India took record coal shipments from US producers in the first quarter, providing a growing market for US coal suppliers, according to data from S&P Global Market Intelligence.

In the first three months of the year, India was the largest international buyer of US coal, beating out other top buyers such as the Netherlands, Japan, Brazil, South Korea and Canada. While India has increasingly bought more coal from the US over the last several years, first-quarter shipments to the country jumped to 5.6 million short tons, up 40.9% compared to the year-ago quarter and 43.9% over the fourth quarter of 2022, according to Market Intelligence data.

Export markets could play a more critical role for the carbon-intensive sector as domestic coal power plants retire in favor of more climate-friendly energy resources in the US. India's growing economy makes it a prime candidate for marketing to power producers, steelmakers, cement producers and other industrial customers.

"India is an important market for US exports," said Steve Piper, director of energy research for S&P Global Commodity Insights. "I think that will be a viable market. The price is going to move around, but I think from a volume perspective, it is part of your business plan if you're an exporter."

The market underappreciates the potential for medium-term growth in capacity for burning coal in India's blast furnaces, B. Riley Securities analyst Lucas Pipes wrote in a June 26 note. India is likely to add even more coal-burning capacity at the basic oxygen furnaces used to make steel over the next three years, Pipes said.

"India is almost entirely reliant on seaborne supplies of coking coal," Pipes said.

Overall, US coal exports surged 20.3% to 24.9 million short tons in the first quarter compared to the same period of 2022. It was the highest level of quarterly shipments leaving the country since 2018 and 2019, when exports reached 27.5 million short tons and 25.4 million short tons, respectively. Coal export volumes in 2022 were equivalent to about 14.6% of the US' annual coal production total.

In 2021, India consumed 1.05 billion metric tons of coal, setting an all-time high for itself and surpassing every country's annual consumption except for China, according to the International Energy Agency's coal market update published in July 2022. At the time, the IEA forecast India's coal demand would grow to 1.16 billion metric tons in 2023. In addition to using coal to generate power, India's coal buyers produce cement, steel and other industrial products.

Earlier this year, metallurgical coal producer Ramaco Resources Inc. reported its inaugural sale to India. The eastern US-based producer also recently announced first-time sales in Japan and Indonesia.

"We're certainly seeing more activity in Asia. ... India is increasingly becoming a bigger presence in US coal," Randall Atkins, Ramaco chairman and CEO, said in an interview with Commodity Insights. "I don't know that they'll be the 800-pound gorilla, but they will certainly be the 500-pound gorilla."

Exports to India have accounted for about 33% of metallurgical coal producer Alpha Metallurgical Resources Inc.'s export sales over the last five years, the company said in a May 8 presentation.

"India is going to be strong this year," Jason Whitehead, Alpha president and COO, said on the company's May 8 earnings call. Alpha did not respond to a request for further comment on Indian coal markets.

Pennsylvania-based coal producer Consol Energy Inc. has also been shipping coal to industrial customers in India. Solid demand out of India was partially why the company could sell about 1 million more short tons of coal than originally expected, Robert Braithwaite, Consol's vice president of marketing and sales, said on a May 2 earnings call.

Consol has booked many of its longer-term sales contracts through 2026 with Indian industrial consumers and expects the market "to expand substantially in the coming decade," Mitesh Thakkar, Consol CFO and president, said on the call. A Consol executive was not immediately available for further comment.

Prices may rise

The growth in demand for metallurgical coal from India and Southeast Asia comes a few years ahead of Europe's planned retirement of its basic oxygen furnaces used to produce steel, Pipes noted.

"We believe that, especially during this transition period where India and Southeast Asia are growing and Europe is not yet retiring [basic oxygen furnace] capacity, met coal prices have the potential to consistently exceed expectations," Pipes said.

The US Energy Information Administration projects coal exports to rise 18.9% from 84.8 million short tons in 2022 to 100.8 million short tons in 2023, according to the agency's short-term energy outlook released in early June.

"Our producers are looking for those opportunities to export coal when the market conditions are correct and if the price is right," Emily Arthun, CEO of trade group the American Coal Council, said in an interview.

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