Eyes on Asian Coal…

The shift in trade from the Atlantic basin towards the Pacific has been well documented by SSY. European coal demand continues to decline, as highlighted by the recent reports of the closure of the last coal fired power station in the UK, but the prospects of continued demand strength in Asia is coming under question.

Indian monthly coal fired power output fell y-o-y in August (-4.9%) and again in September (-5.8%). This is the first consecutive monthly y-o-y decline since the COVID-19 pandemic and follows 47 straight months of y-o-y growth. Whilst total power consumption continues to grow, the rate of growth has slowed dramatically, from 9.7% y-o-y growth in the first half of this year to just 1.1% y-o-y in Q3.

A particularly wet monsoon, and the associated cooler weather, has been a double blow to Indian coal consumption, both dampening demand from air conditioning and improving hydro power output. The India Meteorological Department reports that rainfall from this year’s monsoon was 8% above the long term average. Worryingly for shipowners they also expect above normal rainfall to continue right through to November. Whilst we lack the official data for hydropower generation in September, there are reports of a 40% y-o-y increase (although this is partly due to very low output in September 2023), and a gain in generation share from 11% in the same month last year to 15%.

Vessel movements data show a similar story for seaborne coal imports, with August imports down slightly y-o-y at just under 19 Mt, and September imports down 23% y-o-y at 19.2 Mt. Imports reached a peak this year in March at 24.3 Mt, with average monthly imports of 22.6 Mt for the first half of the year.

Weakness in India may be a cause for concern with Russian miners – Alexander Novak, Russia’s Deputy Prime Minister, recently announced a Russian desire to increase trade with India in the long-term. Russia exported 23.6 Mt of coal to India in 2023, up from 19.5 Mt in 2022. Not only have Russian exports suffered from the western embargo this year, but also from domestic logistical problems and low global coal prices – Russian exports for Jan-Sep fell to 133 Mt (an average of 14.8 Mt per month), down 13.5% y-o-y. Any hopes of a recovery in Q4 or in 2025 will rest on robust demand from China and India.

Chinese coal imports are a question mark for the seaborne coal market. Despite very high stockpile levels at port (63.5 Mt for thermal coal according to MySteel, down only slightly from the peak of 71.8 Mt in July and 8.1 Mt for coking coal, down from 8.5 Mt at the start of September), Chinese imports have been strong. Official data for August show total coal imports of 45.8 Mt, up 3.4% y-o-y and vessel movements data show September fell only slightly whilst remaining up y-o-y.

The outlook for Chinese demand is highly dependent on policy, however. Whilst new coal-fired power stations continue to be built in China, the pace is slowing rapidly following a sharp decline in new permits (9GW approved in H1 24, down 83% y-o-y), and the demand for coking coal depends on the outcome of the recently announced stimulus.

By William Tooth, Senior Dry Bulk Analyst, Research, SSY.