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Coking Coal World Trade -DIIS

Coal News - Published on Thu, 16 Jan 2020

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Australia’s Department of Industry, Innovation and Science’s Resources and Energy Quarterly December 2019 said “After three years of robust gains, growth in world metallurgical coal trade is expected to be relatively sluggish over the outlook period to 2021. The decisions of the Chinese Government will continue to have 3 significant impact on the market: Beijing's efforts to maintain economic growth, through a series of measures including looser controls on the property market and higher infrastructure spending, will be offset by the impact of import and winter pollution restrictions. Recent low prices are expected to both boost demand and reduce supply from high-cost producers.

World imports

Resilient steel production in China has not been sufficient to offset weaker ex-China seaborne demand for metallurgical coal in recent months. Demand is projected to be subdued or decline marginally among most major importers, including China. 3S world industrial production growth slows and possibly even contracts. European Union steel demand looks set to fall by 3 per cent in 2019. Underlying the bearish outlook is an ongoing slump in the manufacturing sector, weak steel exports, uncertainty around Brexit and the impact of trade tensions between the US and several of its major trading partners. India is expected to emerge 3S the key source of demand growth over the outlook period. China's metallurgical coal imports forecast to ease. With metallurgical coal imports in 2019 already significantly higher on a year-on-year basis, up by 6.1 per cent on 2018, the market is seeing a drop in imports as 2019 ends. Importers scrambled to land cargoes in August-September before Chinese ports reached their calendar 2019 quotas. Chinese demand for metallurgical coal has been driven by robust steel production, which grew by around 8 per cent year-on-year. The Chinese government has acknowledged a challenging external environment, due to the US-China trade tensions. The resolution of those tensions, in part or in full, would likely see a rebound in economic activity but an offsetting fall in government stimulus efforts. In the face of fallout from the US-China trade tensions, the Chinese government appears less intent on enforcing winter production curbs on metal producing operations (enforced in order to limit smog) which would have otherwise potentially lowered economic activity. At current price levels, China's metallurgical coal producers will face significant competition from imports. Imports are forecast to fall back, as steel production eases in line with economic growth.

India's metallurgical coal imports have swung around in 2019 India's metallurgical coal imports have remained at record levels in recent months, well above the 5 million tonne mark. Australia remains the supplier of an overwhelming majority of these imports, with the US and Canada well behind. Government initiatives are underway to diversify the country's sources of metallurgical coal imports, and one such recent outreach resulted in an agreement to co-operate with Russia for the supply of coal for use in plants using the pulverised coal injection (PCI) method. The Indian government is planning heavy infrastructure spending, aiming to bring electricity and housing to all citizens and also build 60.000 kilometres of additional highways, dedicated freight corridors. 100 airports, double its port capacity and build metro networks in 50 cities. Steel production is expected to grow to meet rising domestic consumption. However, the pace at which India's steel sector is able to expand remains uncertain, and presents a risk to the outlook. Slowing economic growth has been impacting on steel demand, and consequently metallurgical coal, however recent stimulatory monetary and fiscal measures are expected to underpin growth in 2020 and 2021. India's metallurgical coal imports are forecast to grow at an average annual rate of 5.2 per cent over the outlook period, reaching 70 million tonnes in 2021. India is expected to overtake China as the world's largest importer of metallurgical coal next year, as the degree of China's self-sufficiency rises and India's import needs grow.

Japan and South Korea's imports forecast to remain subdued Metallurgical coal imports into Japan fell by 2.1 per cent in the first ten months of 2019. Steel output, which fell by 3.1 per cent over the same period, has weakened, as motor vehicle sales/production weakens and construction activity for the 2020 Tokyo Olympics comes to an end. South Korea's imports of metallurgical coal grew by 0.8 per cent year-on-year in the first nine months of 2019 consistent with trends in steel output (which grew by 0.0 per cent over the same period). Metallurgical coal imports by both Japan and South Korea, the third and fourth largest importers, respectively, are forecast to remain subdued over the outlook period. Relatively slow global and domestic economic growth is expected to weigh on demand for steel products in both nations.

Metallurgical coal imports forecast to rise in emerging economies Metallurgical coal imports are forecast to grow in South East Asia, although from a low base. Several blast furnace steel plants are expected to come online over the outlook period, notably in Vietnam, supporting import demand for metallurgical coal.

World exports

Global metallurgical coal exports are forecast to show minor growth over the outlook period, as weak prices induce some production cuts. Australia is expected to lead the bulk of the additions to seaborne supply and to comfortably dominate the seaborne metallurgical coal market. Australia's market share is expected to account for 55 per cent of world exports in 2021 lower than 60 per cent, the share achieved in the pre-Cydone Debbie period. Russia. Canada. Mozambique and Mongolia have all raised their exports and their market share in recent years.

Exports from the United States forecast to remain under pressure. Exports grew substantially between 2016 and 2018, in line with higher prices, and to fill the supply gap created by the loss of Australian supply caused by Cydone Debbie in 2017. However, US exports have declined significantly in 2019 driven by a halving in exports to China. Some US producers have filed for bankruptcy protection as prices fall and profits disappear and even turn negative. Others are believed to be considering eliminating overtime and cutting operations to a five-d3y work week. US miners have relatively high costs and freight rates to Asian markets, and have the 3dded handicap of a strong currency compared with Australia. A resolution of US-China trade tensions could see a modest recovery in Chinese imports of US metallurgical coal.

Mongolia's metallurgical coal exports to China have surged Mongolian metallurgical coal exports have risen by 28 per cent in 2019 and Mongolia has overtaken Canada as the world's third largest exporter. Mongolia is set to exceed Australia as the largest supplier to China in 2019. In November, Beijing ordered tighter controls on imports trucked in from Mongolia, slowing the flow sharply. Growth in Mongolia's metallurgical coal exports is thus likely to slow over the outlook period.

Canada's metallurgical coal exports grew by 5.4 per cent year-on-year in the first nine months of 2019 driven by a sharp increase in shipments to China, South Korea and India. India is seeking higher diversity of supply, after being caught out by weather-related disruptions to Australian supply in 2018. Canada's metallurgical coal exports are forecast to grow modestly over the outlook period, driven by new additions to capacity.

Exports from Russia have levelled out. After strong growth in 2018, Russia's exports of metallurgical coal have been flat in 2019. Stronger exports to Japan and China have been offset by weaker exports to South Korea. Russia is forecast to add another 4 million tonnes to seaborne supply in 2020 and 2021. Growth is expected to be driven by new capacity, rail and port expansions and a weak Ruble.

Mozambique's exports to grow, but headwinds remain. Mozambique currently has two exporting metallurgical coal mines: Vale's Moatize and Jindal Steel's Songa mines. Mozambique has faced a number of headwinds in growing its exports. Mozambique's metallurgical coal exports are forecast to rise modestly, as Moatize ramps up to full capacity, but the outlook is clouded by considerable risks, stemming from transport, quality and community opposition issues. Moatize's owners are aiming for annual production of 18 million tonnes in the medium term.

World trade in metallurgical coal
In million tonnes20182019 s2020 f2021 f
World trade337347355358
Metallurgical coal imports
In million tonnes20182019 s2020 f2021 f
China65686256
India60616770
Japan47464646
European Union 2844434344
South Korea36363636
Metallurgical coal exports
In million tonnes20182019 s2020 f2021 f
Australia179184195199
United States56514543
Canada29313233
Russia26283032
Mongolia26353637
Mozambique68910
 

Notes: e Estimate, f Forecast
Source: IEA (2019) Coal Information; IHS (2019); Department of Industry, Innovation and Science (2019)

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Posted By : Rabi Wangkhem on Thu, 16 Jan 2020
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