Amid rising power demand and dearer imported coal sourced from Indonesia, South Africa and other origins, the Pakistan government has approved the import of thermal coal from neighbouring Afghanistan in Pakistani rupee instead of US dollars.
The move is aimed to allow easy imports of thermal coal to generate low-cost electricity in the country, as coal imports from Afghanistan are relatively cheaper compared to other origins. The Afghanistan government has also agreed upon the bilateral trade in Pakistani currency as it is already facing lack of foreign funding, absence of banking channels and non-availability of USD due to U.S. sanctions on the interim government.
Imports made in the Pakistani currency are also seen as saving foreign exchange at a time the country is passing through an economic crisis. As per latest reports, coal imports from Afghanistan for power plants in Sahiwal and Hub in Pakistan are seen as saving around $2.2 billion annually.
According to sources in Pakistan, Afghan high-CV coal (6500-6800 GCV) is available at PKR 47,000/t ($228/t) ex-Pakistan border (without duties and taxes), whereas South African 5500 NAR grade coal is currently being offered at $235-240/t on CFR basis.
The country has been a major buyer of coal from Afghanistan and increased imports ever since thermal coal prices surged since the second half of 2021.
The government has directed authorities to devise an effective mechanism for swift transportation of coal to power plants.
Pakistan’s thermal coal import trends
Pakistan’s thermal coal imports have been on a declining trajectory ever since global prices gained momentum.
During January-May 2022, the country’s imports stood at 5 mnt as against 7 mn t last year.
Over the last few months, imports from Indonesia have taken up a major portion of the country’s total imports, as Indonesian coal prices fell sharply after touching the peak in March 2022 in the absence of Chinese buying interest. This encouraged Pakistani traders to secure supplies from the country.
The Pakistani government has been cutting power to households with up to a fifth of total power generation being offline due to elevated prices of imported coal and LNG.
Shipments from South Africa, however, have seen a staggering decline due to elevated prices on strong European demand.
In the case of Russian coal, only China-backed power plants in Pakistan procure thermal coal from the country, whereas Australian coal is also very costly and has a sprawling market in South Korea, Japan and Taiwan.
According to sources, coal from Afghanistan will make up for a large share of Pakistan’s imports in H2 2022.
To know more about the key drivers in the coal economy join us at India Coal Outlook Conference. CoalMint will be hosting the India Coal Outlook Conference on 3-4 August 2022 at The Lalit, New Delhi, to discuss the key issues pertaining to domestic coal production and supply, the government’s objective of controlling imports and domestic supply gap affecting many industries, the need to increase the purchasing power of Indian steel companies in the volatile global coking coal market as well as issues related to decarbonization of the coal value chain.
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