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G7 Agrees To End Coal Use But Can It?

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Seaborne Coal Volumes Hit Record Highs In 2023

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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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The Renewed Coal Connection Transforming Asian Trade Flows

  • China resumes Australian coal imports after a two-year hiatus due to diplomatic tensions.
  • Coal demand surges in China, countering blackouts as hydropower faces a shortfall.
  • While China increases imports from Australia and Russia, India turns to Indonesia, reshaping Asian coal trade dynamics.
Coal

China’s resumption of imports of Australian coal is upending coal trade in Asia once again, three years after a weakening of Chinese-Australian ties and the subsequent ban on Chinese purchases of coal from Australia.

Relations between the two countries deteriorated in 2020 after the Australian government called for an international inquiry into Beijing’s handling of the initial stages of the Covid pandemic. The call led to a retaliatory ban on Australian coal imports into one of the world’s biggest consumers of the commodity.  

Early this year, China received the first shipment of Australian coal in two years as Beijing signaled it was warming up to restoring trade relations with its former major supplier of the fossil fuel. 

Since then, Chinese imports of coal from Australia have soared, altering once again the trade patterns among Asia’s largest exporters and importers of coal.

China is relying on coal to avoid blackouts as the economy reopened after the Covid lockdowns. During the first half of this year, coal production, coal imports, and coal-fired electricity generation jumped and offset a significant decline in power output at China’s massive hydropower capacity due to insufficient rainfall and drought.     

Total Chinese coal imports surged by 67% year over year in July, and soared by 89% in the first seven months of this year compared to the same period of 2022, official data from the Chinese General Administration of Customs showed this week. 

Australian coal is now flowing again to China, with arrivals at 5.45 million metric tons in July, compared to zero in December 2022, according to Kpler data reported by Clyde Russell, Asia Commodities and Energy Columnist at Reuters.

While China resumed purchases from Australia, it has reduced imports from Indonesia, which in turn has changed the coal flows to India, another major importer in Asia. India has reduced purchases from Australia and is ramping up imports from Indonesia, per Kpler estimates.

In a similar trade pattern, China has increased imports from Russia, while India has reduced Russian purchases. 

Despite the second big shift in Asian coal trade in three years, prices haven’t spiked, suggesting the market is fairly balanced, Reuters’ Russell notes. 

The Asian coal market is the most important market for the fuel and will be such in the future. 

Driven by robust growth in coal consumption in Asia, global coal demand this year will remain at the record-high levels hit in 2022, the International Energy Agency (IEA) said in a new report last month.

Last year, global coal demand increased by 3.3% to 8.3 billion tons—a new record-high, the agency said in its Coal Market Update.

This year, coal demand will inch up by 0.4% year-on-year, to 8.388 billion tons, due to continued growth in industrial coal use which would offset an expected small decline in coal-fired power generation, according to the IEA estimates.

“Whether coal demand in 2023 grows or declines, will depend on weather conditions and on the economies of large coal consuming nations,” the agency noted.

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The EU and the United States are leading the declines in coal use in the power sector, but Asia, especially China and India, more than offset these declines.

In China, the top global coal consumer, demand jumped by 5.5% in the first half of 2023 compared to the same period last year due to very low hydro output so far this year, the IEA said. The agency sees China’s coal demand rising by about 3.5% in 2023, with demand from the power sector up 4.5% and demand from non-power uses growing by 2%. In India, the total increase in coal demand is expected at 5% annually this year.  

By Tsvetana Paraskova for Oilprice.com

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