The collapse of the Indian Rupee is topic du jour, with those who haven't reduced there exposure to India likely to be trying to do so now. While thermal coal is one of the most exposed to India, demand here is still strong despite the erosion of purchasing power through a very weak currency.
This isn't because the top down picture for power is very good. If anything, slow power generation growth has been one of the key macroeconomic failures which has hindered progress in India. In the YTD, total power generation has grown ~3.6%YoY, although is not much higher than 2011 levels.
But not all parts of the power supply chain are weak. Private IPPs have seen an explosion in utilitised generation capacity, with several large coastal power stations currently producing more power than previously expected. Coal fired generation from IPPs is up ~40%YTD, with many of these new operations running on imported coal.
This hasn't been without difficulty, with the failure to hedge fuel costs reality to fixed wholesale power rates creating loss making ventures that required government intervention to change tariff rates. But while utilities are not making money, they still need to burn a lot more coal to avoid loosing more given the huge fixed costs of these operations.
So the plunge in the rupee isn't sufficient to be bearish on coal, with Indian demand, if anything, supportive of higher coal prices.
