- May 2020 witnessed a sharp year on year contraction in the arrival of all solid fuels and met coals, from all origins except thermal coal arrivals from USA and pet coke. After ending 2019 on a strong note and growth in imports in Jan-Feb 2020, fuel imports have changed direction dramatically from March due to the Covid-19 induced lockdown and its economic impact.
- This is not surprising as the Covid 19 pandemic rages across the world, it led to the shutdown of India from March 25th and the gradual reopening only from the middle of May 2020.
- Even now as we have past the mid way mark in June, India has barely opened up and consumer confidence and spending remains at an all time low.
- The entire economy was at standstill in April and recovered slowly in May. This is reflected in the Manufacturing PMI number which plummeted to 27 for the month of April and 30.80 in May 2020. The services PMI number fared even poorer with the number coming in at 5.40 in April and recovered to 12.6 in May 2020.
- The total inventory of Coal and Coke (Including PCI, MetCoke, Petcoke and Anthracite) at the various 37 ports in India exceeded 33 Million Matric Tons (MMT) at the end of May 2020
- At the end of May 2020, Coal India had an estimated 78 MMT of inventory at the pit heads and Indian power plants had 49.6 MMT of inventory at the respective thermal power plants across India.
- Coal India Ltd had a forgettable start to the new fiscal year with dispatches falling by 25.4% year-on- year in April following a drop in demand for thermal power because of the total shutdown. At a mere 39.1 million tons, this is the lowest April volume since FY13,
- Production growth remained muted at a time when demand usually rises in the summer months. The company produced just about 40.4 million tons of coal, an 11% year-on-year decline. The monsoon could further impact coal production because of a seasonal decline.
- With the absence of demand, there is no circulation of money and this has affected liquidity. Traders holding stock will try and liquidate their positions at distress prices to repay their LCs in time and this will see a complete collapse of coal prices in the domestic market.
- With pre-existing weak demand for coal in Europe & COVID-19 induced structural collapse in demand for electricity, we anticipate serious supply disruptions in the coming months. With no other alternate market, Jan to May 2020 saw the emergence of spot supplies from Russia, Colombia & Kazakhstan.
- Two of the biggest inventories of U.S. origin NAPP Coal are with Adani Enterprises & Comsol Energy.
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