Global demand for seaborne thermal coal imports could decline 7% this year to 927m tonnes amid the Covid-19 pandemic and stiff competition from gas, an analyst at Noble Resources said this week.
“China and India are backing out from the market due to ample domestic supply,” said Noble’s head of research, Rodrigo Echeverri, in a Coaltrans webinar.
International shipments of coal have declined over the past two months as governments around the world imposed social distancing and other measures to combat the spread of coronavirus.
Meanwhile, coal continued to face “fierce competition” from the oversupplied gas market, with gas-fired generation profitability in many countries ahead of the equivalent coal burn profit margin, the analyst said.
“We’ve seen massive substitution [of coal] in Europe,” he added.
Of the total, demand from Atlantic-basin countries – including northern Europe, Mediterranean countries and the Americas – could plunge 13% to 148m tonnes, according to Noble estimates.
Continental and southern Europe’s demand was seen down 13m tonnes and 8m tonnes, respectively, to 27m tonnes and 9m tonnes, while Mediterranean demand – including north Africa and Turkey – would remain largely flat at 55m tonnes.
Asia-Pacific demand, however, would drop 6% to 779m tonnes, led by an 11m-tonne decline for South Korea, to 101m tonnes – due to “stringent restrictions on coal-fired plants” – and a 10m-tonne reduction for India, to 169m tonnes.
Noble saw Chinese demand down 7m tonnes at 210m tonnes.
“The Chinese domestic market is incrementally oversupplied as coal output gets ahead of thermal power generation,” the analyst said.
And for India, he noted substantial power-plant stocks – which are currently at around five-year highs – would limit import appetite.
Noble estimated global supply to decline 2.6% to 972m tonnes, although this still represented a potential supply overhang of 45m tonnes.
“Without significant supply reduction from major suppliers, it’s hard to envisage how the market will balance in the short term,” Echeverri said, noting a drop in supply of more than 72m tonnes would be “good news”.
Of the total, Atlantic-basin supply was seen down 7.6m tonnes to 175m tonnes with Pacific supply 19m tonnes lower at 797m tonnes.
The world’s largest coal exporter, Indonesia, could see a 6% decline to 424m tonnes.
“Indonesia departures have slowed down mildly, primarily due to lack of buying interests instead of any supply disruption,” he said.
But key European supplier Russia could keep seaborne supply flat at 137m tonnes, while Colombia sees a negligible 1m tonne drop to 74m tonne.
“Russia departures started to rise recently, mostly from the Pacific side,” Echeverri said.
“And Colombia flows are higher year on year [so far this year], partly due to arbitrage opening in Asia at a lower level of freight,” he said.
Colombian thermal coal exports in the first quarter rose 10% to 18.9m tonnes, although shipments to Europe last month plunged nearly 50% to 1.9m tonne, Montel reported earlier.