Output at India's state-controlled coal producer Coal India (CIL) in May fell on the year following a slowdown in coal-fired generation in the country.

CIL — which meets more than 80pc of India's coal requirements — produced 63.5mn t of coal in May, down by 1.4pc or 0.9mn t from a year earlier, but up from 62.06mn t in April. Supplies, including dispatches to utilities and other coal consumers, totalled 64mn t last month, down by 7.8pc or 5.4mn t from a year earlier, and from 64.46mn t in April.

CIL's drop in output last month was in line with sluggish demand from the power sector, which absorbs the bulk of its supplies. India's coal-fired generation, which meets most of its power requirements, stood at 108.82TWh in May, down from 119.54TWh a year earlier, and 113.48TWh in April, Central Electricity Authority (CEA) data show. The production and supplies dropped from a year earlier also because inventories at utilities, as well as at CIL, remained elevated. Combined coal inventories at Indian power plants stood at 60.46mn t as of 31 May, up from 47.86mn t a year earlier, and 56.69mn t as of 30 April, the CEA data show.

The year-on-year drop in production at India's largest coal producer in May might not lead to any recovery in demand for imported coal, although receipts of seaborne thermal coal may have edged higher last month to 17.99mn t, up from 17.7mn t a year earlier, according to data from analytics firm Kpler, likely supported by pre-monsoon restocking. India's thermal coal imports have remained weak since September last year because of an increase in the country's overall domestic coal production.

The outlook for imports appears to be sluggish with the earlier-than-anticipated arrival of monsoon rains, which could support hydropower generation and pressure coal-fired power in the country, further curtailing utility coal demand. India is facing ample availability of domestic coal following subdued power demand during the summer season.

Weak demand from India for seaborne coal comes as China has also curtailed imports because of weak demand and a domestic coal surplus. The weak demand has prompted some Indonesian coal producers to review their production plans, at a time when mining and logistical operations face disruptions due to an extended spell of rains in key coal producing parts of the country. Indonesia is a key source of seaborne coal for the two coal importing nations. Indonesian coal output between 1 January and 30 May reached 285mn t, down by 16pc from 340mn t a year earlier, according to Argus estimates based on data from the country's energy ministry.

The sluggish demand has continued to offset the impact of the drop in output in Indonesia, putting pressure on seaborne prices in recent months. Argus assessed the GAR 4,200 kcal/kg coal market for Supramax cargoes at $44.76/t fob Kalimantan on 30 May, down by 64¢/t on the week, hitting the lowest level since 1 April 2021, when it was marked at $43.94/t.

By Saurabh Chaturvedi