How will global energy market volatility influence India's non-coking coal imports?

• Ample inventories, soaring prices to keep buyers largely on sidelines
  
  
• Summer spike in power demand may not prompt import push
  
  
• Buyers may turn to US coal amid disruptions to pet coke supply
  
  

Morning Brief: India's non-coking coal imports edged down by 4.5% y-o-y to 147 million tonnes (mnt) in April 2025-February 2026 (11MFY'26), as per provisional data with BigMint. Shipments from Indonesia and South Africa declined y-o-y, dragging down overall volumes.

However, will the downtrend continue, considering the US-Iran conflict, which has disrupted the passage through the Strait of Hormuz and played havoc with oil and gas exports from the Persian Gulf?

With natural gas and crude oil prices shooting up sharply, thermal coal has also been impacted, amid concerns that rising gas prices will push buyers to shift to the more affordable, easily available fossil fuel.

This, coupled with uncertainty around Indonesian production curbs, has propelled global benchmarks higher. Consequently, Indian portside prices of both Indonesian and South African thermal coal surged to three-year highs in the first week of March, driven by rising export offers and freights.

However, despite tightening availability of crude oil and gas, India is unlikely to significantly increase its thermal coal imports immediately, though coal demand will undoubtedly strengthen. This is because of two key reasons.

Comfortable supply expectations lessen import demand

So far, ample inventories have kept import demand subdued. Several buyers of South African thermal coal hold 1-2 months of inventory, though availability at certain ports remains tight due to earlier logistics disruptions in South Africa.

Meanwhile, overall coal stocks at power plants were at around 54 mnt on 9 March, adequate for nearly 24 days at the present rate of consumption. Coal India's pithead stocks also remain higher y-o-y at 121 mnt on 9 March 2026 against 107 mnt on 1 April 2025.

Consequently, buyers have adopted a wait-and-watch approach, with most unwilling to match the elevated offers floated by sellers.

Auctions by Coal India also indicate comfortable supply and muted demand. During April 2025-February 2026, only 47% of the quantity offered was allocated, with a 37% premium over notified prices. This was lower in February, at 35%.

Soaring prices dissuade buyers

Rising thermal coal prices, bunker costs, and freights are likely to deter price-sensitive Indian importers. As of 5 March 2026, FOB RBCT offers for 5,500 NAR were heard around $100-110/t, while 4,800 NAR offers were heard around $80/t FOB.

As per BigMint's assessment, coal vessel freights from Richards Bay (South Africa) to Paradip (India) increased by $6/t since end Feb to $21.6/t on 10 March 2026, lifting delivered cargo costs.

Similarly, on 6 March, prices of Indonesian 5,800 GAR coal increased by $2.35-2.4/t, while 4,200 GAR coal increased by a sharper $4-4.5/t. Meanwhile, 3,400 GAR coal prices rose moderately by $0.8-0.9/t. Supramax vessel freights from East Kalimantan to Navlakhi rose by $3.7/t since end Feb'26 to $18/t as on 10th Mar'26.

Imports may be strictly need based as per quality and blending requirements. However, some concerns remain.

Scorching summer may trigger coal demand spike

India is set to experience severe heat waves during March-May, with temperatures in northern and southern peninsular India already at above-normal levels. A key factor behind lower imports in 11MFY'26 was the milder summer and a prolonged monsoon, which had reduced cooling demand.

With a harsh summer, power consumption is set to surge, necessitating a ramp-up of operations by coal-based utilities. Coal-fired generation remains the backbone of India's power grid, accounting for around 70% of India's total power output, despite accelerating renewable energy capacity additions.

However, imports by power plants fell 25% y-o-y to 39 mnt during April 2025-January 2026 compared to 52 mnt earlier, suggesting an overall reduction in import-reliant power generation.

Moreover, gas shortages may lead to a shift to electricity usage, especially for heating purposes. This has become evident in how domestic consumers are increasingly buying induction cooktops to cope with reported shortages of LPG cylinders, according to reports. Such a shift would also lift power demand and, hence, coal consumption.

Similarly, industrial users requiring gas for heating purposes and facing curbs on consumption could also turn to electricity, provided necessary infrastructure is in place. However, this would be a comparatively slower transition.

Tightening pet coke supply could push buyers to US NAPP

The supply of pet coke, primarily used in cement production, is also likely to be impacted, which could again boost coal demand. Domestic pet coke production accounts for around 70% of consumption, with the rest dependent on imports.

Since pet coke is a by-product of refining heavy crude, higher crude prices and limited availability of it will increase refinery feedstock costs and raise pet coke prices. As for imports, Saudi Arabia supplies around 20% of Indias intake.

As of 12 March, imported pet coke offers rose sharply by around $20-25/t w-o-w to $150-155/t CNF India due to higher crude oil prices, elevated freights, and logistical disruptions linked to the ongoing Middle East conflict.

These led to cautious buyer sentiment, with some shifting to US North Appalachian (NAPP) high-calorific value (CV) coal as a substitute fuel, as it carries a comparable calorific value and lower logistical risk. Others buyers have begun evaluating greater use of domestic coal blends if pet coke prices remain elevated.

Outlook

Overall, BigMint expects India's thermal coal imports to be limited in March and, most likely, April, as India has adequate domestic coal reserves and buyers are unwilling to pay the current higher prices and freights. However, imports are not likely to drop very sharply, as specific quality requirements (Indian coal suffers from high ash content) will prompt continued sourcing of overseas-origin coal.

It is also to be noted that Indonesian coal, which is the mainstay of Indian imports, remains in short supply due to uncertainty over government's production quotas. As such, there has been a sharp fall in Indonesian exports, with vessel line-up data suggesting that shipments in early March averaged roughly 0.79 mnt per day compared with a longer-term average of about 1.3-1.35 mnt per day since 2024.