out of poverty. We can grow this relationship further.”
The Minister said the growth of India’s energy sector is truly astonishing.
“Since 2000, more than 500 million people have been ‘switched on’ to electricity, with coal providing around 44 per cent of India’s energy mix.”
“However, by 2017 there was still 168 million people living in India who had no access to electricity. That is almost seven times the population of Australia,” he commented.
“If we could lift our thermal coal exports to India to the same market share we currently have with China – to just under 25 per cent of their imports – we could export an additional 37 million tonnes of high energy, low ash thermal coal.”
That is the equivalent of three or four new Adani Carmichael–sized coal mines. If this investment occurred in the Galilee Basin, it could open up a new, sustainably-sized coal basin in Queensland.
According to Mr Canavan, based on current average prices for 2019, this could bring in an extra $3.4 billion in export income and provide around $240 million of additional royalties for state governments.
“In line with that, we’d also be looking at potentially creating upwards of 4,000 new jobs for Australians in the coal sector, with these jobs predominantly being in rural and regional areas,” he said.
The report finds that thermal coal consumption is likely to continue to increase in the next decade, and possibly beyond, in order to meet India’s increasing energy requirements.
However, in the longer term, coal demand will depend heavily on the pace of expansion in renewable generation in India.
Another key factor will be the pace of growth in Indian coal production. India has ambitious targets, but faces challenges in its coal sector around approvals, land acquisition, productivity, transport and pricing.
Overall, the report states that the outlook for India’s thermal coal imports is finely balanced. A number of scenarios are possible, and the future for India’s thermal coal imports depends on movements in the balance of India’s future coal production and consumption.
Australia is currently not a significant supplier of thermal coal to India, but opportunities are present. The report discusses the opportunities, but also the barriers, for Australian thermal coal exporters and the Australian mining equipment, technology and services sector.
The Coal in India 2019 Report can be found here.