India: US thermal coal demand recovers, but large cargo influx may pressure prices

• Inventories fall in Week 16 after two weeks of steady stock build
  
  
• Supply pressure to rise with 2.5 mnt of US coal headed toward India
  
  

Demand for US thermal coal in India is showing early signs of recovery, but buyers remain cautious and highly price-sensitive. At the same time, a large influx of incoming supply risks putting renewed pressure on prices.

After two weeks of steady stock accumulation, inventories finally drew down in Week 16 as lifting volumes increased. However, a substantial pipeline of floating vessels carrying over 2.5 million tonnes (mnt) of US coal is headed toward Indian ports. The coming weeks will test whether demand can keep pace with supply.

Fragile demand recovery

Between Week 14 and Week 15, stocks grew by nearly 100,000 tonnes (t) as new arrivals outpaced lifting. But in Week 16, the trend reversed. Stocks fell by approximately 43,000 t, while lifting grew to 120,704 t -- the highest weekly offtake in the three-week period.

This suggests that buyers, after weeks of hesitation, finally began moving inventory. The question is whether this momentum will continue.

Fuel shift supports US coal demand

The real driver of US coal demand in India is not power plants -- it is cement makers. And they are increasingly switching from petcoke to US coal.

Petcoke has traditionally been the fuel of choice for Indian cement plants because of its high calorific value and competitive pricing. However, the Middle East war disrupted supply from Saudi Arabia and other Gulf sources, sending petcoke prices soaring.

At the same time, freights from the US Gulf Coast to India eased, making US Northern Appalachian (NAPP) coal more attractive.

A major cement producer recently stated it was not using petcoke at all, instead using US NAPP coal at $140/t delivered to India. By late April, a cement producer reported hearing US thermal around $135/t -- significantly cheaper than petcoke.

According to Nuvoco Vistas' 4QFY26 earnings call, the company's blended fuel cost for petcoke increased from INR 1.84/Mcal to INR 2.01/Mcal. In response, the company is actively reducing petcoke consumption. In the east, petcoke usage is expected to decline by 300-500 basis points. In the north, it is being reduced from 50-60% to approximately 45%.

Large supply pipeline builds pressure

However, the immediate challenge for the market is not demand -- it is the sheer volume of coal already on the water.

As of mid-to-late April, floating vessels carrying NAPP and Illinois Basin (ILB) coal for the retail segment totalled over 1.1 mnt. For the industrial segment, floating volumes are even larger -- over 1.4 mnt -- with deliveries scheduled at ports including KPCL, Paradip, Gangavaram, Kakinada, and Dahej through early June.

This means that even as stocks drew down in Week 16, a massive wave of new supply is about to arrive. Several vessels are already in transit or awaiting discharge, with more scheduled to load at Baltimore and Norfolk.

Cautious optimism in market

Market feedback from traders tells a story of softening prices and cautious buyers.

In mid-April, a trader noted that US thermal coal was being offered at INR 14,500-15,000/t ex-warehouse. Another observed that prices remained high with limited demand.

By late April, prices had started dropping. A trader reported the market was soft and uncertain. Another noted that buyers were focusing on domestic coal, which was being preferred over petcoke due to price levels. A trader summed up: "Prices now are cooling down. Limited buying interest."

Divergence between retail and industrial demand

The retail segment saw a healthy increase in lifting during Week 16, rising to 120,704 t. This suggests smaller buyers are beginning to take delivery. However, with over 1.1 mnt of retail-grade coal already on the water, stocks could surge unless lifting accelerates dramatically.

The industrial segment remains cautious. Large buyers are waiting for prices to fall further and exploring domestic coal alternatives. One trader noted that for 5,500 NAR coal, bids were around $89/t CFR India, but demand had not yet picked up.

Several cement producers have already booked US thermal cargoes. Notable industrial receivers include Ramco, Wonder, JSW, My Home, and UltraTech Cement.

What this means for the market

Week 16 showed encouraging signs: US thermal coal stocks drew down and lifting grew. The fuel switch from petcoke to US coal is gaining momentum.

However, the floating vessel data reveals a wave of supply already on the water. Over 2.5 mnt of retail and industrial coal are en route. If this volume arrives without a corresponding surge in demand, stocks will rebuild quickly, and price pressure will return.

The next two to four weeks will determine whether recent improvements in offtake can be sustained or if the market reverts to oversupply and renewed price pressure.