India Ratings (Ind-Ra) has said that growth of coal consumption in India may remain tepid as plant load factor of thermal power plants (PLF) is likely to drop in the current fiscal. It has estimated that prices for the benchmark Newcastle coal with 5,500 calories of energy value will hover between $50 per tonne and $60 per tonne between 2018 and 2022.
The rating agency further said that given domestic coal availability likely to increase, thermal coal imports may decline by 15-20 million tonnes annually over the next two-three years and government policies in large seaborne trade participants and persistent substitution to renewable energy are likely to have a significant influence on coal prices. However, it also pointed that India’s domestic coal production is all set to increase on account of government efforts to reduce imports. The higher target is partly to be met by production in coal blocks fraught with clearances issues.
Ind-Ra believes investment in new coal projects is likely to remain subdued globally due to gloomy long-term demand prospects. Many top global suppliers may not invest in raising output, creating a strong floor for prices. It also pointed that higher-than-expected volume ramp-ups by large global miners and proliferation of renewables, major downward revision in royalties or taxes, and major decline in global economic activity may pose a downside risk to assumed prices.