BOOSTING EUROPE’S COAL IMPORTS REVIVAL

This circular cantilever stacker/reclaimer from SCHADE ensures optimum handling of coal in a storage dome.

Richard Scott, Bulk Shipping Analysis

Coal imports into European countries are likely to show another big annual increase in 2022, prolonging last year’s revival. After falling steeply when the pandemic weakened energy use, the recovery trend is being aided by tight energy markets across Europe. But longer-term restraining pressures, reflecting environmental influences, are widely expected to again become more visible in the fairly near future.

Although European coal imports are still well below the levels seen a few years ago, the total volume remains a sizeable part of the world coal market. As a result, numerous cargoes to destinations around the continent are carried by bulk carriers of varying capacities. Related activity at many bulk commodity handling ports throughout the region, both in northern Europe and the Mediterranean is a feature.

Imports into the European Union plus United Kingdom during 2021 comprised about 7% of global seaborne coal trade. Steam coal, used mainly in power stations, comprises the largest proportion received, contributing about three-fifths of the European volume. Coking coal for steel industry use contributes the remainder. Positive influences were seen in both categories last year as the effects of the coronavirus pandemic receded, strengthen ing demand for the output of all industries consuming coal directly or indirectly.

The biggest individual coal importer is Germany, forming two-fifths of the regional volume as shown in the table. Other major individual buyers are France, Italy and Netherlands, together comprising over a quarter. The United Kingdom, formerly a top buyer, is now a minor player, and so is Spain. Closure of many or most coal-fired power stations has been instrumental.

SHAPING THE TREND Europe’s coal consumption and imports are affected by the broad economic trends which have an impact on energy usage, while government environmental and energy policy pressures in recent years often have been a more prominent

influence. Currently, the European economy’s recovery from the pandemic recession is slowing. It has been tempered by adverse effects from the tightening energy market largely caused by natural gas supply shortfalls.

According to the latest outlook for the world economy published by the OECD organization in late September, gross domestic product in the eurozone group of countries could slacken from 5.2% last year to 3.1% in 2022. A further sharp deterioration to almost nil growth (+0.3%) next year is indicated as a possibility.

This bleak prediction for the period ahead emphasizes how the intense inflationary pressures exacerbated by higher energy prices is seen as damaging economic activity in all European countries. Energy demand is likely to reflect the downturn, leading to an overall weakening, but coal seems well placed to partly compensate for gas shortages, particularly in the power generation sector.

In the latest analysis, OECD economists point to “substantial uncertainty about the economic outlook, with significant downside risks”. A further comment is that across Europe “reducing energy consumption and diversifying supply sources will be critical to avoid shortages”. The OECD sees a “full year recession in 2023” in many European countries as a possible outcome.

Coal consumption will depend upon how demand in the main consuming sectors — power stations and steel mills —progresses. Output trends in these sectors are likely to be adversely affected by the background of deteriorating economic activity. But steam coal usage and import requirements seem set to benefit from the energy market’s difficulties which could continue into and perhaps through next year.

IMPORT PATTERNS Coal imports into the European Union plus United Kingdom revived in 2021, reversing almost half of the previous year’s decline. All the principal importing countries recorded increases last year. The 2022 pattern, based on the trend so far and signs of volumes in future months, suggests further large annual increases in most countries. Whether the trend will be sustained through 2023 is not so clear.

In 2021 imports of coal by sea into the EU+UK totalled 88mt (million tonnes), a rise of 18mt or 25% compared with the previous year, based on Clarksons Research data and Bulk Shipping Analysis calculations, summarized in the table. Especially notable growth was seen in Germany and Netherlands. The regional expansion followed a 39% fall in the total to 71mt during 2020.

Within the coking coal segment European imports plummeted to about 27mt in 2020, before rising by a fifth to 33mt last year. In the larger steam coal component a much greater fall to 43mt in 2020 was followed by a 28% rise to 56mt in 2021. Coking coal is an essential ingredient used in the production of steel by the blast furnace/pig iron process. Steam coal, especially the volumes used by power stations, can be substituted by other fuels or renewable energy.

EU+UK coal imports are now a diminished proportion of the world total at 7%, compared with about 12% of global seaborne trade five years ago. This region has been by far the weakest performer among the world’s major coal importers, mainly as a result of tougher European environmental policies than seen elsewhere.

Germany is still the largest coal buyer among individual European importers, even though its annual volume is well below that seen previously. Seaborne steam and coking coal received by German power stations, steel mills and other users totalled 52mt in 2016, comprising 36% of the EU+UK quantity. Last year’s 37mt total saw Germany retaining the biggest percentage share of the overall volume, at 42%. Elsewhere in Europe, Spain’s steam coal imports declined steeply from over 16mt in 2017 to 3mt last year, as shown by the table. In Italy the overall steam and coking coal imports decline over the same period was from 16mt, to 8mt, while Netherlands saw a reduction from 14mt, to 10mt. France experienced a halving of annual overall coal imports to 7mt. In the table category labelled ‘other EU+UK’ annual

France Germany Italy Netherlands 2017 2018 2019 2020 2021 2022* 14.5 12.7 9.8 7.0 7.3 8.0

46.1 44.5 40.2 29.2 37.3 42.0

15.8 14.4 14.1 14.1 10.6 10.9 7.6 4.2 8.4 9.8 10.5 13.5

Spain# 16.6 13.4 6.6 1.9 3.3

4.0 Other EU+UK 38.0 38.8 30.9 20.8 22.3 27.0 Total EU+UK 145.4 137.6 110.7 70.7 88.4 105.0 % change -5.4 -20.9 -38.6 25.0 18.8

* forecast #steam coal source: Clarksons Research, Bulk Shipping Analysis, September 2022

coal imports fell by two-fifths during the 2017 to 2021 period, down to 22.3mt. One component, UK imports, had diminished by the end of the period to 4.6mt, down by a percentage similar to the change in the whole category.

As a geographical extension of the European area, Turkey is also a significant coal importer, receiving large annual volumes exceeding 25mt in recent years. The 2021 total was 25.7mt, similar to that of the previous twelve months and continuing a stable trend. Steam coal mainly for power station use is the chief component, comprising nearly four-fifths.

PROMINENT DRIVERS A broad theme explaining reduced coal usage and imports in numerous European countries in recent years was extensive coal-fired power station closures. Many plants were closed or idled, or their capacity utilization declined. This trend has been attributed by Euracoal, the European Association for Coal and Lignite, to high levels of Emissions Trading System carbon prices which effectively rendered coal uncompetitive against other energy sources.

An accompanying trend was the rapid shift towards alternative energy sources. In particular, increasing availability of renewable energy supplies, especially windturbine generated electricity, was a prominent feature. The other main influence in the past two years was weakening coal consumption caused by the adverse effects of the Covid-19 pandemic on economic activity and overall energy demand, followed in 2021 by rebounding coal demand when economies and their energy markets started to recover as the pandemic receded.

Changes in domestic coal production volumes within Europe, another influence, now has only a limited impact on import demand because this output is relatively small. Closures of uneconomic mines in recent years have been seen. Among coal importing countries, hard coal production is now mostly confined to Poland. Low grade lignite (brown coal) is mined mostly in Germany and Poland, but also in several other countries.

According to Euracoal figures, in 2021 Germany produced 126mt of lignite while hard coal output was nil. Poland’s production was 52mt lignite plus 55mt hard coal. There was also 1.1mt of UK hard coal output from remaining small mines. Elsewhere among EU importing countries domestic production was insignificant.

Consequently coal consumption trend changes have become the main influence affecting European countries’ purchases on the international market. Steel mills’ use of, and import demand for, coking coal remained fairly flat until the pandemic downturn and then revived, broadly reflecting steel production progress. In the steam coal segment, overall energy market changes often driven by government policy decisions are now the biggest influence on coal use and imports. The pandemic caused disruptions and, in 2021 and into this year shortages of natural gas exacerbated by the war in Ukraine have enhanced coal’s contribution.

Based on calculations by independent climate think tank Ember, electricity generation from coal in the European Union during 2021 contributed 15% of all electricity generated, three percentage points below the 2019 proportion but almost a third below the percentage in preceding years. Meanwhile renewables generation from wind, solar, hydro and biofuels has risen strongly.

These changes emphasize trend directions and longer term downwards

pressures on coal use in power stations. Energy usage patterns clearly were distorted by the exceptionally severe economic recession seen in Europe in 2020 which affected coal consumption. Over the following twelve months when a consumption revival was underway, energy market tightness began to have an upside impact on coal. Gas shortages multiplied into 2022 and the positive impact on coal was accentuated, despite a continuing shift towards cleaner energy supplies.

THE ROLE OF POLICIES Within the European Union promoting cleaner energy resources and reducing air pollution is a long-established environ mental policy priority. Cutting greenhouse gas emissions drastically by decarbonizing energy-consuming activities is a central aim. One major focus has been coal-fired power stations, especially large-scale plants, many of which were phased-out. Substitution with gas-fired units, and intensive development of renewable energy — with wind power generation becoming a feature — has been evident.

How much coal is used is affected by policy measures agreed by EU member countries — the Emissions Trading Scheme, air pollution directives and renewable energy targets. The driver is an emphasis on sustainability, mitigating climate change in particular. More attention also has been given to other aspects such as energy security and industrial competitiveness.

Reflecting these influences coal now has a relatively low share of electricity generation in the EU, contributing only around one-seventh. According to energy company BP’s data the principle shares of EU electricity generation in 2021 comprised nuclear (25.3%) and renewables — wind and solar power — (25.2%). The remainder was comprised mostly of gas (18.9%), coal (15.2%) and hydro-electric (11.9%). But the renewables contribution is subject to considerable short-term variations and therefore is not entirely reliable, as it is dependent upon often unpredictable weather conditions.

In a number of European countries coal continues to be part of the ‘baseload’ reliable generation capacity still needed. The EU retains many import-dependent coal-fired plants operating, despite the intention to reduce and eliminate coal’s contribution in the power sector amid decarbonization, probably ensuring a substantial albeit declining steam coal market in the years ahead.

Previously European countries revealed plans to cease power generation from coal by set dates during the period up to the end of the present decade. In France, Italy, Netherlands and the UK deadlines announced were within the 2022-2029 period. In Germany, which has the largest coal-fired plant sector, a later target date of 2038 was proposed for phasing out electricity generation from both hard coal and lignite.

This process has been aided by the falling cost of renewable energy technology. Enhanced wind and solar power efficiency and often lower costs have altered the economics of and perceptions for alternative energy supplies. But in numerous countries closing coal-fired power stations is a major and longer-term procedure. Switching to other energy sources on the scale required to replace all coal-fired capacity is a change which could take many years.

A significant additional policy influence implemented in August this year was the European Union’s ban on coal imports from Russia in response to the invasion of Ukraine, as part of the EU’s sanctions regime. Russian volumes had previously formed a large proportion of regional coal import supplies. This action has resulted in European buyers seeking additional volumes from alternative suppliers around the world.

CONTINUED POSITIVE TREND At the beginning of this year there were widespread expectations of sustained progress in Europe’s economic activity through 2022, continuing a solid recovery from the pandemic recession. Rising demand for the products of coalconsuming industries — electricity generation and steel production in particular — were predictable. However, inflation has proved much greater than foreseen. Energy and especially gas price increases, exacerbated by the war in Ukraine and reduced supplies of gas from Russia, and other inflationary pressures led to tightening monetary policies and slower economic growth, with a return to recession in Europe now forecast.

Nevertheless an exceptionally tight European energy market is benefiting demand for coal. In a recent update the International Energy Agency estimated that last year’s 14% EU coal consumption growth may be followed by a further rise of 7% in 2022. IEA analysts observe that this expansion is being driven by the electricity sector, where coal is increasingly being used to replace gas. This analysis shows that “several EU countries are extending the life of coal plants scheduled for closure, reopening closed plants or raising caps on their operating hours.”

Another increase in European coal imports seems likely to result. The annual seaborne coal volume imported by the EU+UK area during 2022 could increase strongly by perhaps as much as 15–20% from last year, as shown in the table, to exceed the 100mt level. A limited proportion of the rise may reflect higher coking coal imports, although steel production has been subdued amid faltering demand.

Most of the rise envisaged will be additional steam coal for power generation in countries which still have coal-fired generation capacity available and are able to switch energy sources, providing an extended short-term boost.

Looking further ahead to 2023, estimates for Europe’s coal imports are largely speculative because of greater than usual uncertainty surrounding the energy market. Regional economic activity could be depressed, as OECD economists recently envisaged, with average GDP growth in the eurozone close to zero, and in the UK nil, amid the possibility of “more severe fuel shortages, especially for gas”. If this possibility proves realistic, coal will be affected.

Some forecasters tentatively indicate an extended upwards trend. Possible growth of up to 5% in European coal imports next year could result from a continuation of the tight energy markets, before environmental pressures restraining coal use become the predominating influence again and cause a weakening trend to unfold. DCi

Polaris Shipping, one of South Korea’s largest bulk carrier operators, has specified Nippon Paint Marine hull and hold coatings for a trio of Very Large Ore Carriers (VLOC).

Two of the 250,000dwt vessels — Stellar Young and Stellar Way — were applied with the company’s NEOGUARD® and FASTAR® coatings in July at Keppel Subic Shipyard, Inc. and Keppel Shipyard in Singapore, respectively. Sistership Stellar Venture is scheduled to receive the same application in September, at China’s Dalian Shipbuilding Industry Marine Services Co., Ltd. (DSIC).

A NEOGUARD 100 GF (glass flake) abrasion resistant, anticorrosive system, known for its mechanical strength, was selected to protect topsides and boottops. The company’s new nano domain technology antifouling FASTAR I has also been specified for boottops, in addition to the vessels’ flat bottom. The hydrogelcontaining version of the antifouling, FASTAR XI, was selected for the vertical sides to reduce fuel consumption by as much as 8%.

Although FASTAR has yet to be fully benchmarked given the coating’s recent introduction, performance indicators suggest the coating could succeed Nippon Paint Marine’s popular LF-Sea® range as the commercial maritime industry’s antifouling of choice.

Polaris Shipping’s Fleet Support said: “We have been using Nippon Paint Marine’s antifouling technology for both new buildings and existing tonnage since 2010, first LF-Sea, then A-LF-Sea, and now FASTAR. We look forward to positive effectiveness and performance so that it minimizes the risk of fouling when operating in idle conditions. This has a number of environmental benefits.”

Ryan J. K. Kim, General Manager, Nippon Paint Marine (South Korea), furthered that while FASTAR was applied to reduce biofouling and reduced drydock time and improve application times, NEOGUARD was also applied to protect the coating from mechanical damage.

“To reduce the risk of damage to hull coatings when berthing alongside we recommend a glass flake coating to add additional impact protection, from fenders and the like,” he said.

Nippon Paint Marine’s R&D Senior Manager in South Korea, M. G. Choi, said: “It is often thought that expenditure and environment protection are inversely proportional. But FASTAR has been found to reduce costs and protect the environment at the same time. This remarkable antifouling technology shortens the time in drydock for coating applications, reducing costs and off-hire time, allowing ships to return to service quickly and the cost of repairing the shipyard will be reduced. And when they return to service, they find fuel consumption has reduced.”

“Like Polaris Shipping, we are a company that strives to reduce the impact of shipping on the marine environment. The development of FASTAR is very much in line with the needs of our customers and their energy efficiency requirements,” Choi said.

Established in 2004, Seoul-based Polaris Shipping operates a fleet of 16 VLOCs, 13 Capesize bulkers, one VLCC and two LR2 tankers.

Since its official market entry in January 2021, Nippon Paint Marine has applied the FASTAR technology to 155 vessels as of May 2022. Nippon Paint Marine has newly secured three M&R projects from Polaris Shipping this time and will try to further expand the technology globally in the coming future.

ABOUT NIPPON PAINT MARINE Nippon Paint Marine business is a subsidiary of Nippon Paint Holdings, Asia’s foremost paint supplier and the world’s fourth largest coatings company.

With a global manufacturing and distribution network Nippon Paint Marine has been producing marine coatings since the 1880s and is widely regarded as a pioneer in the development hull protection and antifouling paints.

In the 1990s, the organization developed and launched Ecoloflex, the world’s first self-polishing (SPC) tin-free antifouling paint. The first low-friction LF-Sea series followed in 2008 and in 2017 the organization introduced Aquaterras, the world’s first biocide-free antifouling paint. In 2021, Nippon Paint Marine introduced FASTAR the industry’s first antifouling coating with a nano resin structure.

Nippon Paint Marine is accredited to ISO 14001 environmental standards and manufacturers coatings products in line with UN Sustainable Development Goals.

Biofouling management, fuel efficiency and GHG emissions

The importance of maintaining a smooth and clean hull free from biofouling has been outlined in a new report from IMO.

The report ‘Analysing the Impact of Marine Biofouling on the Energy Efficiency of Ships and the GHG Abatement Potential of Biofouling Management Measures’ highlights that a layer of slime as thin as 0.5mm covering up to 50% of a hull surface could trigger an increase of greenhouse gases (GHG) emissions in the range of 25% to 30% depending on ship characteristics, its speed and other prevailing conditions. These percentages can be much higher for more severe biofouling conditions, depending on the type of ships and other parameters.

In addition to analysing the impact of biofouling on ship efficiency and how current industry practices for biofouling management impact ship efficiency, the study presents results from seven scenarios (or anti-fouling strategies) in relation to a reference (“always clean”) of a target vessel (bulk carrier), between dry-docking periods.

These results demonstrate the magnitude of fuel, CO2 and cost savings that can be achieved by keeping this ship as clean as possible from biofouling. Biofouling management is one important contributor to the overall operational efficiency of ships and should be considered by shipowners to achieve IMO’s Carbon Intensity Indicator (CII) rating indicator that measures vessel carbon intensity over time.

The study’s preliminary findings, launched at last November’s COP 26, found that keeping ships’ hulls free from just a thin layer of slime could reduce a ship’s GHG emissions by 25%.

The final report was launched during the The 2nd GloFouling Partnerships Forum and Exhibition on Biofouling Prevention and Management for Maritime Industries (11–14 October), held at the International Maritime Organization (IMO) Headquarters, bringing together international experts from the biofouling sector along with maritime organizations, the industry and academics from around the world.