India could become new home for discounted Russian coal amid volatile prices

India is likely to import more thermal coal from Russia in the near term to take advantage of discounted offers amid elevated seaborne pricing and disrupted trade flows, market sources told S&P Global Commodity Insights March 30.

Global trade flows had been heavily disrupted in the wake of Russia's invasion of Ukraine, as buyers in Europe appeared unwilling to risk purchasing fresh Russian cargoes and instead looked further afield to replace these tons.

This left market participants speculating as to where these Russian volumes would find a home, with most agreeing that India could be a likely destination given that Russian coal would likely be offered at a significant discount and Indian buyer's price sensitivity.

Sources said Russian coal producers are offering their fuel to Indian traders and end-users at a discount to global coal prices. However, discussions over shipping and payment for the material have been a hindrance in concluding deals so far.

Traders said the low-CV coal is offered at a discount of about $5/mt to the Indonesian coal price, or a discount of $2-$3/mt to the Indonesian index. Indications for Russia's 5,500 kcal/kg NAR were heard at $200/mt CFR India and for 6,000 kcal/kg NAR at $250/mt CFR India.

In comparison, Indonesian 5,900 kcal/kg GAR FOB was assessed at $209/mt whereas the Newcastle 5,500 kcal/kg NAR FOB price was assessed at $194.95/mt FOB on March 29, according to S&P Global data.

Shipping risk

However, traders stressed that these were preliminary indications and prices were open for negotiations as there were numerous other factors to consider rather than just price discounts.

"Shipping companies don't want to go to Russia to load the coal so buying on an FOB basis is not being discussed so we have to see if they are able to ship," a Singapore-based trader said. "Secondly, payments are also difficult because they are asking into Swiss accounts and even the timing of payment is not clear, whether payment will be done after delivery or when ship leaves the Russian border."

According to estimates by market sources, India imported about 7 million mt of thermal coal from Russia in 2021, up from 6 million mt in 2020. The estimates also suggest that India imported 138,446 mt of coal from Russia in January-February this year, down 54% year on year.

Earlier in the week, India's minister for steel Ramchandra Prasad Singh said India would look to increase its imports of coking coal from Russia, despite the ongoing situation, which had sources in the thermal coal market speculate that this could also pave the way for more imports of thermal coal.