LAUNCESTON: With thermal coal and liquefied natural gas (LNG) prices holding close to record highs in Asia, it would be logical to expect demand destruction, especially in developing nations said to be price sensitive. But it isn't happening yet.
India, the world's second-biggest coal importer, behind China, saw record arrivals in June of thermal coal, used mainly to generate electricity, according to data compiled by commodity analysts Kpler.
Thermal coal imports were 19.22 million tonnes in June, up 35% from May's 14.23 million and 56% above the level of June 2021, the data showed.
India's LNG imports also remained robust, coming in at 1.87 million tonnes, according to Kpler.
While this was down from May's 2.15 million tonnes, it was above the 1.84 million from June last year. It's also worth noting that May's imports were the strongest in seven months.
India has long been assumed to be sensitive to high prices, and certainly its actions in boosting imports of highly discounted Russian crude oil in recent months have supported the assumption.
But, if anything, thermal coal and spot LNG prices have risen far more sharply than crude oil since Russia's Feb. 24 invasion of Ukraine and are trading at extreme levels compared with long-run averages.
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The weekly index for benchmark Australian thermal coal at Newcastle port, as assessed by commodity price reporting agency Argus, was $410.82 a tonne for the seven days to July 8.
This was down from the record high of $425.31 a tonne in the week to May 20, but was still 194% higher than the $138.80 at the same week in July last year, and some 755% above the $48.07 that prevailed in July 2020.
India has been reducing the volume of thermal coal it buys from Australia but still took 1.9 million tonnes in June, although this was down from 3.39 million in the same month in 2021.
It has boosted imports of cheaper, lower-quality coal from Indonesia, with June arrivals at 14.25 million tonnes, up from 4.37 million in June 2021.
However, while this will help with the import bill, Indonesian coal is also trading at elevated levels, with fuel containing 4,200 kilocalories per kilogram assessed at $84.99 a tonne in the week to July 8.
This is down from the high so far this year of $120.86 a tonne on March 11, but is 33.6% above the $63.59 of the same week in July last year and 263% higher than the $23.39 of July 2020.
LNG volumes
Spot LNG prices are also still at near-record levels as concern over Russia's natural gas supplies to Europe by pipeline continue to overshadow the market.
New York-traded futures based on the S&P Global Commodity Insights JKM benchmark ended at $38.84 per million British thermal units (mmBtu) on Monday.
That is down from the record high of $51.77 on March 7 but still 212% above the $12.45 at the same time in July last year and an astonishing 1,700% above the $2.16 of the same day in July 2020.
It's not only India that has continued to import expensive fossil fuels, with neighbouring Pakistan seeing LNG arrivals of 750,000 tonnes in June.
This was down from May's 770,000, but June and May were Pakistan's strongest months for LNG imports since May 2021, and June's figure was 15.4% above the same month last year.
If there is a sign of high prices starting to affect demand, it's in Pakistan's imports of thermal coal, which dropped to 611,090 tonnes in June, according to Kpler.
This is down from 1.24 million tonnes in May, and 1.48 million in June last year.
South Africa, the world's third-largest coal exporter, has in recent years been a top supplier to Pakistan, but imports dropped to just 230,472 tonnes in June, down from 820,922 in June last year.
This most likely reflects South Africa being a swing supplier to Europe, which has boosted coal imports from countries other than Russia, which has been the top supplier to the continent.
Looking at Asia as a whole, thermal coal imports increased in June to 68.96 million tonnes from May's 62.8 million, and were roughly in line with the 69.58 million in June last year.
LNG imports in Asia were 20.51 million tonnes in June, down slightly from May's 21.98 million and the 21.85 million in the same month last year.
Overall, the flows data indicates that, despite high prices, demand for power generation fuels such as thermal coal and LNG is holding up, especially in countries where sharp declines may have been expected.