India to foot $8 bn for coal, fertiliser, scrap imports

Price outlook for most is moderate or lower compared to last year but import dependence is rising

While the fall in prices of gold and crude oil in recent weeks will help India prune its import bill, coal, fertiliser and steel scrap, among others, will only see more imports, as their prices have moderated. The import bill of the three commodities is projected to go up $8 billion. This could offset the benefit of the fall in gold and crude prices from the trade deficit viewpoint.

Analysts say the price outlook of most commodities is moderate or lower compared to last year, but import dependence has been rising.

Salil Garg Director, Corporates India Ratings & Research, said, "India's coal import in 2012-13 was 135 million tonnes, including thermal and coking coal, and we see imports will increase 10 per cent as demand from power plants is increasing."

Thermal coal prices were in the range of $85-110 a tonne last year and at present are $80. For 2013-14, the price outlook has been lowered. Citi has said the average price could be $89.

In the last two years, import of fertiliser in volumes and value has increased 30 per cent. In 2012-13, urea import was around eight million tonnes, while DAP and MOP were 7.75 million tonnes.

Vaishali Chopra, fertiliser analyst, Rabobank Group, India, said, "Urea remained the preferred choice as a fertiliser, due to its low price for farmers. This trend for skewed demand in favour of urea will continue in 2013, as it remains out of the Nutrient Based Subsidy (NBS). The imports for DAP and MOP will be depressed, as their prices are higher in the retail market."

Prices of DAP and MOP are expected to moderate during 2013-14 but imports will depend on improvement in demand.

Another commodity where the import bill is rising is steel scrap. The reason is falling ore production. The Karnataka ore mining issue was cleared only last month, while Goa mining is on halt.

Sajid Chinoy, India economist, JP Morgan Securities Services, said, "With ore extraction falling sharply, the economy has been forced to import much larger quantities of scrap metal, which have almost doubled from $7 billion in FY10 to $13 billion in FY13."

He says the import bill due to coal will increase by $3.5 billion, fertiliser, $1.5 billion, and steel scrap, $3 billion, in 2013-14.