The global seaborne thermal coal market is expected to see a significant demand increase of 48 million tons from 2017 to reach 963 million tons in 2018, the trading house Noble Group said at the Coaltrans China conference in Beijing.
The additional coal demand is mainly driven by China, India and the rest of eastern hemisphere countries, the coal-hungry Asia market. Among them, China, India and the other countries accounting for an increase of 16 million tons, 11 million tons and 14 million tons respectively.
“China’s thermal power generation rises by 8.6% as compared to the overall increase in power generation of 7.35%. While hydro power generation can be expected to improve, China is likely to import more low CV coal from Indonesia,” said Rodrigo Echeverri, head of hard commodities analysis at Noble Resources International.
China’s supply-side structural reform, which has resulted in the stepwise closure of antiquated production processes, is expected to boost the Chinese demand.
“There is support due to elimination of supply capacity after about 500 million tons of outdated capacity has been phased out since 2016,” said Tian Hui, vice-president of China National Coal Association.
Asia basic materials & coal analyst Michelle Leung with Bloomberg Intelligence pointed out that larger miners in China are becoming larger as they have better sales and logistics networks, while the inefficient ones are being shut down. But the total production is not dropping, he added.
According to Leung, South Korea’s thermal coal imports, which grew recently due to demand from power plants commissioned before the country’s new president Moon Jae-in took over, is unlikely to sustain because renewable energy is more focused on by Moon.
As for India’s seaborne coal demand, Leung believed that the imports will be strained with state-owned Coal India buying more railway rakes to keep reliable supply of coal to their customers and the Indian government’s plans to allow private mining.
Instead, as JumoreGlobal Insights said, Coal India will likely show growth in production year-on-year but is likely to lag their targets.
Coal prices to bottom out
The relatively low stocks of coal would ensure that the prices would bottom out earlier than most other commodities, said Echeverri.
“Coal is not alone in the current price correction. Except for oil, most of the commodity prices have moved lower,” he said, adding that commodity prices, moving down together, will certainly find their bottoms at different times.
It is noted that the new technologies constantly developed are reducing the cost of generation of solar power and the environmental concerns of using coal are expected to reduce the share of thermal power in the energy mix in the coming years. But, currently, energy security is still very important for each country and coal is not likely to be replaceable fully.