Pakistan’s thermal coal imports have recorded a surge of 26% on m-o-m basis from 0.86 mn t in May’20 to 1.09 mn t in Jun’20.
While on y-o-y basis the same has increased by 8% (1.01 mn t recorded in Jun’19), vessel-line up data maintained with CoalMint reveals.
Cement sector records the highest jump
Sector-wise, thermal coal imports from cement sector has recorded a noticeable rise of 37% m-o-m in Jun’20 at 0.34 mn t.
This can be attributed to the gradual pick-up in the construction activities post further easing of COVID-19 led lockdown restrictions and resumption of work after month-long Ramzan festival and Eid holidays in May’20.
In case of coal imports from power sector, no major change was observed in Jun’20 m-o-m basis and the same stood at 0.41 mn t.
Imports from Indonesia show a remarkable rise
Country-wise, the highest imports were recorded from South Africa at 0.87 mnt (up by 23% m-o-m) followed by Indonesia at 0.21 mn t (up by 108% m-o-m) in Jun’20.
Pakistan’s coal imports from Indonesia surged significantly during the past month amid limited buying interest from China (Indonesia’s top export destination), that subsequently compelled Indonesian sellers to explore alternative Asian coal-consuming markets like Pakistan.
Sudden absence of Russian coal
An interesting fact observed is Pakistan which had procured thermal coal from Russia in the first four months of 2020 (Jan-Apr about 1 mn t in total) has suddenly stopped its imports from Moscow starting May’20.
Now the key reason for the same as cited by the reliable sources is the recovery of thermal coal demand especially from its two traditional importers, Turkey and Germany (post lifting of lockdown restrictions), where Russian suppliers are aggressively competing with Colombian coal.
Pakistan’s coal imports fall in FY20
During fiscal year FY20 (Jun’19 to Jul’20), Pakistan’s thermal coal imports fell by 1.52% y-o-y basis and stood at 14.3 mn t which is not a dramatic plunge, indicating the limited impact of COVID-19-induced lockdown announced in the country in Mar’20.
South Africa and Indonesia continued to remain the top two coal suppliers of thermal coal to Pakistan in FY20 contributing to 91% of the total imports. In the last fiscal the percentage contribution of both the countries in Pakistan’s total coal imports stood at around 94%.
Continuing the trend in FY20, power sector remained the top user of imported coal followed by cement sector.
CoalMint Analysis: Mixed outlook for Pakistan’s coal imports
Amid the uncertainity due to global spread of COVID-19, we have analysed few factors that are implying mixed outlook for Paksitan’s coal imports in FY21.
The factors listed below can lead to increased thermal coal demand and its imports in the ongoing fiscal:
- In its budget announced last month, Pakistan government has reduced the customs duty on coal imports, from 5% to 3%, which will promote imports of coal in the ongoing fiscal
- Along with this, the country’s government has raised customs duty on imports of clinker and cement to 35% which means that there will be increased domestic production of cement, promoting thermal coal demand.
- In case of power sector, with the easing of lockdown restrictions and business and industrial activities picking up, power consumption will also rise and so does thermal coal requirement from the sector.
However, few things that can dampen the country’s cement demand and subsequently thermal coal requirement are:
- Lack of an increase in government spending from FY20 levels in the budget announced
- Delay in the start of low-cost housing schemes
- A concurrent slowdown in exports especially from Afghanistan due to increasing spread of COVID-19 in the country
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