Column: Southeast Asia set to enter the big leagues of coal importers

LITTLETON, Colo., May 10 (Reuters) – Southeast Asia only accounts for about 12% of global thermal coal imports, so it is often overshadowed by China and India in discussions of top coal consuming markets and the associated impact on emissions.

However, the region routinely imports more than 100 million tons of coal a year and has outpaced other major importers in terms of annual growth rates since 2018, expanding at an average rate of 14% a year, flow data shows. from Kpler.

That pace of growth compares with China’s 3% and India’s 13%, and if sustained means the region could soon emerge as a powerful driver of global coal use that could offset coal use declines that are coming. expect in other markets.

In addition, due to the varied nature of the area’s economies, political systems, and demographic trends, the Southeast Asia region as a whole may be less likely to meet global targets for reducing coal use and less susceptible to international pressure to reverse emissions trajectories. .

HIGH DEPENDENCE

Fundamental to the region’s coal import appetite is the area’s high dependence on coal for electricity generation.

Indonesia, the region’s largest economy and the world’s leading exporter of thermal coal, doesn’t actually need to import much coal, but relies on it for more than 60% of its electricity generation, data from Our World in Data shows. .

The Philippines is the largest importer of coal in the region and, along with Malaysia, Vietnam and Cambodia, relies on coal for more than 40% of its electricity, while Thailand uses coal for around 20% of its electricity generation.

The region’s cumulative use is estimated to be around 200 million tons per year, according to the US Energy Information Administration.

PEAK PERIOD

While coal use across the region is fairly constant, the summer months when the weather is warmer tend to be when coal imports are highest.

In 2022, Southeast Asia’s total thermal coal imports increased to more than 10 million tons per month from May to August, from a monthly average of about 8 million tons during the first four months of the year.

Through the first four months of 2023, Southeast Asia’s thermal imports are 18% above what they were at the same point in 2022, suggesting that utilities may be better supplied this year than they were last year. of the rebound in demand for air conditioning during the summer.

Economic growth across the region also slowed during the first quarter of 2023 compared to the end of 2022, as global consumption of goods faltered, which may result in reduced industrial energy demand in the coming months.

However, the ongoing economic recovery in China is having favorable effects throughout the region.

The revival of manufacturing activity in China is generating increased demand for parts and raw materials from key supplier nations such as Malaysia, Indonesia and the Philippines, all of which have strong supply chain links to China.

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Despite mixed economic signals, the International Monetary Fund projects most Southeast Asian economies to experience robust expansion in 2023, with real gross domestic product (GDP) expected to grow 5% in Indonesia, up 6 % in the Philippines and 5.8% in Vietnam. , according to a regional overview published this month.

That said, some of those projections have been slashed since late 2022 as the health of the global economy has soured due to rising interest rates and the continuing fallout from the Russia-Ukraine war.

As a result, power producers across the region are likely to take a conservative approach to power generation additions and likely favor the lowest cost option for baseload power production.

In turn, that should support continued strong use of coal in power generation mixes and limited expansions to the use of more expensive natural gas, which remains well above long-term average prices in international markets.

If Southeast Asian power producers continue to favor coal as the primary source of electricity as regional economies expand, the area’s coal imports could rise steadily and raise new concerns for climate trackers who advocate reduced coal use. coal in all regions.

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

Reporting by Gavin Maguire; Edited by Stephen Coates

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, according to the Trust Principles, is committed to integrity, independence and non-bias.