Pakistan: Inventory build-up weighs on coal import shipments in May’2020 

Pakistan, one of the key thermal coal importers has recorded a plunge of 28.4% M-o-M basis in its May imports at 1.21 MnT against 0.87 MnT in Apr’20.

While the highest imports have been recorded from South Africa followed by Indonesia, the imports from the latter got halved in May.

Since the start of 2020, Russia has been among the top three thermal coal exporters in Pakistan. However, in May, there was zero export shipment by Russia to the country. On the other hand, for the first time in five months of 2020, about 51,150 tonne coal was booked from Malaysia.

Buyers stock up coal in April

According to the market sources, in April, when the country was under partial lockdown to contain the spread of COVID-19 and imported coal offers touched new lows, the Pakistani buyers had continued their coal buying despite sluggish demand to have the advantage of low-cost fossil-fuel. As a result, there was hardly any major plunge in the country’s thermal coal imports in April when all other countries’ imports recorded a significant plunge.

Imports fell despite increased power demand

Pakistan’s power demand recorded a plunge of almost 25-30% in April whereas in May rapid rise in temperatures and increased industrial and commercial activities due to the easing lockdown caused the country’s power demand to peak at 3200 MW per day, government data reveals.

As Pakistan is completely import-dependent for coal, the fact stated above suggests that in May country’s power sector utilised the coal stocked up in the previous month.

Demand drops from cement sector 

In case of cement sector which is also key consumer of thermal coal, the construction package announced by the government in the first week of April and permission to resume the construction activities during the month had pushed the cement manufacturers to increase their thermal coal imports in April.

However, the impact of the construction package was not felt in May and the country’s domestic cement demand dipped by 38% whereas exports plunged by 25% y-o-y basis.

This decline in sales was mainly attributed to the Covid-19 pandemic, slow activity in Ramazan, and the long Eid holidays, which slowed down overall construction activities in the country and its key export destinations. Subsequently, Pakistan’s thermal coal imports from the cement sector dropped in May.

Outlook

The country has lifted lockdown restrictions in June and it is being anticipated that the industrial and business activities would pick up further during the month, pushing power demand. Whereas in case of the cement sector, country’s exports are likely to improve in June with majority of economies opening up. This improved demand from both sectors is likely to boost the country’s imported coal requirement.

First five months scenario

Qty in MnT

Note: In first 11 months of Pakistan’s fiscal year FY20, from Jul’19-May’20, the country imported 13.2 MnT of coal against 13.5 MnT in the corresponding period of previous fiscal FY19.