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Thermal Coal World Trade - DIIS

Coal News - Published on Wed, 08 Jan 2020

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Australia’s Department of Industry, Innovation and Science’s Resources and Energy Quarterly December 2019 said “Strong demand and high prices drove growth in thermal coal trade between 2016 and 2018. This growth is forecast to reverse over the outlook period to 2021, with weaker import demand expected to drive a slight contraction in thermal coal trade.


In 2019, thermal coal imports are likely to have risen modestly to 1.2 billion tonnes. The trend for world imports over the outlook period is expected to be slightly downwards. Imports from most developed countries are in decline, as governments phase out coal-fired power generation. China’s thermal coal imports are forecast to moderate in 2020, as domestic output rises and hurried stockpiling ends. Countering these trends, emerging Asian nations are expanding their coal-fired power generation and have seen stronger-than-expected import growth. The net result of these divergent trends is a marginal decline in imports out to 2021.

China’s thermal coal imports forecast to moderate Thermal coal imports into China, the world’s largest importer of thermal coal, have been surprisingly strong in 2019, after import caps in late 2018 affected the amount of coal entering from Indonesia and Australia. In the first ten months of 2019, imports stood at an estimated 210 million tonnes, up 7.7 per cent year-on-year. Imports have been supported by a tight domestic coal market in China, with domestic prices very high relative to imports. Domestic coal production is likely to have grown by about 5-6 per cent in 2019. Producers have been encouraged by relatively high domestic prices and strong demand from both power utilities and industry. Thermal coal demand has been strong, as power utilities raised coal-fired generation to fill the gap left by poor hydro power generation in the year to October and a significant weakening in wind power generation in the September quarter. The Chinese government appears to have relaxed import caps. Higher domestic prices relative to imports have supported import demand. In the longer term, Chinese coal production is expected to grow at a faster pace, further reducing imports. After three years of supply-side reforms, the bulk of capacity closures have largely concluded, and new, more efficient, additions to capacity have and will continue to boost production. China’s railway networks have also been enhanced since 2018, improving the connections between the nation’s coal producing regions and its main demand centres. Policy uncertainty has been and is expected to continue to be a key risk to the outlook. The Chinese government is expected to continue to manage overall import levels to achieve various goals, including balancing domestic consumption and production, stabilising domestic coal prices, supporting domestic industries and reducing air pollution.

Japanese thermal coal imports forecast to gradually decline. Japan is the world's third largest thermal coal importer. Its imports fell by 3.5 per cent in the first ten months of 2019, weighed down by high coal inventories, gradually recovering nuclear output and maintenance shutdowns. Thermal coal imports in 2020 should be buoyed by ongoing outages in Japan's nuclear power sector, including two plants closed for security upgrades. Updates by Japanese power utilities on the availability outlook for 2020 means Japanese nuclear output could drop to 56TWh, down from the 66.6TWh expected in 2019. Longer term, coal (and gas-fired) power generation will be adversely affected by increased competition from nuclear restarts and renewables.

South Korea's coal imports to decline as energy transition accelerates In the first nine months of 2019. South Korea's thermal coal imports declined by 3.7 per cent year-on-year. Imports were weighed down by 3 range of factors, including the return of nuclear power generation, and the temporary closure of several coal-fired power plants. South Korean importers have recently reduced imports of Russian thermal coal because of dust issues. This has seen a lift in imports from Australia. In early November, the Government announced that South Korea will bring 3bout the early permanent closure of six of its older coal-fired power units by the end of 2021. This will remove 2.62 GW of capacity, however, the impact of this will be offset by 3.1 GW of new coal-fired capacity, due to come online before 2021. Since 2018, to improve air pollution coal plants in operation for over 30 years have been unable to operate from March to June. In late November, South Korea confirmed an escalation of that approach, announcing that it will suspend operations at 15 of its oldest and most polluting coal-fired power units from the star of December to the end of February. Power utilities have been preparing for it with some bringing forward planned maintenance from the spring period. Higher utilisation rates by gas-fired plants and the more efficient coal-fired power plants are likely to fill the gap left by the dosed units; estimates suggest about 3-5 million tonnes of thermal coal demand will be impacted by the measure. Beyond 2019-20, the government will conduct annual reviews to decide the scale of coal shutdowns in December-March. Overall. South Korea's thermal coal imports are forecast to fall modestly over the outlook period.

Taiwan's coal imports are forecast to remain steady Taiwan's thermal coal imports have been slightly weaker in the year to date compared with the corresponding period in 2018. and this trend is forecast to continue. While Taiwan's government is seeking to raise power generation from gas and renewables, annual coal imports are expected to remain resilient in the outlook period, hovering at about 80 million tonnes.

India's coal production has declined more sharply than demand Growth in power demand in India in 2019 has been impacted by weaker than expected activity, as tighter lending sees the auto sector struggle. India has also been impacted by the fallout from US-China trade tensions. Annual growth in domestic production of thermal coal recorded sharp declines in the three months to October 2019. Coal India's production recovered to 50 million tonnes in November, still down 4 per cent on October 2018. October's production was 39.35 million tonnes, against a target of 57.17 million tonnes. In percentage terms, this was the highest monthly shortfall in a number of years. Output in September-October was hampered by local community agitations and unrest, and by the monsoon season, which ran for longer than normal and had a heavy impact on production and transport. The prolonged monsoon season has also raised the likelihood that hydro output will be better than expected over the next few months, lowering coal-fired power generation needs.

Domestic coal production is expected to return to strong positive growth in 2020 but is expected to continue to lag consumption growth for some time; import requirements will therefore remain high for the foreseeable future, which is inconsistent with the Indian Government's desire to move to total self-sufficiency in thermal coal. In November, Coal India announced that it had decided to advance, by two years to 2023-24, its target year for achieving an annual production capacity of one billion tonnes. By March 2024, Coal India plans to switch over to mechanized coal handling and loading systems at 35 projects with 3 yearly production capacity of 4 million tonnes and above. This is aimed to reduce transport costs and production process losses.

South East Asia to be a key source of import growth While South East Asian countries are relatively small importers individually, collectively, the region is expected to play a growing role in thermal coal markets over the 2020s. The region has a significant number of new and planned coal-fired power plants. Coal plays a key role in Vietnam's Power Development Plan. With a significant number of newly constructed coal-fired power stations likely to boost coal demand further beyond rising domestic supply, import requirements are likely to rise. Vietnam's thermal coal imports were up 112 per cent on the year in January-October 2019. to 37.47 million tonnes from 17.71 million tonnes. Australia has been the biggest benefactor of this surge in Vietnamese demand, with volumes in the 10 months more than trebling on the year, to 13.58 million tonnes from 4.46 million tonnes.


World exports of thermal coal are likely to be little changed in 2019. After growing by over 4 per cent in 2018, lower exports from the Americas and South Africa were offset by increased supply from Indonesia and Russia. Lower prices are expected to drive a decline in supply from the more marginal producers in 2020. Australia and Russia are expected to be the key sources of export growth, with growth slowing towards the end of the outlook period.

Indonesia's thermal coal exports to soften, but from a high b3se Thermal coal exports from Indonesia, the world's largest thermal coal exporter, continued to grow noticeably in 2019. Exports rose by almost 8 per cent year-on-year in the first ten months of 2019 contributing to weakness in prices in seaborne thermal co3l markets. The rise in exports comes as production surges. Indonesia’s Ministry of Energy and Mineral Resources (ESDM) has revised its coal output target to around 530 million tonnes for this year, up from an initial target of 439 million tonnes. The increase comes after the ESDM granted approvals to several coal mining companies to raise their output this year. Indonesia's new online Coal Sales Verification Module (MVP) went live on 1 November despite late calls for a delay from Indonesian miners. The MVP was created by the central government to raise control over the coal sector by monitoring production and sales activity. A key feature of the MVP is that it will issue a verification report electronically for port authorities and surveyors, which is designed to assist with compliance. The government warned that miners who do not populate the system with the required production data on time will likely face stumbling blocks in processing paperwork required for their exports to sail. Beyond 2019, thermal coal exports are forecast to fall from current record levels. The fall in prices in 2019 is expected to lower exports over the early part of the outlook period. In the longer term, fast growing domestic needs are also expected to weigh on Indonesian exports.

Russia's thermal coal exports forecast to grow. After strong growth in 2018, Russian thermal coal exports have risen at a more modest pace in 2019 — exports were 4.7 per cent higher year-on-year in the first three quarters of the year. Rail and port developments in Russia's east, and the persistently weak Ruble are expected to support ongoing growth in Russia's thermal coal exports over the outlook period.

Colombia's thermal coal exports to remain subdued. In the first ten months of the year. Colombia's thermal coal exports fell by 7.5 per cent year-on-year. A sharp fall in exports to Europe drove the fall, more than offsetting a rise in exports to China, South Korea and India.

Going forward, Colombian exports of thermal coal to China and India are unlikely to climb sufficiently to offset losses in Europe and North America, Colombia's traditional export markets, where thermal coal consumption is shrinking. As a result, exports are forecast to continue to fall over the outlook period.

South Africa's coal exports forecast to remain subdued. Despite production disruptions due to community and union protests, thermal co3l production has grown strongly in South Africa in 2019. A relatively tight domestic market has allowed miners to arrest a fall in profit margins by diverting sales away from weaker seaborne export markets (particularly in East Asia). Between a quarter and a third of the country's output is exported. More than three quarters of South Africa's electricity is currently supplied from domestically produced thermal coal.

The government's Integrated Resource Plan (IRP) 2019 is an energy generation master plan for the nation. The IRP sets out how the nation's electricity will be supplied from now until 2030. and includes plans to decommission some of South Africa's coal-fired power plants. It forecasts 60 per cent of the nation's electricity will still be generated from coal by 2030. With a growing population and rising electricity use, that suggests a relatively strong level of domestic demand for South Africa's thermal coal output. However, miners will remain under government pressure to provide coal cheaply to Eskom, the country's state-owned electricity utility. South Africa's thermal coal exports have declined by around 5 per cent in 2019: modestly higher exports to most of the main South African export markets, such as India and Pakistan, have been more than offset by sharp declines in exports to a number of other destinations, such as other African nations, the Netherlands, Taiwan, Sri Lanka and South Korea.

Low prices to drive down United States' exports. Thermal coal exports from the US have fallen sharply in 2019 in line with lower prices, falling by 29 per cent year-on-year in the first ten months of 2019. Lower exports to Europe, India and South Korea have more than offset the impact of a modest rise in exports to Japan and Latin America. The US coal sector has been impacted by a number of bankruptcies, as lower prices eliminate profit margins and as coal-to-gas switching accelerates in the US power sector coal's share as a source of power generation fell to 23.5 per cent in August from 28.3 per cent a year before. US exports look set to fall further in the outlook period as coal mines shut

World tradeMt1119118211851184
Thermal coal imports 20182019 s2020 f2021 f
South KoreaMt106106105104
Thermal coal exports 20182019 s2020 f2021 f
South AfricaMt78787878
United StatesMt49383530

Notes: s Estimate, f Forecast.

Source: IEA (2019) Coal Information 2019, accessed through the IEA 20/20 Professional Browser, IEA (2018) Coal Market Report 2018; IHS (2019); Department of Industry, Innovation and Science (2019)

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Posted By : Yogender Pancholi on Wed, 08 Jan 2020
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