Indian firms buy 2 million tons of Australian coal sitting in Chinese warehouses

Representative Image (Reuters)

Faced with an acute shortage, Indian companies have reportedly purchased nearly 2 million tons of Australian thermal coal and continue to buy more fuel that is lying in Chinese warehouses for months amid rising tensions between the two countries.

Indian companies are buying coal at $12 to $15 a ton discount to fresh shipments from Australia, a Bloomberg report said.

Coal accounts for over 70 percent of India's electricity output, and utilities account for about 75 percent of India's coal consumption.

Also read: Explained | Why is India facing a coal shortage?

The buyers include cement-makers and sponge iron plants that are using the fuel to compensate for the domestic shortages, the report said.

"The development reflects the extent to which China-Australia relations have soured: China is battling a crippling energy crunch that’s set to get worse as winter sets in, and yet it won’t touch coal from Australia due to a geopolitical squabble," sources told Bloomberg.

China’s decision to ban the purchase of Australian coal due to political tensions left 70 ships and 1,400 seafarers stranded with their cargoes outside Chinese ports in January, the report said.

Moneycontrold could not independently verify the report.

Also read: Explained | Why Europe and China are facing an energy crisis and how it affects India

Coal stockpiles at Indian coal-fired power plants have nosedived. As of September 29, 16 of India's 135 coal-fired power plants had zero coal stocks, according to the Central Electricity Authority (CEA).

Over half of the plants had stocks that would last fewer than three days, while over 80 percent had less than a week's stock left.

Coal India, which produces over 80 percent of India's coal, recently said an increase in global prices and freight costs had led to a curtailment in power production by plants using imported coal, adding to the pressure on utilities using domestically mined coal to ramp up output.