India Gets Pushy with Coal

Dave Forest, Pierce Points (09/08/2010)
"One of the 'drums' I've been banging for awhile is coal exportable to India. The case is pretty clear. India's domestic coal prices are fixed at a level that doesn't make much profit for local miners. The result has been underinvestment and flagging supply.

According to India's Central Electricity Authority, 24 of 84 coal-fired plants across the nation are running at 'critical' coal supply levels—meaning these facilities have less than seven days of coal supply in inventory. That's nearly 30% of India's coal-fired power running on fumes. Even more concerning, 12 of those 24 low-coal plants are at "super critical" levels. With less than four days worth of coal supply.

Some of these plants are suffering from transportation bottlenecks. Rail infrastructure is not sufficient to get the needed amount of coal to site. Many are straight up unable to procure the supplies they need anywhere in the country, which is why the government has been pushing to increase coal imports (particularly through direct ownership of coal mines around the Indian Ocean perimeter).

. . .This is a big tailwind for coal, though not all deposits will benefit equally. There is increasingly a premium being attached to coal assets within India's 'area of influence.' Anything that can easily be shipped via the Indian Ocean is going to get a lot of love going forward."

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