India buying more US coking coal after disruptions in Australian supply

India is buying more US coking coal after disruptions in top supplier Australia, and as US miners seek new markets due to declining demand from America's steel industry, an executive at Xcoal Energy & Resources India said on Monday.

Interruptions to Australian supply have worsened in the past few years, driving Indian steelmakers to seek new sources of coking coal, Durgesh Pathak, Xcoal marketing manager, said. "On the Australian side, there have been a lot of challenges in terms of breakdown at the mines," Pathak told Reuters on the sidelines of the Coaltrans conference in Bali.

"Also Australia is becoming more unpredictable in terms of cyclones," he said. Xcoal, a privately held coal marketing and logistics company, is headquartered in the United States.

 

A fire at coal miner Peabody Energy's operations in the state of Queensland late last year disrupted supplies for three months. And floods in Australia's major coal-producing region in February damaged several rail lines and disrupted shipments.

Cyclone Debbie, which tore into Queensland in the first quarter of 2017, was another "classic example" of the dangers of depending on a single supply source, Pathak said.

"In a matter of a few days, the prices went up by almost 100 percent," he said.

Pathak sees India's demand for coking coal, used in steelmaking, growing by 4 million to 5 million tonnes this year. The growth of India's US coking coal imports, however, will outstrip that growth, rising by 7 million to 8 million tonnes at least, displacing volumes from Australia, he said.

In accessing coal from the United States, Indian producers get access to a wider array of coal grades, he said.

US producers, driven out of their domestic market by sluggish demand from their own steel industry, are also paying the freight differential between the United States and Australia to sweeten the deal, he said.

"The US is eating up the freight differential. Some are not going to pay even $2 more ... It is not economic but it is competitive," Pathak said.

"There is a strong possibility that the participation of US coking coal could be even higher."