China thermal coal prices under pressure, India to gain ground in 2020: S&P Platts

Chinese thermal coal prices are likely to come under pressure in 2020 from rising domestic output, while India makes further gains in its quest to surpass China as the world’s largest thermal coal importer.

India’s increased demand for imports, which is due largely to domestic production and transportation challenges, will likely come at a time of subdued import demand growth from China, where domestic supply is expected to increase 5 per cent next year, China-based energy analyst Guo Chaohui told S&P Global Platts.

Guo expects China’s total coal demand growth to dip to 2.5 per cent in 2020 due to weakening economic activity from 3.8 per cent in 2019, while competition from natural gas and renewables will also rein in coal demand, he said.

Some market sources expect a new tariff system in China from January 1 will provide some support for coal imports and put domestic prices under pressure. China has announced plans to scrap its coal-electricity price linkage mechanism from next year in a bid to keep raw material and electricity prices low.

Despite the potential for an uptick in imports, Platts Analytics projects China’s thermal coal import volumes to fall 1.8 per cent year on year to 215 million tonnes in 2020 due to higher domestic production displacing demand for imported coal at coastal power plants.

With China’s growth expectations tempered, suppliers will likely turn to India, which the International Energy Agency said in its latest World Energy Outlook report will likely overtake China as the world’s largest coal importer by the mid-2020s.

“However, there are uncertainties over how the supply-demand balance in Asia plays out,” the IEA said. “Among exporters, Australia and Russia could take advantage of any new export opportunities, as Indonesian exports decline.”

India’s strong demand for seaborne thermal coal will be encouraged in 2020 due to bottlenecks in rail deliveries and domestic production issues, according to Platts Analytics. “We do not project a considerable increase in Indian domestic coal production in calendar year 2020, increasing only 26 million tonnes  year on year to 735 million tonnes, which should underpin continued import demand growth,” Platts Analytics said.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

Leave a Reply

Your email address will not be published. Required fields are marked *