Russell: The Big Three Asian thermal coal producers look healthy while others are pale

Asia dominates global thermal coal markets, but the future looks increasingly divided between the robust domestic markets of the three heavyweights China, India and Indonesia as well as a slowly fading seaborne industry.

In recent years, the three countries have increased their coal production rapidly to meet the rising demand for energy.

Outside of these three nations, Australia, Russia, United States, and South Africa are the main exporters of seaborne products.

While the domestic thermal coal market in China, India, and Indonesia will likely grow in the coming decades, this cannot be said of the seaborne market.

This week, the CT Asia conference (formerly Coaltrans Asia) held on Bali, Indonesia, was a clear example of this divide.

Speakers from India and Indonesia presented a rosy picture of the future of coal consumption, going as far as to suggest new domestic uses of the fuel such as the gasification of coal to produce chemicals.

Analysts present at the event also predicted that China, which is responsible for 60% of the coal produced in the world, would continue to use this more polluting fuel to reduce its reliance on imported fossil fuels, such as crude oil or liquefied gas (LNG).

China's coal production, all grades included, will reach a record of 4,04 billion tons by 2024. This is according to official statistics, and has doubled since 2006. The output may reach a new record in 2018, with the production of 3,17 billion tons for the first eight-month period up 3% compared to the same period the previous year.

India's production exceeded 1 billion tonnes for the first in 2024. With the expansion of the private mining blocks, it is estimated to reach between 1.2 and 1.4 billion tons in the coming years.

Indonesia's coal production also reached a record in 2024, with 836 million tonnes. This was higher than the government's target of 710 millions tons as miners took full advantage of record Chinese imports.

The production of the largest economy in Southeast Asia is expected to fall this year. This is largely due to the fact that China's imports have fallen amid increased domestic production and an increase in renewables like solar and wind.

Import Replacement

The two largest buyers of seaborne coal, China and India are also the biggest miners, and both have policies that aim to maximize domestic production and minimise imports.

Imports are unlikely to drop to zero but they will be reduced as domestic coal production increases and infrastructure for moving it improves.

Seaborne thermal coal exporters have other concerns besides China and India.

Japan and South Korea have been reliable markets for high-energy coal, but their demand is likely to decline in the coming years.

Japan restarts nuclear plants, builds renewables like solar and could further be constrained by LNG. This is expected to become cheaper in 2027, dragged by a new wave of supply from Qatar and United States.

In a presentation Tuesday, S&P Global Commodity Insights Analyst Pritishraj showed predictions that coal will drop from 28% of Japan’s electricity production in 2025 to only 9% by the year 2050.

South Korea also plans to increase nuclear generation and, similar to Japan, will be able burn more LNG instead of coal if LNG prices fall as expected.

Some areas of seaborne thermal coal are showing signs of growth, including Vietnam, Thailand, and Malaysia.

According to Kpler's data, Vietnam's seaborne thermal coal imports reached 43.33 millions tons in 2024. This was a new record.

The pipeline of coal-fired power plants is likely to slow down, causing them to plateau.

Exporters of thermal coal by sea are facing a major problem: the lack of new coal-fired power plants outside China, India and Indonesia.

Global Energy Monitor reports that these three countries are responsible for 95% (262 gigawatts) of all coal-fired power plants under construction in the world, out of a global total of 274.5 GW.

Indonesia can divert coal exports into its domestic market. If China and India keep increasing their production locally, the outlook of the seaborne thermal market is one of a steady, slow decline.

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These are the views of the columnist, who is also an author. (Editing by Shri Navaratnam).

(source: Reuters)