Column: China’s renewed appetite for Australian coal disrupts flows from Asia

LAUNCESTON, Australia, Aug 10 (Reuters) – China’s renewed appetite for Australian coal after Beijing ended its unofficial import ban, coupled with generally strong demand for the fuel used to generate power, is forcing a realignment of maritime flows in Asia.

China’s total coal imports have soared this year, with customs data released Aug. 8 showing July imports at 39.26 million metric tons, up from June’s 39.87 million but with a massive 66.9% increase over the same month last year.

During the first seven months of the year, the world’s largest coal importer recorded arrivals of 261.18 million metric tons, 88.6% more than the same period in 2022.

This figure includes all grades of coal, but the bulk is for thermal coal, used mainly to generate electricity, as China is largely self-sufficient in coking coal for steelmaking, and what it imports comes mainly via land from neighboring countries. Mongolia.

Thermal coal imports from China were estimated at 29.0 million metric tons in July by commodity analysts Kpler, up from 27.61 million in June and the second strongest month so far this year.

Kpler data shows that China’s thermal coal imports started to strengthen from March, and it is not just a coincidence that this was after the unofficial ban on shipments from Australia ended.

Beijing had imposed the ban on imports from Australia, the world’s second-biggest exporter of thermal coal behind Indonesia, in mid-2020 as part of a series of trade measures that followed rising diplomatic tensions over Canberra’s call for an investigation. international conference on the origins of the COVID-19 pandemic.

Australia’s election last year of the centre-left Labor Party to replace the conservative Liberal-National coalition allowed for a reset in relations and, so far, Beijing has ended its restrictions on coal and lifted tariffs on barley. .

China’s imports of thermal coal from Australia went from zero in December last year to 5.45 million metric tons in July, according to Kpler data.

Since April, Chinese imports of Australian thermal coal have been above 4.8 million metric tons per month, a level only hit three times in the January 2017 to September 2020 period.

With China’s return to Australian coal, it has cut volumes bought from Indonesia, with imports of thermal coal from the Southeast Asian nation reaching 16.98 million metric tons in July, well below this year’s peak of 22. 46 million in March.

China also picked up imports of Russian thermal coal, with seaborne arrivals of more than 4.4 million metric tons in the three months to July, up from levels of around 2.6 million in the previous three months.

China’s increased appetite for thermal coal from Australia and Russia has led to a shift in imports from India, the world’s second-biggest coal buyer.

INDIAN CHANGE

Indian steam coal imports from Australia in July were 613,080 metric tons, according to Kpler, and have been below 1 million since March.

From December to February, Indian imports of Australian thermal coal had been above 1 million metric tons per month, peaking in January at 1.79 million.

India’s imports of Russian thermal coal fell to 709,849 metric tons in July, the lowest level since February and about half the so-far 2023 peak of 1.47 million in May.

In contrast, India is reverting to Indonesian thermal coal, with July arrivals of 6.87 million metric tons, up from 6.04 million in June.

For July, Indonesia’s share of India’s thermal coal imports was 63%, which was the highest since 65% in April.

While thermal coal flows in Asia are once again changing, it is worth noting that prices have been largely flat, indicating that the market is more or less in balance.

China and India generally import Australian thermal coal of lower energy value than traditional buyers in Japan, South Korea and Taiwan.

Grade 5,500 kilocalories per kg (kcal/kg) at Australia’s Newcastle port, as assessed by commodity price reporting agency Argus, ended at $86.14 per metric ton in the week to 4 of August.

It has been in a tight range of around $86 per metric ton since early June, after steadily declining from its record high of $284.20 per metric ton, hit in March of last year amid fears of power shortages. in the aftermath of the Russian invasion of the Ukraine.

The price of Indonesian coal with an energy content of 4,200 kcal/kg has also been stable in recent weeks, ending at $51.30 a metric ton in the week to August 4, having traded in a narrow range of around $52 since mid-June.

The opinions expressed here are those of the author, a Reuters columnist.

Edited by Shri Navaratnam

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