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The Coal Crisis Is Hitting Critical Here

Things never look that bad. Until they are.

Like in India's coal sector. Where recently, many analysts have been suggesting that demand is going remain subdued--as with the global sector in general.

But for anyone watching the numbers the last few years, it's been clear major problems are coming in coal supply here. And last week, news emerged showing that the issues in the coal sector have hit full-on crisis levels.

Platts reported that India's main power producer NTPC has been forced to shut down 46% of its coal-fired capacity across the country. Due to insufficient coal supplies arriving at these power plants. Meaning a big loss in total electricity supply--with 16 gigawatts now idled.

The majority of the outages are coming in northern and central India. Where coal demand for power generation is running 1.5 million tonnes per day. While actual delivered supplies have been just 1.3 million tonnes per day recently--due to problems with production and delivery from the country's major coal miner, Coal India.

That's led to some shocking statistics at India's power plants. As of Sunday, 56 of the country's 100 coal-fired facilities were running at "critical" levels of coal supply, with less than 7 days of inventory on hand. And 29 of those plants--representing nearly a third of the total fleet--are at "super critical" levels of less than 4 days' inventories.

The rubber is hitting the road here because of low levels of hydro power generation, following light rainfalls during a weak monsoon season. Causing greater reliance on coal-fired power--and exposing the considerable weaknesses in the supply chain for this sector.

For its part, power generator NTPC is moving to fix the situation. By importing more coal. The company announced last week it plans to increase its thermal coal imports by 63% this coming fiscal year--to a total of 17 million tonnes.

With domestic coal production not looking to rise anytime soon, this could become a familiar pattern for other Indian consumers. At least, if the country wants to avoid a repeat of the national blackouts that took place in 2012.

Here's to critical supplies,

Dave Forest



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