It seems the hits just keep on coming for Australian coal exports. On Friday, I reported that the coal market could soon be facing hard times from growing global supplies and lower demand from China. Now, Bloomberg has reported that India plans to build a 327 kilometre rail network that would enable mining of vast untapped coal pits and put an end to the imports of foreign coal:
Coal India Ltd., set to build a $1.4 billion railway link through its three richest mining regions, said the untapped pits will help the world’s second-biggest thermal coal importing nation end overseas purchases.
The 203-mile (327-kilometer) network, to be funded by the company and built by Indian Railways in five years, will free up 300 million metric tons of coal annually in the states of Odisha, Jharkhand and Chhattisgarh, Coal India Chairman S. Narsing Rao said in an interview. Indian power companies pay about 40 percent more than local prices to import 70 million tons of coal, about 20 percent of their annual consumption.
“The railway line can eliminate the need for imports of thermal coal in five years,” Rao said in an interview from his office in Kolkata. “Given the reserves we have, we should not have to depend on other countries for electricity generation”…
“India is doing everything to increase coal production,” said Debasish Mishra, a partner at Deloitte Touche Tohmatsu India Pvt. in Mumbai. “The railway plan needs to be supplemented with speedy approvals and efficient project management.”
India is currently the world’s second biggest importer of coal and accounted for $6,565 million (14%) of Australian coal exports in 2011-12, according to DFAT. If India can pull-off the rail project and free-up these new sources of coal supply, then it would obviously have a detrimental impact on Australian coal demand and prices just as other sources of coal supply are coming online globally.
