Fuelling India’s Steel Industry With Foreign Coal

4 minutes, 13 seconds Read
Source: ZE.
Source: ZE

It’s 67 years today that India gained its independence from British Rule. In that time India has seen its population increase threefold, while its economy has risen to ninth strongest in the world.

In terms of energy India is the fourth largest consumer after the U.S., Russia and China, having seen its commercial primary energy consumption increase by a staggering 700% in the last four decades.

Historically, India has always relied on indigenous coal to power its industrious economy.

It has been the most important source of energy for electricity generation; accounting for 55-60% of the country’s needs according to India’s Ministry of Coal. To look at it another way, energy that’s derived from coal in India is about twice that of energy derived from oil, whereas worldwide, energy derived from coal is about 30% less than energy derived from oil (U.S. Energy Information Administration (EIA).

Source: EIA. The commercial power sector consumes more than 75% of the coal (on a side note, household/domestic use of coal – or any energy for that matter – is significantly lower in comparison. According to the Global Tracking Framework Report, a remarkable 300 million people go without access to any electricity in the country, depending instead on firewood and biomass to fuel their needs).

However as the world’s second most populous nation continues to experience spectacular annual economic growth rates, with another 5% forecasted for this year, coal consumption is now surpassing production levels.

Figure 1: Production Vs. Consumption of coal in India, 1980-2012. Source: EIA. Graph created by ZEMA.

As can be seen in figure 1 above, annual consumption in tons has started to significantly outpace production since the early part of the last decade.The black line simply represents the actual difference between the two, showing that India has been consuming more than what they have been producing and that this trend is accelerating.

In order keep its mighty economy powering ahead; India now finds itself looking further afield to source enough coal to fuel future industrial expansion.

According to the state’s Planning Commission, India imported 20% of its coal requirements in 2012. They estimate imports could rise to more than 23% of supply by 2017. These gains are not going unnoticed. Earlier this summer Bloomberg was one of the first report that India will eclipse China as the top importer of coal by 2014.

One of the major drivers for increasing demand in India today is its booming steel industry.

India ranks fourth as the largest steel producer in the world behind China, Japan and the U.S. The Indian Steel Ministry estimates that the rapid rise in steel production will increase by 40% to 110 million tonnes by the end of the decade. In order to sustain this growth, India will need access to more coking coal, which is typically used to generate energy for the manufacturing of steel.

The Indian government forecasts it may need twice as much coal by 2017 or an additional 47 million tonnes each year to meet this demand. Recently the Vancouver Sun newspaper in Canada reported that India has been looking towards British Columbia’s vast coal reserves as a source for feeding its growing demand. No doubt we’ll be seeing more reports beginning to emerge elsewhere in the world.

How India plans to deal with these new sources of coal will be one to watch.

At ZE we’ll be watching too, using our award-winning enterprise data management solution, the ZEMA Suite. ZEMA provides access to required energy and commodity data in India, including data on coal, crude oil, foreign exchange, petroleum products, weather and economic indicators.

ZEMA can help organizations in India, as it does in other parts of the world, to analyze, manage risk and automate the trading process.

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