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Emerging consumers to support coal trade

While coal demand and imports in Europe, India and China are slowing down, emerging consumers in South East Asia will salvage coal trade, to a certain extent, according to Drewry Maritime Research.

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“A wave of reducing carbon footprints is flowing across the globe,” the London-based firm stated. “Major coal-consuming countries are looking to reduce coal consumption. Many EU countries are now part of the Power Past Alliance, with aim of accelerating the transition away from coal.


“For example, the Netherlands is planning to phase-out coal by 2030 and the UK and Italy intend to do the same by 2025. In India, the government plans to reduce the share of coal in electricity consumption by 10% in the next five years. On similar lines, China aims to reduce the share of coal in the energy mix by 5%-6% over a similar period.”


According to Drewry, the emphasis on curbing coal consumption is now visible, as growth of coal imports has slowed in the last five years, with coal trade growing by a CAGR of just 1.1% in 2012-2017.

Coal imports in Mt (source: Drewry)
Coal imports in Mt (source: Drewry)

Imports by major Asian importers (Taiwan, China, S Korea, India and Japan), which account for more than 60% of global imports, rose by 0.3% during 2012-17, while during 2007-2012 these increased at a CAGR of 12%.


Elsewhere EU’s imports declined steeply during 2012-17, dampening the growth of global trade. While the EU is determined to phase out coal, the declining cost of renewables is making green technology a viable option for developing countries of Asia.


“Nevertheless,” said Drewry, “there exists a group of Asian countries – Malaysia, Philippines, Thailand, Vietnam and Pakistan – where coal consumption is rising steeply. Increasing imports by these emerging consumers is providing support to coal trade.


“The combined coal imports of these countries increased at a CAGR of 9.9% between 2012 and 17. In 2017, their total imports reached 91 Mt, equivalent to 11% of global trade and only 5% lower than EU imports.


“Taking into account planned power projects, coal will dominate the energy mix in next five to 10 years in most of these countries. For instance, in Philippines, 6 GW of additional coal-fired power capacity is set to come online by 2022. Additionally, 8 GW capacity is waiting for approval. In Malaysia 2 GW of coal-fired capacity is slated to come online by 2020.”


Increased consumption by “emerging importers” will support coal imports, said Drewry.


“Both Malaysia and Thailand depend almost entirely on imports for coal consumption,” it stated. “Therefore, there will be an approximately a one-to-one increase in coal consumption and imports.


“In Philippines and Vietnam too, domestic coal production will increase at a slow pace, leaving more room for imported coal to meet the energy requirement. Pakistan holds high untapped potential of coal production.


“However, improving coal production capacity will take time, and over the coming years, imports are likely to increase with rising power consumption.”


In short, Drewry believes that rising coal consumption in all five Asian countries will lift coal imports, and, overall the consultant expects coal imports in this group to increase by 40 Mt between 2017 and 2022.


“Coal imports to these countries will mainly support short haulage trade,” it stated. “However, imports trade in these countries is highly regionalised, with almost all imports sourced from nearby exporters – Indonesia and Australia.


“For all the countries, except Pakistan, Indonesia is the top exporter, whereas Pakistan sources its coal mainly from South Africa. In wake of higher charter rates, these countries will continue to prefer sourcing from close suppliers. Thus, the imports to these countries will provide support to short-haul trade.”


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