Key Points
India's coal-fired power generation hits record levels in 2024
Domestic coal production limits import needs
Thermal coal prices experiencing significant decline
Power sector shows resilient growth trajectory
Consistent with the robust economic growth in India, the country's coal-fired power generation is rising, outpacing all other sources of energy, the global financial services firm said.
Coal production volumes in India have also been quite strong, limiting the need for Indian power generators to buy from overseas markets. The relatively lower need for imports has provided little support to seaborne coal prices, BofA Securities said.
Data indicates that India's coal-fired power generation was very strong last year -- 2024, and recent investments in power plants suggest that coal consumption will likely hit a record in 2025 again.
"Beyond India and taking the baton from China, other developing economies, such as Vietnam, have emerged in recent years as robust thermal coal importers, a trend that will likely continue for the next 18 months," it said.
Further, the BofA Securities noted that there are some common themes between India and China, which are depressing near-dated thermal coal prices.
While the medium-term demand story is positive, the report noted that Indian coal stocks at power plants are very high as well, with more than 90 per cent coming from domestic producers.
"However, we also see robust capacity under construction in India in coastal areas, hinting at potentially strong seaborne demand for coal in the next two years," said the report.
Overall, global coal prices have collapsed since late November on rising thermal coal inventories in China.
Heading into shoulder season, BofA sees further downside risks to prices in the near term. In China, heightened competition from renewables is displacing coal and curbing the need for imports.
