— China Daily
CHINA’S imports of seaborne thermal coal are poised to climb to the most this year in August while those of fellow top buyer India slump to a 3½-year low.
The diverging trends in the world’s two biggest importers of the fuel – used mainly to generate electricity – largely reflect the interplay in their domestic markets of coal production and the rising deployment of renewable energy.
China’s seaborne imports of thermal coal are estimated to rise to 25.63 million tonnes in August, up from 22.77 million in July and the most since December last year, according to data compiled by commodity analysts Kpler.
Imports from top thermal coal exporter Indonesia are on track to reach a five-month high of 16.13 million tonnes, while those from second-ranked Australia are expected to rise for a third consecutive month to 5.84 million.
The increase in China’s imports of seaborne thermal coal at first glance appears incongruous with official data showing thermal power generation easing 1.3% over the January-to-July period, amid rising hydropower and renewable output.
But thermal power generation, which in China is overwhelmingly coal-fired with only a small contribution from natural gas, rose 4.3% in July from the same month a year earlier, according to data released on Aug 15.
At the same time, China’s domestic coal production was slipping with July output of 380.99 million tonnes being down 3.8% from the same month last year and the lowest since April 2024.
Buying interest
The higher thermal generation and lower coal output was enough to spark buying interest from China, while low prices for seaborne thermal coal also helped boost demand for imports.
Indonesian coal with an energy content of 4,200 kilocalories per kg (kcal/kg), as assessed by commodity price reporting agency Argus, dropped to a four-year low of US$40.45 a tonne in the week to July 4.
The stronger buying interest from China has led to a mild recovery in the price, which rose to a two-month high of US$43.33 a tonne in the week to Aug 22.
A similar dynamic is underway in the main grade of Australian coal sought by China, which has an energy content of 5,500 kcal/kg.
This grade ended at a five-month high of US$71.92 a tonne in the week to Aug 22, having risen 9.4% from a four-year low of US$65.72 in the week ended June 6.
China-led factor
The recent rise in prices would appear to be almost entirely a China-led factor, as India’s imports of thermal coal have been weakening.
August arrivals are forecast by Kpler to come in at 9.74 million tonnes, down from 11.99 million in July and the lowest since February 2023. They are also down almost by half from May’s 17.96 million tonnes, which was the peak so far this year.
The slump in India’s thermal coal imports comes as coal’s share in India’s electricity dropped to a five-year low in July, and was down 4.2% from the same month a year earlier, according to an analysis of data from federal grid regulator Grid-India.
At the same time, output from hydropower rose 22.4% and renewables increased by 14.4%, which was more than enough to cover the 1.8% growth in overall power generation.
Rising output
India is also increasing domestic coal output as more private miners start to operate and sell fuel with analysts expecting production in the fiscal year that started on April 1 to rise to around 1.15 billion tonnes, eclipsing the record of 1.05 billion in the prior fiscal year.
What are the key implications of the contrasting fortunes of seaborne thermal coal imports in China and India in recent months?
The short-term takeaway is that domestic coal production remains key to demand and prices in the seaborne market, and that China is still the main driver.
The longer-term implication is that both China and India are installing renewable generation capacity at rapid rates while also increasing domestic coal output.
This makes it more likely that over time their demand for imported thermal coal will trend lower, even allowing for periods of heightened demand when domestic supplies dip or coal-fired generation increases. — Reuters
Clyde Russell is an Asia commodities and energy columnist at Reuters. The views expressed here are the writer’s own.
