In the first half of 2022, the world experienced inflation; the Federal Reserve opened the fifth round of the interest rate hike cycle and overlaid with the escalation of geopolitical conflicts, and the international energy market faced challenges, thermal coal importers are also under pressure to import coal.
The West proposed sanctions, indicating that thermal coal importers in Western countries would no longer use Russian coal, and subsequently, the flow of international thermal coal importers’ imports changed. The energy market reconfigured a new pattern.
International market supply countries are affected by force majeure and lousy weather, prioritizing protecting the domestic market demand, resulting in a decline in coal exports. In contrast, demand countries thermal coal importers, due to geopolitical conflicts and abnormal high-temperature weather, thermal coal importers’ countries coal demand surges, international coal supply and demand imbalance, resulting in coal prices at a high level of oscillation operation.
1. Indonesia's steam coal exports fell in the first half of the year, international thermal coal importers’ demand remains high, and coal prices are high and oscillate.
Thermal coal importers rank first in the world for coal imports from Indonesia; Indonesia is the world’s largest thermal coal exporter, coal resources are vibrant, superimposed on the late formation of coal, mining conditions are good, laid a good foundation for coal exporting countries.
According to global coal shipment data, steam coal importers show that as of June 26, Indonesia’s total coal shipment was 141 million tons, down 13.9% year-on-year. The decrease in Indonesia’s coal exports is mainly affected by the following factors.
The Indonesian government issued a ban on coal exports, resulting in a sharp decline in coal exports. The amount of coal thermal coal importers can purchase from Indonesia also plummeted. At the beginning of the New Year, the Indonesian Ministry of Energy and Mines announced a one-month suspension of coal exports to alleviate domestic supply constraints.
According to data released by Indonesia’s National Bureau of Statistics, coal importers importing from Indonesia in January were only 13,276,500 tons, down 65.3% year-on-year and 60.4% sequentially, a record low since data was recorded in January 2014. Later, with the increase in the inventory of Indonesian power companies, the tension eased. Partially loaded coal from thermal coal importers was allowed to leave port, the ban gradually lifted, and coal export orders began to resume.
2. Australia implemented a new coal export tax to protect the domestic power enterprises with coal
As a global energy
exporter, Australia has the fourth largest coal reserves. The data shows that the recoverable coal reserves are 90.94 billion tons, accounting for 8.8% of the world’s total recoverable reserves. Australian coal has good burial conditions, low mining difficulty, and excellent coal index, with high calorific value, low ash, and sulfur characteristics. Australian coal is one of the world’s largest coal importers’ top choices for sourcing coal.
According to the global coal shipment data from thermal coal importers, as of June 26, thermal coal importers shipped 152 million tons of coal purchased from Australia, down 13.4% year-on-year. In the first half of the year, Australia was mainly affected by bad weather, resulting in a decline in coal exports.
3. Russia is affected by force majeure factors; coal shipments are restricted
Russia is not only the third largest exporter of coal in the world but also the sixth largest producer of coal in the world. The coal resources reserves are enormous, and the types are wealthy, including steam coal, lignite, bituminous coal, and anthracite coal. The coal thermal coal importers imported from Russia have a high calorific value. Since China banned the import of Australian coal, Russia has become the primary source of imported high calorific coal.
In the first half of the year, by force majeure factors, the United States, the European Union, and other sanctions, Russian coal exports were subject to payment and transportation bottlenecks, and coal exports fell.
In addition, Russia is subject to geographical vastness. Uneven distribution of coal resources, coupled with the EU countries saying that their thermal coal importers would no longer import Russian coal, so nearly a quarter of the coal will be exported from the west to the Far East due to the sparse distribution of railroad networks in the Far East, the lack of railroad capacity, it is difficult to support the smooth transfer of coal, resulting in a decline in shipments.
It can be seen that Russian coal is subject to force majeure factors and transport restrictions, resulting in a decline in exports. Still, Russia is also actively taking relevant measures to strengthen the construction of railroad transport and restart some ports to improve the export efficiency of the Far East. The focus of exports began to shift to the Asia-Pacific market.
The second is the international demand situation.
Due to the geopolitical
conflicts in the international market, natural gas prices have risen rapidly. EU countries have started to restart coal-fired power generation to replace natural gas due to high-cost constraints.
In the EU itself, fossil energy production is relatively low and thus highly dependent on imports; more than half of the thermal coal importers imported coal from Russia
. After the embargo on Russian coal in August, EU steam coal importers may seek alternative resources from other coal-producing countries, most likely increasing imports of Australian, Indonesian, and South African coal. However, the “coal rush” has led to a renewed rise in coal prices.
India is the world’s second-largest thermal coal importer; in May this year, affected by abnormally high-temperature weather and frequent power outages in the country, causing a power crisis. As India’s own coal production is challenging to meet the needs of power companies, steam coal importers every year must import nearly 150 million tons of thermal coal to supplement domestic demand.
To alleviate the domestic power crisis, the Indian federal government issued the first coal import schedule, requiring all public enterprises in all states to import more than 22 million tons of coal and private power plants to import 15.94 million tons of coal.
Third, the outlook of the international thermal coal importers import market in the second half of 2022
The international market is driven by high oil and gas prices due to geopolitical conflicts, triggering global energy scarcity. The outlook for the year’s second half is that the supplying countries may reduce coal exports to protect domestic coal demand.
In contrast, the demand countries restart coal-fired power generation due to cost issues and a surge in coal demand.
Supply and demand sides in the growth rate and time there are specific differences is expected to continue the international market supply and demand tension, global steam coal prices will also maintain a high level of vibration.