In a bid to reduce fine dust emissions and control air pollution, South Korea has decided to suspend operations at half of its 58 coal-fired plants during March.
While the exact number of power plants to be shut will be decided as per the country’s power demand, remaining plants will operate at 80% capacity during March.
During Dec-Feb’20, the country had shut about 9-17 coal-fired plants out of the total 60 plants. Two of the oldest plants have been completely shut by the country recently.
South Korea has adopted this strategy of idling coal-fired plants (especially during winters) since last year to combat air pollution. However, the government has decided to increase the number of plants being idled in Mar’21 amid anticipation of lower electricity demand during warmer days in March.
A dent on Australian coal demand?
This is likely to have a negative impact on Australian thermal coal demand and prices as it is the top supplier of thermal coal to South Korea.
In 2020, out of South Korea’s total coal imports of 133.2 mn t, 40% was procured from Australia whereas for Australia, South Korea had been fourth-most preferred export destination in 2020.
No buying by Indian importers
Australian thermal coal prices that had gained some momentum in early 2021 have already started its retreat since last week due to negligible demand from India. The sudden rise in freight rates in the last few days is keeping Indian importers at bay.
The freight for panamax vessel between Newcastle to Indian East coast is currently trending at $23-24/t which was around $16/t a month back.
Although no deals have been concluded in the last two weeks, bids for 5500 NAR Australian high-ash coal are being heard at $52/t, FoB basis while offers are at $56/t. The trade price for the same had touched a high of $58/t in the third week of January.
However, with South Korea idling its coal-fired plants there is likelihood of increased availability in the market which would further pull down the prices of Australian coal.
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