India's coal imports declined for the third consecutive month in August 2025, falling more than 16% year on year to a new 2.5-year low.

India imported 17.15 million tonnes of coal over the month, down 15.16% month on month (MoM) and 16.84% year on year (YoY), according to iEnergy's latest monthly report. This marked the lowest level since March 2023, with both coal and coke imports dropping sharply amid weak demand.

Global economic activities sent complex signals against the backdrop of trade frictions, slowing demand, and shifted policy priorities. Combined with a seasonal lull, these factors dragged India's coal imports to the lowest point in over two years.

Growth trends in major economies and policy adjustments also affected commodity markets. The U.S. recorded 3.8% annual GDP growth in the second quarter, but newly imposed tariffs fueled inflationary pressure, prompting the Federal Reserve (Fed) to deliver its first interest rate cut since December 2024.

Meanwhile, Japan's exports weakened under the tariff impact, and China continued to face headwinds from soft domestic demand and sluggish real estate investment. Although the European Central Bank kept interest rates unchanged, the gap between Europe and the U.S. is expected to narrow following the Fed's rate cut. These factors collectively shaped an international coal market characterized by slow demand recovery and persistent cost pressure.

India's subdued coal imports were mainly attributed to weak power demand, high coal inventories, and rainfall-disrupted industrial activity. It is worth mentioning that demand also diverged across coal grades, origins, and consuming sectors.

India imported 10.16 million tonnes of non-coking coal in August, down 26.46% YoY and 14.94% MoM, while anthracite import climbed 23.47% YoY and 49.28% MoM to 215,000 tonnes. Coal demand from the power sector plunged 52% YoY due to high stockpiles and soft consumption.

In the month, India generated 160.03 TWh of electricity, up 4% YoY while down 3% MoM, reflecting seasonal demand fluctuations. The country's installed power capacity reached 495.6 GW by the end of August.

Of this, thermal power generation stood at 104.5 TWh, remaining flat YoY yet down 1% MoM. While thermal power capacity accounted for just 49% of India's total, it contributed 65% of output, underscoring its continued role as a stable energy source.

Despite steady production in the steel sector, mills favored price-competitive PCI coal as a supplementary fuel, limiting growth in coking coal imports but setting a record high for PCI inflows.

Imports of coking coal reached 4.67 million tonnes during the month, down 4.65% YoY and 24.1% MoM. Imports of PCI coal totaled 2.11 million tonnes, up 21.26% YoY and 6.73% MoM.

India's steel sector is preparing for strong performance in fiscal year 2026, which may lift coke demand, said Sandeep Poundrik, secretary of the Ministry of Steel. He added that the newly revised goods and services tax (GST) will act as a catalyst for steel sector growth, improving supply to construction, automotive, and consumer goods industries. Infrastructure and real estate activities are also expected to recover as the monsoon subsides.

The cement industry increased purchases of petroleum coke due to its price advantage over thermal coal. However, rainfall slowed construction activity, weighing on coal imports from the sector.

In August, India's cement output increased 6% YoY yet declined 4% MoM. The new GST structure is also expected to enhance profitability in the cement industry.

Cumulative coal imports totaled 168 million tonnes in January-August, down 3.32% from 174 million tonnes a year earlier, with the pace of decline expanding 1.76 percentage points compared to July, iEnergy data showed.

India imported 225,500 tonnes of met coke in August, falling 48.09% YoY and 15.27% MoM, while petroleum coke imports grew 33.05% YoY and 12.83% MoM to 1.76 million tonnes.

The steel and sponge iron industries remained the largest coal importers in India in August, at 7.62 million tonnes, a 1.28% YoY drop and a 25.4% MoM decline, as per iEnergy data.

In the month, India's power sector imported 2.95 million tonnes of coal, down 47.75% YoY and 5.5% MoM; cement sector imported 626,200 tonnes, down 7.4% YoY and 49.01% MoM; chemical industry intake 396,300 tonnes, up 33.93% YoY but down 14.39% MoM.

By origin, Indonesia remained India's largest coal supplier in August, shipping 7.14 million tonnes, down 18.71% YoY while up 5.09% MoM. Australian coal arrivals slid 15.43% YoY and 36.48% MoM to 3.25 million tonnes. Imports from Russia rose 20.4% YoY and 23.99% MoM to 3.13 million tonnes, and South African coal imports dropped 45.57% YoY and 53.85% MoM to 1.14 million tonnes.

Looking ahead, India's coal imports are expected to pick up after the monsoon, though overall volumes may remain below previous years' levels. Power demand is likely to rebound alongside economic recovery, but high domestic coal inventories and growing renewable energy output will continue to cap thermal coal imports.

The steel and cement industries are entering their traditional peak season in the fourth quarter. Higher capacity utilization may support demand for coking coal, PCI coal, and petroleum coke, though growth will likely be constrained by domestic economic trends and global steel market conditions. Policies such as import restrictions on met coke will continue to encourage steelmakers to procure more coking and PCI coal instead.