While India holds massive coal reserves, a 5.2% increase per annum in coal consumption has surpassed domestic production – leading to a widening import requirement.
National Australia Bank analysts point out that under India’s Eleventh Five-Year Plan, the Government’s power ministry is planning to develop seven “ultra mega” coal-fired power plants by 2012. Five of these plants will be located near port facilities – with the intention to operate on imported coal.
“Typical coal consumption for plants of this size is around 12 to 13 million tonnes a year,” NAB analyst Gerard Burg said in his November Coal Market Outlook.
“The imported fuel plants could increase India’s thermal coal imports by around 70 million tonnes."
China will also remain a key driver with the country expected to hold net importer status for all of 2008.
Indonesia will not be able to fill the demand either – as its export growth continues to be limited by domestic production.
“Indonesia’s State Electricity Company plans to rapidly increase coal-fired generation capacity in response to power shortages and rising oil prices," NAB said.
The bank predicted thermal coal and semi-soft coking coal prices to rise by 40% in the 2008 Japanese financial year. Hard coking coal prices are also forecast to rise by around 33% to $US130/t.