NH Weekly Utility 02: Coal Demand Unshakable in India

The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. — Ed.  

In 2022, India produced 860mn tons of coal (+13% y-y), making it the second-largest consumer of coal after China. The produced coal is mainly used for domestic demand, with more than 75% used for power generation.

Portion of nuclear + wind power generation exceeds 50% in Europe

Over Jan 1~7, electricity generation portion by power source in the EU broke down as nuclear 27.1% (+0.4% w-w), coal 13.7% (+1.7% w-w), gas 11.8% (+2.4% w-w), wind 23.8% (-6.5% w-w), solar 2.6% (-0.2% w-w), hydro 14.3% (+0.2% w-w), and other 6.7% (+1.9% w-w). With the end of the Christmas and other holidays, power generation is normalizing upwards. But, with the portion of nuclear + wind power generation having increased to 50.9% following last week, the portion of coal + gas fell to 25.5%.

The week’s key raw material prices for power generation

A look at recent prices (as of Jan 9) of major raw materials for power generation shows: WTI US$74.6/bbl (-3.0%, w-w), New Castle US$393.8/ton (+0.2%, w-w), Northeast Asian natural gas (Japan/Korea Marker) US$27.1/MMBtu (-7.6%, w-w), US natural gas (Henry Hub) US$3.9/MMBtu (-2.0%, w-w), and European natural gas (Dutch TTF) US$23.5/MMBtu (+4.5%, w-w).

India’s coal use continued to rise in December

According to the Indian government’s Ministry of Coal, India’s coal production reached 82.87mn tons (+11% y-y) in Dec 2022, with a cumulative record of 860mn tons (+12.5% y-y) through December. Of the coal produced in December, 79% was used for power generation. India’s coal imports reached up to 16.46mn tons (+19% y-y) in Oct 2022, and accumulated 180mn tons (+11.7% y-y) by October. Total power generation in India was 128.5TWh in December (+14% y-y), an 8% increase through 2022. For reference, the rough portions of power generation in December were 80% coal, 10% renewable energy, 7% hydro, 3% nuclear, and 1% gas/other.

Meanwhile, China recorded 335.93mn tons (+6% y-y) of coal production in Nov 2022, and accumulated 3.37bn tons (+10% y-y) by November. On the other hand, coal imports dropped to 12.29mn tons (-23% y-y) in Nov 2022 and to 45.33mn tons (-42% y-y) cumulatively by November. Both China and India are ramping up their own coal production to meet rising coal prices.