The global seaborne thermal coal market is expected to grow by around 48 million mt from 2017 to touch 963 million mt in 2018, according to trading house Noble Group at the Coaltrans China conference in Beijing on Tuesday.
The demand is going to be mainly powered by a coal-hungry Asia led by China, India and the rest of eastern hemisphere countries accounting for an increase of 16 million mt, 11 million mt and 14 million mt respectively.
“Thermal power generation in China is up by 8.6% compared to the overall increase in power generation of 7.35%.
While hydro power generation can be expected to improve, China is likely to import more low CV coal from Indonesia,” Rodrigo Echeverri, head of hard commodities analysis at Noble Resources International, said at the Coaltrans China conference in Beijing.
The Chinese demand is expected to stem from the closure of antiquated production processes.
“There is support due to elimination of supply capacity after about 500 million mt of outdated capacity has been [shut] since 2016,” said Tian Hui, vice-president of China National Coal Association.
“It is difficult to say if Chinese coal demand has peaked as yet,” said Kevin Tu, China program manager at International Energy Agency.
There were other contrasting views which emphasized on seaborne volumes remaining flat on diminishing imports into China and India.
“Larger miners [in China] are becoming larger as they have better sales and logistics networks, while the inefficient ones are being closed down. But the total production is not dropping,” said Michelle Leung, Asia basic materials & coal analyst at Bloomberg Intelligence.
According to Leung, South Korea’s imports, which recently increased due to demand from power plants commissioned before President Moon Jae-in took over, is unlikely to sustain because of Moon’s focus on renewables.
About India’s seaborne coal demand, Leung said that the imports will be strained, with state-owned Coal India buying more railway rakes to reliably supply coal to their customers and the Indian government’s plans to allow private mining.
“Coal India will likely show growth in production year-on-year but is likely to lag their targets,” said Echeverri.
The advent of new technology is reducing the cost of generation of solar power and the environmental concerns of using coal are expected to reduce the share of thermal power in the energy mix in the coming years.
“Energy safety is still very important for each country and coal is not likely to be replaceable [fully],” said Hui.
LOW INVENTORIES TO SUPPORT PRICES
The relatively low inventories of coal would ensure that the prices would bottom out earlier than most other commodities, said Echeverri.
“Coal is not alone in the current price correction. With the exception of oil, most of the commodity prices have moved lower,” he said.
“Commodity prices move down together, but find their bottoms at different times [periods],” Echeverri said.
Sea News, April 11