India continues to import coal from the Russia-a market that is increasingly isolated by sanctions. Data from research consultancies shows that this trend will likely make India’s coal import from Russia in March the highest in more than two years.
If data from consultancy firm Kpler is to be believed, Vessels carrying at least 1.06 million tonnes of coking coal, mainly used for steelmaking, and thermal coal, used primarily for electricity generation, are set to deliver the fuel at Indian ports in March, the highest since January 2020.
India’s sixth-largest supplier of coking and thermal coal, Russia is most likely to offer more competitive prices to Chinese and Indian buyers as European and other customers spurn Russia because of sanctions, traders said, adding that the trade could also be boosted by a rouble-rupee trading arrangement.
Approximately 870,000 tonnes of Russian coal have already been delivered or are expected to be delivered at Indian shores until March 20, the highest since April 2020, Indian consultancy Coalmint says.
If coal was loaded at the Russian port since mid-February, the number would be much higher, as it typically takes about a month for Russian vessels to deliver to India, said Aditi Tiwari, coal market head at Coalmint.
Tiwari added, that the Indian buyers are taking a step back after the SWIFT ban and sanctions on Russia. They are looking out for alternatives from Australia and the U.S.
Several Russian banks have been cut off from the SWIFT secure messaging system that facilitates cross-border payments.
But at least three vessels carrying coal set sail to India from Russian ports after Russia launched its invasion of Ukraine on Feb. 24, according to Refinitiv vessel tracking data and an industry source.
“Indian buyers are still getting coal from Russia into the market here, but are starting to find it increasingly difficult because banks are not willing to open letters of credit,” the industry source said adding that Bankable long-term customers are being handed over coal on a trust basis, while relatively new customers aren’t able to procure coal because of financing issues.
V R Sharma, the managing director of Jindal Steel and Power Ltd (JSPL) (JNSP.NS), said importing from Russia would be difficult unless there is a “rupee-rouble” trade.
India is exploring ways to set up a rupee payment mechanism with Russia to soften the blow on New Delhi of Western sanctions imposed on Russia.
“If rupee-rouble trade is approved, then we can get coal at affordable and cheaper prices from Russia,” Sharma said.
JSPL, Tata steel, Kalyani steels, and JSW Steel are the importers from Russia in March.
One f the major exporter from Russia informed that firms are continuing to supply coal to India, but some issues have begun to surface.
“Tomorrow, if they were to put strict controls on payments, then trade would be organized through buyers in other countries,” he said.