It's amazing when you watch things set up perfectly.
For months, I've been writing about India's surging coal demand. Which should see the nation's imports of thermal coal rise by about 50% this fiscal year.
Amid this rapid expansion, there's been one factor keeping a lid on global coal prices: Indonesia.
Indonesian production of thermal coal has grown almost in step with Indian import demand. Making this the go-to source for Indian coal importers. But news this week suggests that's about to change. Potentially setting us up for the final act in the Indian coal boom.
The Indonesian government announced last week it will limit coal production for 2014. Setting an output target of 397 million tonnes.
This is extremely significant. Because that number is actually about 6% less than the 421 million tonnes of coal Indonesia mined in 2013.
Sources on the ground have suggested that this should lead to slowed growth in Indonesia's exports. Factoring in existing coal stockpiles, imports might rise slightly in 2014--but only by about 10 million tonnes above 2013 levels.
That's probably not going to cut it when it comes to satisfying burgeoning coal demand in India. Indian imports are on pace to grow by 50 million tonnes during the current year.
A loss of supply from Indonesia would thus leave Indian buyers in the lurch. Forcing them to scramble for supply elsewhere.
Coal projects in South Africa may benefit immensely. That nation is one of the only major coal producers positioned for export to India. During January, South Africa's Richards Bay Coal
Terminal sent 28% of its export shipments to the "South Asia" region that includes India.
Significantly, India's largest coal miner--Coal India--announced late last week that it has signed a new deal targeting South African coal. The firm inked an agreement with the South African Department of Trade and Industry to explore "mutual prospects" in the coal sector. With one of the stated goals being "acquiring mining concessions".
Judging from the numbers, we could see some big deals here as Indian buyers attempt to lock down much-needed supply. Also look for India to be very active anywhere else they can find coal around the Indian Ocean sphere.
Here's to the final act,
By Dave Forest