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Sentiment in the thermal coal market is nearly as poor as it gets right now.

The mood has been further dampened this week by price cutting from Chinese coal producers. With sellers slashing prices in an attempt to clear out inventory.

That's led to an almost complete loss of appetite for imports into China. With buyers simply adopting a "wait and see" posture--looking for domestic supplies to get even cheaper.

But amid all the negativity, the data shows that the fundamentals for the global market are still strong. Driven by major supply issues looming in one part of the world: India.

Data released this week by the Press Bureau of India reveals that the supply-demand situation is growing worse here. With power plants across the country simply not being able to obtain all the coal they need to keep operations going.

The chart below tells the story. Showing coal deliveries by major producer Coal India to power users, as a percentage of total contracted volumes.

The numbers here suggest a growing supply crisis. For the most recent fiscal year (2013-14), for example, Coal India committed to deliver 412.3 million tonnes to power users. But was only able to come up with 353.82 million tonnes--resulting in a contract delivery rate of just 86%.

coal volumes from india

And the numbers show that trend of under-delivery is only getting worse. In May of this year, Coal India was only able to deliver 84% of the 35.92 million tonnes it had contracted to power plants. During April, the delivery rate came in at just 82%.

That's a large and widening gap between supply and demand across the country. With flagging production at existing coal mines, and problems in starting up new output increasingly pushing coal users toward imports as a go-to source.

That trend is going to continue for the foreseeable future. Which is why news emerged this week that India's power companies are aggressively seeking coal mining acquisitions in South Africa and Indonesia. Watch for more moves on that front over the coming months.

All of this remains a major bullish force for the global coal market. We'll see when surging import demand here starts to have an effect on international pricing.

Here's to meeting commitments,

Dave Forest
Web / @piercepoints / Facebook

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