13 Nov 2019
Australia- A sharp plunge in India's electricity demand in October has been matched by falling coal imports, but weakness in vehicle sales and fuel demand hasn't yet showed up in crude oil imports.Power demand in Asia's third-largest economy slumped 13.2% in October from a year earlier, the steepest monthly decline in more than 12 years, according to government data. Coal imports fell to 14.7 million tonnes in October, the lowest since January and the third straight month of declines, according to vessel-tracking and port data compiled by Refinitiv.
Imports were also down 16.9% from the 17.7 million tonnes recorded in October last year, a further sign that India's coal demand is softening in the face of slower economic growth.It's also not the case that imports are being replaced by higher domestic output. In fact the opposite is happening, with state-owned Coal India COAL.NS well behind its production target so far this fiscal year.The world's largest coal mining company did manage to increase output in October from September's six-year low, but the 39.35 million tonnes produced was still down 20.9% from the same month last year, according to data on the company's website.
In the first seven months of the fiscal year that started in April, Coal India has produced 280.36 million tonnes, down 8.5% from the same period last year.The weakness in both coal imports and domestic coal output is not only a reflection of slowing industrial power demand, but also of how renewable energy is making increasing inroads into India's generation mix.India's thermal coal use over the seven months to end-October was steady on a year earlier, compared with average annual growth of 6.3% over the past 12 years, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a report released earlier this month.
And coal generation actually fell by 12,500 gigawatt hours (GWh) in the first seven months of the fiscal year, compared with the same period last year, IEEFA said.In the meantime, generation from all non-coal sources, which include solar, hydro, wind and natural gas, rose by 24,000 GWh, or 8.4%, over the same period, the report said.Given that renewables are increasingly cost competitive against existing coal-fired generation, it's likely that India's electricity growth will continue to be dominated by solar and wind.
However, a recovery in industry will likely have a flow-on effect on coal-fired generation, given that much of the country's spare generation capacity is held in under-utilised coal plants.
The Indian government is expected to roll out new measures to stimulate the economy, and they may well need to, given the ongoing woes of the key automotive manufacturing sector.
Gross domestic product grew by just 5% in the June quarter, its slowest pace since 2013, and the International Monetary Fund has trimmed its growth forecast for this fiscal year to 6.1% from an initial 7%.
Passenger vehicle sales are reported to have fallen 6.3% year-on-year in October, the 12th straight month of declines, although somewhat better than the 23.7% slump in September.
The struggling industrial and farming sectors, along with falling vehicle sales, are crimping fuel demand growth, which rose just 1.4% in the April to September period, according to government data.
The International Energy Agency expects India's crude oil consumption growth to drop to 170,000 barrels per day (bpd) in 2019, the slowest since 2014.
However, so far India's crude oil imports are showing resilience, with Refinitiv estimating that 4.72 million bpd arrived in October, up from 4.16 million bpd in September and 4.36 million bpd in August.
Some of the October arrivals may have been related to a catch-up of cargoes from Saudi Arabia, after the kingdom's oil production was cut for several weeks in the wake of attacks on its facilities in mid-September.
But if fuel demand growth continues to disappoint, it's likely that India's crude oil imports will start to moderate in coming months, joining the softness already visible in coal.
Source : https://www.zawya.com