Things are not going well for Coal India.
Reports this week suggest the major coal producer is struggling with project expansions.
The firm has ambitious growth plans on the table. With the stated aim of increasing domestic coal output from 482 million tonnes this year to 615 million tonnes by 2016-17.
But sources in the company told the press many of the planned projects have made “little headway”. Land acquisition and infrastructure build-outs for coal transport are reportedly the big sticking points.
These problems have been plaguing India for some time. A bureaucratic and often ineffective system has hampered development of the country’s abundant resources.
Which is good news for the global coal sector.
India’s domestic shortfall has made it the fastest-growing thermal coal importer on the planet. Other Asian giants like China, Japan and South Korea are seeing coal import growth stagnate. But India has increased shipments by over 40 million tonnes per year over the last two fiscal years. An incredible 82% leap.
Thermal coal prices have softened considerably lately. So too shares in coal producers. But the situation would be much more dire if it wasn’t for India picking up a lot of slack on the demand side.
In fact, if Indian import growth continues the way it is (which appears likely based on the above) the market may end up a lot tighter than many observers are betting.
This is the time for thermal coal projects in the Indian Ocean sphere.
Here’s to solid demand,
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