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Thermal coal imports pick up in most Asian buyers as prices moderate

Cheaper prices and rising energy demand are boosting seaborne imports of thermal coal among most, but not all, of Asia’s major buyers of the fuel used to generate power. The world’s two biggest coal producers and importers, China and India, are leading the charge, with March imports expected to hit multi-month highs.

China’s imports of seaborne thermal coal are forecast to reach 26.82 million tonnes in March, according to data compiled by commodity ana- lysts Kpler. This would be the highest monthly total in Kpler records going back to January 2017, and would be 41% above February’s 19.96 million tonnes and 70% more than the 15.81 million tonnes from March 2022.

The major exceptions to the strong imports of thermal coal in Asia are Pakistan and Japan, although the reasons are vastly different. Pakistan’s March imports are expected to be just 142,441 tonnes, according to Kpler. While this is up from February’s 104,046 tonnes, it’s worth noting that the last four months have been the weakest in Kpler data going back to January 2017, and that Pakistan regularly imported between 1.0 million and 1.5 million tonnes a month over much of the past six years. Japan’s imports of thermal coal are expected at 10.16 million tonnes in March, the lowest since November.

Indonesia's Feb trade surplus seen shrinking as imports rise for Ramadan

Indonesia's trade surplus likely fell further last month to $3.27 billion as imports rose ahead of the Muslim fasting month of Ramadan, when consumption typically peaks, a Reuter’s poll showed. Southeast Asia's largest economy has been recording trade surpluses every month since May 2020, but they have narrowed in in recent months due to moderating commodity prices. January's surplus was $3.87 billion.

Indonesia is the world's biggest exporter of thermal coal and palm oil. It is also a top supplier of other commodities, like tin, copper, rubber and nickel products. Export growth in February was seen slowing further to 5 per cent on a yearly basis, compared with the previous month's rate of 16.37 per cent, according to a median forecast of 17 economists.

Meanwhile, February import growth was seen jumping to 9.74 per cent from 1.27 per cent in January. Ramadan in Indonesia, the world's largest Muslim-majority country, will start next week. Faisal Rachman, an economist with Bank Mandiri, said rising imports reflected companies' preparations for Ramadan and post-pandemic recovery of manufacturing activities.

Indonesian thermal coal prices largely stable w-o-w

Indonesian thermal coal prices have changed but slightly over the last week. Low-calorific value (CV) coal prices remained unchanged, while high-CV coal prices dropped by around $4/t. Supplies in Indonesia tightened ahead of Ramadan which began on 22 March, 2023. Also, incessant rainfall in the east and south of Kalimantan have affected coal output.

Most Asian countries such as India and China are heading towards procurement of low-CV Indonesian coal. China and India account for about 50% of total Indonesian exports. Hence a change in Indian and Chinese procurement will result in a change in Indonesian prices and exports.

Thermal coal prices of 4200 GAR coal at Kandla port have been largely stable m-o-m at INR 8,400/t. Indonesia's thermal coal exports increased by 15% m-o-m to 28.14 million tonne (mnt) in February 2023 as against 24.43 mnt in January, CoalMint data showed. China was the largest importer of Indonesian coal at 8.48 mnt in February, up 21% as against 7.02 mnt in January.

Indonesian miners’ credit quality tied to thermal coal for 4 to 5 years more: Fitch

Thermal coal will continue to underpin the credit quality of Indonesian coal-mining companies for the next four to five years, amid a “slow and uneven” phasing out of the fossil fuel in the AsiaPacific, said analysts at ratings agency Fitch Ratings.

ShubhaSethi, a director at Fitch’s Asia-Pacific corporate ratings team, said at a webinar that most coal companies’ plans to diversify away from thermal coal include Greenfield projects that might require more time to finance and execute. And while Indonesia might have sealed a US$20 billion foreign-funded energy transition deal under a Just Energy Transition Partnership (JETP), the deal’s impact will be felt only five to 10 years later.

Sethi cited Indonesian coal giant Adaro Energy’s US$728 million aluminum smelter project as a Greenfield project that would take at least two to three years to execute. The project was announced in December 2022, and sits on a new industrial estate in Borneo. She said that, similarly, Adaro peer Indika Energy was working towards raising non-coal revenue to 50 per cent by 2025.

China leans on coal amid energy security push

Last year, scorching summer temperatures and a drought in China's southwest caused hydropower output to dwindle, leading to power outages. "We will strengthen the basic supporting role of coal (and) take orderly steps to increase advanced coal production while ensuring safety," said the National Development and Reform Commission (NDRC) in a report to the annual gathering of parliament.

China's state planner underlined a greater role for coal in its power supply, saying the fossil fuel would be used to improve the reliability and security of its energy system. Soaring global energy prices following Russia's invasion of Ukraine and domestic supply disruption have prompted Beijing to step up its focus on energy security in recent years.

The world's second-biggest economy relies on coal to generate about 60% of its electricity, but has significantly boosted its use of natural gas and renewable energy in recent years to lower carbon emissions. Fluctuating output from renewable plants, however, has led policymakers to lean on reliable and easily dispatchable coal power to shore up the country's baseload supply. Last year, scorching summer temperatures and a drought in China's southwest caused hydropower output to dwindle, leading to power outages.

China-Australia relations: Chinese buyers snap up more coal as diplomatic relations thaw

China imported US$23.7 million worth of coking coal and US$18.2 million worth of thermal coal from Australia in February, official data showed, after Beijing lifted an unofficial ban on the product that was imposed in 2020.The volume of Australian coking coal entering China reached 72,982 tonnes last month, while some 134,254 tonnes of thermal coal was snapped up by Chinese buyers, according to data released by the General Administration of Customs.

While the imports signal warming relations, the volume is far below the level it was before diplomatic ties took a turn for the worse in mid2020. In February of that year, China imported 3.4 million tonnes of thermal coal and 3.9 million tonnes of coking coal. Chinese imports of Australian coal resumed in February and no year-on-year comparison is available.

This year, however, Chinese buyers have stepped up inquiries about Australian coal with state-run companies showing “renewed interest” due to the quality, price and logistics advantages, according to Harry Huo, the chief editor at The Shanxi-based coal information provider also said “a lot of vessels over two megatonnes” departed Australia in February and were set to arrive in China by March.

Australia

Australia to tighten gas, coal emissions rules

The Australian federal Labor government has secured the support of the Greens party in passing its reform to the safeguard mechanism, which is central to a target of reducing greenhouse gas emissions by 43pc of 2005 levels by 2030.

The Greens backed down on calls to ban all new coal and gas projects but secured an amendment that all new gas developments must have net zero scope 1 emissions. This has derailed the planned onshore wells in the Beetaloo basin and Australian firm Santos' offshore Barossa gas field by increasing cost of development, according to Greens leader Adam Bandt.

Australian Carbon Credit Units (ACCUs) cost around A$38/t ($26/t) on 27 March and will be capped at A$75/t under the scheme. ACCUs peaked around A$57/t in January 2021 before returning to trade between A$25/t and A$35/t since late February 2021, according to the Clean Energy Regulator. EITEs other than coal and gas will be eligible for up to A$1bn in funding, with A$400mn targeted at industries like steel, aluminium and cement that are needed for renewable energy.

Australia's Queensland coal exports at six-year low

Shipments from the four key Queensland coal ports in Australia fell to a six-year low in February owing to flooding and a train derailment but are set to rebound in March. The ports of Hay Point, Dalrymple Bay Coal Terminal (DBCT), Abbot Point and Gladstone shipped 12.37mn t of coal in February, down from a six-month low of 15.45mn t in January and from 14.12mn t in February 2022, according to port data.

The slow start to Queensland coal shipping for 2023 has seen ship queues at the adjacent ports of Hay Point and DBCT remain at an above average 51 as it was in mid-February, but up from 37 in mid-January. The Queue at Gladstone is also longer than normal with 40 vessels waiting at anchor on 14 March, up from 30 on 9 February. This gives the ports an opportunity to ramp

up throughput in March, if coal supply is strong enough

The 55mn t/yr Hay Point, which is operated by BHP Mitsubishi Alliance, had a particularly weak February as it struggled to recover from flooding on delivery pathways in January and worked through some planned maintenance.

Australian Coal Exports Down in 2022, Despite Overall Rise in Seaborne Coal Trade

The seaborne coal market grew by almost 6% during 2022, reversing the negative trend of the previous years. As more countries chose to boost their use of conventional energy, coal was again in high demand. However, Australia’s coal exports were still down last year, mainly as a result of China’s choice of alternative markets for its coal needs. This is expected to change in 2023, as the two countries have mended their relations.

After a slow start in the first quarter, global coal trade has really picked up pace last year, and is now fully back to pre-Covid levels. In the full 12 months of 2022, total global seaborne coal loadings increased by +5.9% y-o-y to 1208.0 mln tfrom 1140.4 mln t in the full 12 months of 2021, although still below the 1275.6 mln t in Jan-Dec 2019. In 3Q 2022, shipments increased again to 317.7 mln t, up +6.3% y-o-y, and just -0.5% from 3Q 2019. In 4Q 2022, loadings were 318.3 mln t, up +13.3% y-o-y from 4Q 2021, and -0.1% from 4Q 2019.

Coal shipments from Australia have drastically affected in recent years by the country being backlisted by Mainland China, previously Australia’s largest customer. That said, Australian exporters have been relatively successful in finding new markets limiting the impact on overall volumes. In 2020, Australian coal exports fell sharply by -7.8% y-o-y to 357.7 mln t, from 388.0 mlntonnes in 2019.

Coal still has an important role to play in South Africa today and tomorrow

In the march to net zero, nations have been criticizing coal for its negative environmental effects: Coal combustion releases pollutants linked to smog and respiratory illness, from carbon dioxide and sulfur dioxide to nitrogen oxides to mercury and lead. On the other hand, coal is an abundant fuel source that is inexpensive to produce and convert into energy. Countries around the world continue to rely on it. That’s certainly the case in South Africa, where the country’s grid system was built around coal.

As the African Energy Chamber’s new report, “The State of South African Energy,” points out, South Africa currently depends on coal for 80% of its power generation. For the people of South Africa, coal is a lifeline. So, yes, I understand the environmental concerns related to coal usage, but they, alone, should not dictate South Africa’s energy decisions. Making a strategic, gradual move away from coal makes sense for South Africa, but to abruptly cease coal usage at this juncture would be detrimental to the nation and its people.

We must be pragmatic about the key role coal plays in South Africa. The chamber’s report does project a decline in coal use, but it will be a slow and steady one. By 2030, we anticipate coal usage to be down from the current 80%, but still hovering around 65%. Clearly, this will still be a large portion of the country’s overall power generation.