(Opinions expressed here are those of the author, a columnist for Reuters.)
* GRAPH – Imports of coal by sea from China vs from Australia, Indonesia: tmsnrt.rs/35zCHFM
LAUNCESTON, Australia, Jan 12 (Reuters) – China’s effective ban on Australian coal imports is forcing a readjustment in flows between the world’s two biggest importers and the world’s two biggest exporters.
Indonesia and Australia dominate the global seaborne coal trade, with the Southeast Asian country topping the list for thermal coal, which is used primarily in power generation, while Australia is the largest shipper of coking coal, which is used to make steel, and second in thermal coal.
China is the world’s largest coal importer, while India ranks second.
China’s main coal supplier is Australia, but this ended in the second half of last year following Beijing’s unofficial ban on imports from Australia, believed to be in retaliation for Canberra’s calls for an international investigation into the origins of the coronavirus pandemic.
Even though Indonesia is China’s second largest supplier, demand is now booming as imports from Australia have fallen to almost zero.
For India, the situation has turned around, with Indonesia in danger of losing its status as the South Asian nation’s main supplier to Australia, a country that in the past shipped only relatively small volumes of coking coal to India.
The shifts in coal flows are evident in the December data compiled by Refinitiv.
China’s imports from Australia are just 447,523 tonnes, the lowest since Refinitiv began compiling ship tracking and port data in January 2015, and dropping massively from a 2020 high of 9.64 million tonnes in June.
Even moderate volumes from Australia may not be available to end users as Refinitiv data only measures cargoes that have already been issued, meaning it is likely that the shipment has not yet passed customs.
However, China’s imports from Indonesia surged to 12.19 million tonnes in December, surpassing the previous record of 10.47 million in April 2019, and almost tripling from the 4.3 million recorded in November.
India’s imports from Australia totaled 6.24 million tonnes in December, up from 5.06 million in November and 5.48 million in October, with the past three months beating the previous high of 4.81 million from December 2019.
India’s imports from Indonesia totaled 5.65 million tonnes in December, below the volume from Australia, and down from 5.82 million in November and 6.75 million in October.
This December figure is also far below India’s record imports from Indonesia, 10.58 million tonnes in April 2019.
It is worth noting that most of Australia’s coal exports to India are coking coal, but ship tracking data suggests an increase in thermal coal volumes as well, possibly as a result of Australian miners seeking new markets to replace lost shipments to China.
INDONESIA WINS WITH PRICES
While the flow data clearly show the changes brought about by Beijing’s ban on imports from Australia, the impact on prices is less pronounced.
Indonesian thermal coal generally has a lower energy value than Australia, and is therefore trading at a discount to the benchmark Australian Newcastle index.
Indonesian coal with an energy value of 4,200 kilocalories per kg, as assessed by commodity price reporting agency Argus, ended the week of January 8 at $ 45.56 per tonne, the highest since July 2018.
Prices have rallied 101.3% since 2020 lows of $ 22.63 per tonne in the week to September 4.
That looks like an impressive rally, and of course additional demand from China is a factor, but Australian thermal coal prices are also rising, even though buyers from China are losing out.
Newcastle’s weekly index was at $ 80.36 per tonne on Jan. 8, down from its recent high of $ 83.26, but still 73.3% above its 2020 low of $ 46.37, which was reached in the week to 4 September.
The rise in the Newcastle index is likely related to increased demand from traditional Australian customers in north Asia, such as Japan, whose imports from below rose to 9.17 million tonnes in December, the highest since January 2020, and up from 8.13 million in November. .
Demand is driven by cooler than usual weather in much of northern Asia, and limited availability of spot cargoes for liquefied natural gas, which hinders gas fired generation.
While Indonesia appears to be the main beneficiary of rising prices and China’s ban on Australian imports, the biggest loser is definitely China.
It has had to pay more for alternative supplies, and there have been reports of coal shortages in some parts of the country, such as winter bites.
China’s domestic coal prices have also surged, with a benchmark thermal supply in Qinhuangdao SH-QHA-TRMCOAL soared to the highest level since consultants SteelHome began providing assessments in 2011.
Prices hit 878 yuan ($ 135.79) per tonne on Monday, up 88% since a 2020 low of 467 yuan in early May.
If Beijing succumbs to the Australian coal boycott, it is likely that domestic prices will fall, as they will face competition from cheaper imports. (Edited by Christian Schmollinger)