Russell: China's thermal coal imports surge as India's tumble
In August, China's seaborne thermal coal imports are expected to reach their highest level this year while India's top buyers slump to a three-and-a half-year low.
The two largest importers of this fuel, which is mainly used to generate electricity, have divergent trends. This is largely due to the interaction between coal production on their home markets and the increasing use of renewable energy.
According to commodity analysts Kpler, China's seaborne thermal coal imports are expected to reach 25,63 million metric tonnes in August. This is up from 22,77 million metric tons during July, and the highest since December of last year.
The top thermal coal exporter Indonesia is on course to hit a five-month record of 16.13 millions tons. Australia, ranked second, will likely see a rise in imports for the third consecutive month.
At first glance, the increase in China’s seaborne thermal coal imports appears to be incongruous when compared with official statistics showing a 1.3% decline in thermal power production between January and July.
According to data released by the National Bureau of Statistics on August 15, thermal power generation in China, which is dominated by coal with a very small contribution from gas, increased 4.3% from July last year.
China's coal production is also declining. July's output was 380.99 millions tons, a drop of 3.8% compared to the same month in the previous year. This is the lowest level since April 2024.
Low prices for thermal coal shipped by sea helped to boost imports.
Argus' commodity price reporting agency Argus reported that Indonesian coal, with an energy content 4,200 kilocalories/kg (kcal/kg), had dropped to a 4-year low of 40.45 a tonne in the week ending July 4.
The price has recovered slightly due to the stronger Chinese buying interest. It reached a two-month peak of $43.33 per ton during the week ending August 22.
The main Australian coal grade sought by China has an energy content that is 5,500 kcal/kg.
The grade reached a new five-month-high of $71.92 per ton during the week ending August 22. This is a 9.4% increase from the four-year-low of $65.72 for the week ended on June 6.
INDIA IMPORTS SLIP
India's thermal coal imports have declined, and it would seem that the recent price rise is almost exclusively a China factor.
Kpler predicts that August arrivals will be 9.74 million tonnes, down from 11.99 million in July. This is the lowest level since February 2023. The total is also almost half of the 17.96 million ton peak in May.
According to Grid-India, the federal grid regulator, coal's share of India's electricity fell to a 5-year low in July and was 4.2% lower than it was a year ago.
The increase in power generated by renewables and hydropower was greater than the overall growth of 1.8%.
Analysts expect that India will also increase its domestic coal production as more private mines begin to operate and to sell fuel. Production is expected to reach around 1.15 billion tonnes in the fiscal period which began on April 1. This would surpass the previous record of 1.05 million tons.
What are the main implications of the divergent fortunes of seaborne coal imports to China and India over the past few months?
Short-term, the key takeaway is that China remains the primary driver of demand and price in the seaborne markets.
Longer-term, both China and India are increasing their coal production while installing rapid renewable generation capacity.
It is more likely, therefore, that their demand for thermal coal imported will decrease over time. This includes periods of increased demand when domestic coal supplies drop or coal-fired power generation increases.
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These are the views of the columnist, an author for.
(source: Reuters)
