LAUNCESTON: Asia's imports of coal slumped in February as prices remained close to record highs for both thermal and coking grades, and the crisis in Ukraine means the cost of the fuel is unlikely to retreat any time soon.
Seaborne imports of all grades of coal across Asia, the top-consuming region for the polluting fuel, fell to 59.27 million tonnes in February from 61.92 million in January, according to port and vessel-tracking data compiled by Refinitiv.
This was the lowest monthly total in Refinitiv data dating back to January 2015, and was also some 13% below the 68.15 million tonnes the continent imported by ship in February 2021.
A milder winter across north Asia, high prices and the lingering effects of Indonesia's short-lived export ban for the month of January are the most likely culprits behind the drop in February import volumes.
China, the world's biggest coal importer, has recorded a weak start to 2022, with February imports of 11.65 million tonnes marginally higher than January's 11.27 million, but the combined total for the first two months of the year is the lowest Refinitiv has assessed.
Imports in the first two months of 22.92 million tonnes are 46.2% below the 42.58 million recorded in the first two months of last year, according to Refinitiv.
India, the second-biggest importer, brought in 10.93 million tonnes of coal in February, down a touch from January's 11.06 million. The combined total for the first two months is 31% adrift of the 31.83 million for the same period in 2021.
Third-ranked Japan imported 12.71 million tonnes in February, down from January's 15.62 million and a decline of 7% for the first two months of 2022 compared to the same period last year.
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South Korea, Asia's fourth-biggest coal importer, saw arrivals of 7.37 million tonnes in February, down from January's 10.2 million, but unlike the region's big three, this was actually a modest 4% gain on the first two months of 2021.
It's perhaps not surprising that coal imports were lower in Asia at the start of this year, given the winter just ended was milder than the previous winter of 2020-21.
But high prices are also likely to have played a part in the drop in volumes, especially for price sensitive buyers such as India and Pakistan.
Some cargoes delivered across Asia in February would have been bought at spot prices that prevailed in January, when regional benchmarks shot higher as the world's top exporter of thermal coal, Indonesia, implemented a ban on exports in order to ensure supplies for domestic power plants.
The benchmark Newcastle Index for Australian thermal coal , as assessed by commodity price reporting agency Argus, leapt from $175.25 a tonne at the end of 2021 to a record high of $264.52 a tonne in the week to Feb. 25.
The crisis in global energy markets created by Russia's invasion of neighbouring Ukraine last week has seen the Newcastle price climb even higher, with futures traded on the ICE exchange ending at $275 a tonne on Monday.
In the physical market globalCOAL reported the bid/offer component for Newcastle coal at $287.50 a tonne on Feb. 25, while similar grade South African coal for export at Richards Bay was assessed at $247.50.
Seasonal price retreat postponed?
In more normal circumstances it may be expected that the combination of high prices, lower import volumes and the end of the northern winter would result in downward pressure on prices.
But the crisis in Ukraine has upended normal expectations.
Russia remains a major coal supplier to Asia, and while sanctions against Moscow have yet to target energy exports, it's likely that an increasing number of traders, utilities, banks and insurers will effectively self-sanction.
Russia shipped 7.06 million tonnes of coal to customers in Asia in February, down slightly from 7.26 million in January, according to data from commodity consultants Kpler.
Major buyers included China with 1.89 million tonnes in February, South Korea with 1.58 million, Taiwan 879,000 and Japan 831,000, according to Kpler.
If these buyers decide that Russian coal is no longer desirable or feasible to import, this is going to put pressure on supplies from other sources, such as Indonesia, Australia, South Africa and the United States.
Uncertainty is likely to keep coal prices well bid, even as high prices contribute to demand destruction in Asia.
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