Global seaborne coal demand to grow this year, led by China and India

The global seaborne thermal coal market is expected to grow by around 48 million mt from 2017 to touch 963 million mt in 2018, Platts reported.

The growth will be led by China, India and the rest of the eastern hemisphere countries, each of which will grow by 16 million mt, 11 million mt and 14 million mt respectively.

In India, the seaborne coal demand is going to strain imports, primarily due to 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,” the report quoted Rodrigo Echeverri, head of hard commodities analysis at Noble Resources International, as saying.

In China, thermal power generation is up by 8.6%, as compared to the overall increase in power generation of 7.35%.

“While hydropower generation can be expected to improve, China is likely to import more low CV coal from Indonesia,” Echeverri said.

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“There is support due to elimination of supply capacity after about 500 million mt of outdated capacity has been [shut] since 2016,” said Tian Hui, vice-president of China National Coal Association.

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.

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],” he added.

Uttara is a correspondent with Indoasiancommodities. You can write to her on uttara.malhotra@indoasiancommodities.in.

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