Weak demand to pull non-coking coal consumption lower in fiscal 2021, gradual recovery expected thereafter
Non-coking coal consumption is expected to fall by 6-7% in fiscal 2021 due to a likely decline in coal-based power generation, the largest consumer of non-coking coal, as the slowing economy is expected to see a downturn on account of the COVID-19 pandemic. To be sure, power demand is expected to be lower by 2-4% in fiscal 2021, leading to decline in non-coking coal offtake of Coal India Ltd. (CIL) and Singareni Collieries Company Ltd. (SCCL) by ~2% and ~31% respectively y-o-y for the April-December period of the fiscal 2021.
With a gradual recovery fiscal 2022 onwards on the back of economic revival, non-coking coal consumption is expected to clock a CAGR of 2-3% to 980-1000 million tonnes (MT) in fiscal 2025 from 856 million tonnes in fiscal 2020, driven by growth in coal-based generation at 2.5-3% CAGR over the same period and supported by pick-up in demand from other sectors such as cement and sponge iron. Domestic supply is forecasted to log a CAGR of 4-5% CAGR from 673 million tonnes in fiscal 2020 to 830-840 million tonnes in fiscal 2025. Growth in production will be driven by increase in production from Coal India Ltd (CIL), with new projects sanctioned like Magadh open cast mine (peak rated capacity 51 MT), Amrapali mine (peak rated capacity of 25 MT), and Parasea Belbaid underground mine (peak rated capacity of 2 MT).
