India: Why cement plants are buying more coal while power plants are holding back

• Cement demand rises - shift from petcoke to thermal coal driving imports
  
  
• Power demand weak - high stocks and low demand delaying buying
  
  

India is often discussed as a single coal market, but the reality is more complex. Two major sectors are moving in opposite directions. The cement industry is aggressively switching to thermal coal, creating a new source of demand. Meanwhile, the power generation sector is holding back, with high inventories and unseasonal weather reducing the urgency to buy. Understanding this two-speed market is essential for any supplier looking to sell into India.

Cement sector: Rapid shift

Indian cement manufacturers have been traditional users of petroleum coke, or petcoke, as a fuel. But the recent spike in petcoke prices, driven by Middle East supply disruptions, has made this fuel uneconomical. In response, cement makers are pivoting to high-calorific value thermal coal.

The shift is visible in actual cargo movements. Russian high-calorific value coal has been sold to Indian cement plants for April shipment at prices between $118 and $119/t CIF. These are substantial purchases, indicating a genuine change in procurement strategy. Buyers are looking at coal from the United States, Russia, South Africa, and Colombia as alternatives to petcoke.

Power sector: Holding back

The power generation sector tells a very different story. Coal stocks at Indian power plants stood at 59.55 mnt in mid-April, sufficient for more than 19 days of consumption at current burn rates. This is a comfortable inventory level that gives plant operators little reason to rush into the market.

In fact, 13 domestic coal-based power plants and seven imported coal-based power plants were operating with what are termed "critical stocks." While this sounds alarming, it often reflects logistical inefficiencies rather than genuine shortages. Some plants may have low stocks because coal is stuck in transit, not because it is unavailable.

Unseasonal rainfall has also played a role. Early April rains have capped electricity demand, reducing the need for coal-fired generation. Power plant operators are content to wait, watching weather forecasts and inventory levels before committing to new purchases.

Implications for suppliers

This two-speed market creates opportunities and challenges for coal suppliers. The cement sector offers a growing market for high-calorific value coals. These buyers are price-sensitive but have shown a willingness to switch fuels permanently if the economics make sense. Suppliers who can offer consistent quality and reliable delivery may capture lasting market share.

The power sector, by contrast, is a tougher sell in the near term. High inventories and moderate demand mean that utilities are in no hurry. They can afford to wait for better prices or for clearer signals about summer demand. Suppliers targeting this segment may need to offer competitive pricing or longer-term contract terms.

For the Indian market as a whole, the divergence between cement and power demand means that average figures can be misleading. Overall coal imports may look stable or even strong, but the composition of that demand is shifting. Suppliers who understand these nuances will be better positioned to serve the Indian market effectively.