- Asia’s total thermal coal imports see marginal drop
- India’s procurements of Russian coal record a dramatic rise
- China cuts down imports amid higher domestic availability
Morning Brief: The geo-political tensions between Russia-Ukraine, which triggered a sharp rise in global thermal coal prices this year, seemed to have had only a marginal impact on the trade volumes in Asia. This is because coal is still quite integral for power generation in this region.
The total thermal coal imports of major Asian countries, including China, India, Pakistan, Japan, and South Korea, fell a mere 2% y-o-y to 301 million tonnes (mnt) during January-August, 2022.
But if we analyse the trade dynamics, inflows of Russian coal gained strength in India and even South Korea, despite the latter announcing a directive to suspend trade ties with Moscow.
Hot summers drive up India’s imports
India remained the top importer of thermal coal in Asia at 115 mnt in January-August, 2022, with the country’s imports rising 12% y-o-y, as per CoalMint data.
Despite domestic coal production recording a rise of 14% y-o-y in the first eight months of the year, more-than-expected hot summers drove up India’s power demand by 8% this year.
Shipments from Russia and Indonesia marked the highest rise of 126% and 38% respectively. With some initial hurdles post-the onset of war, increased Russian coal started flowing into the domestic market from May this year.
High-CV Russian coal prices were at a 50-60% discount from other-origin coals, making it quite lucrative not only for power utilities but also cement, brick kiln, and sponge iron sectors.
Indonesian supplies increased as the Indian government mandated power plants to import 10% of their requirement between May to mid-August.
Apart from these two countries, imports from Mozambique also recorded a rise with steel major JSPL bringing in its VT1 grade for sponge iron manufacturing.
Japan compensates for Russian coal from Canada
The world’s second-largest coal importer, Japan, saw only a marginal drop in its thermal coal imports by 5% y-o-y to 84 mnt during the first eight months of the year.
However, if we look at the coal trade flow in the country, Russian imports were lower by 32% amid sanctions. The same was compensated by increased imports from Canada which rose by 126% y-o-y. Imports from Australia were up by 6% y-o-y to 57 mnt.
South Korea’s imports from Australia drop
Total thermal coal imports of South Korea were largely unchanged in the first eight months of the year.
But a major alteration was seen amid elevated Australian coal prices that resulted in a 23% decline in coal imports from Canberra.
Australian coal was replaced by shipments from Russia, Indonesia and the US.
In fact, Russian coal imports to South Korea were recorded at 13 mnt, up by 18% y-o-y. This came as higher LNG prices compelled some power utilities in the country to buy cheaper Russian coal, despite the government’s decision to limit reliance on Russian imports.
Increased production pulls down Chinese imports
Amid record-high coal output this year, China’s rank in the global thermal coal trade was third as it recorded a 41% y-o-y decline in imports to 30 mnt as shipments from all destinations fell.
This came as the country focused on reducing its import dependency and increased domestic production. China’s coal production went up by 11% during January-August, 2022 to 2.93 billion tonnes.
If we look at trade dynamics, Russia and Indonesia have been the top two thermal coal sourcing destinations for China for the last two years, after the ban on Australian coal.
However, in 2022, imports from these two countries also recorded a substantial drop as China’s power demand took a hit due to the resurgence in Covid cases and subsequent lockdowns and weak industrial activities.
Pakistan’s imports fall by 33%
Islamabad’s thermal coal imports fell by 20% during January-August to 8 mnt as a depreciating currency and elevated thermal coal prices deterred its buying appetite.
While Pakistan’s imports from its top destination, South Africa, fell by 52% y-o-y, the same from Mozambique and Indonesia recorded a rise of 171% and 45% respectively.
This came as coal from these origins were available comparatively cheaper against South Africa and their specifications were suited for the power and cement sectors.
Outlook
In the near term, strong winter restocking demand has again lifted coal buying appetite in Asia. Chinese power utilities are making overseas bookings in Indonesia, besides Russia. Japanese utilities have signed long-term deals with Australian miners to get supply for the rest of 2022, while South Korea is seeking coal from across the world at favourable prices. Indian buyers are seen opting for cheaper Russian imports, as long as its availability persists, while limiting exposure to high-priced material from other sources. Experts believe that the changed dynamics are here to stay even in the long run.
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