After buying cheap Russian oil, India is now setting sights on its coal

Even as the world shuns Russian goods, India is setting its sights on Russian coal. India’s coal imports from Russia jumped in March 2022 to highs not seen in more than two years, according to commodity intelligence firm Kpler.

India is hungry for coal. Even as the world shuns Russian goods, the Asian giant is setting its sights on Russian coal after already buying up its discounted oil.

The European Commission last week proposed banning Russian coal as part of a new round of sanctions against Moscow.

India's coal imports from Russia jumped in March to their highest levels in more than two years, according to data from commodity intelligence firm Kpler.

Matthew Boyle, lead dry bulk analyst, told CNBC in an email that coal imports from Russia were at the highest level since January 2020. Russia's Far East ports were the source of two-thirds of March's volume.

The Commonwealth Bank of Australia's director of mining and energy commodities research said that markets suspect that India and China may boost coal imports from Russia, offsetting some of the impact of a formalised EU ban on Russian coal imports.

Last week, India said it would double imports of Russian coking coal.

The EU ban on Russian coal imports comes at a time when the international coal market is already very tight with high prices.

Despite warnings from the West, India continues to lean into their supply chain relationship with Russia for natural resources like oil and coal.

The main benchmark for coal imported into Europe was $300 per tonne last Tuesday, compared to $70 per tonne a year ago.

India signed a mega trade deal with Australia on April 2, which will likely benefit the country's coal crunch.

More than 85% of Australian goods exported to India will be free of tariffs. Analysts said that Australia won't have enough coal to meet India's growing needs.

According to the International Energy Agency, coal accounts for 70% of India's electricity generation. China is the first country in the world to import coal.

Russia is the sixth-largest coal producer. More than half of the country's coal exports went to Asia in 2020, while less than one third went to Europe.

Russia accounted for 2% of India's overall imports in 2021.

Indian Steel Minister Ramchandra Prasad Singh told a conference in New Delhi that they were moving in the direction of imports of coking coal from Russia. He said the country had imported 4.5 million tonnes of coking coal from Russia, but did not give a period.

Despite warnings from the West, India continues to lean into their supply chain relationship with Russia for natural resources like oil and coal.

A currency swap line is an agreement between two central banks to exchange currencies and provide foreign currency funding.

Even with Western sanctions, such a mechanism would allow India to buy Russian energy exports and other goods.

Several Russian banks have been cut out of the global system for connecting banks.

India's coking coal import dependency has increased to around 85%.

A mega trade deal it signed with Australia early this month may bring some relief, but it might not be enough.

Australia won't be in a position to supply India with more coking coal because supply growth will be limited.

India was hit by a coal shortage late last year.

Australia's coking coal exports should be shifted away from other countries so that India can claim a bigger share.

South Korea, Japan and Europe are looking to get away from Russia, so it's harder to argue that demand for Australian coking coal will weaken.