Extended support for coal trade

Over the past twelve months global coal trade’s volume has remained steady, compared with the previous year, and it seems likely that 2023 could see a similar outcome. A small increase this year is a possibility, as envisaged by several forecasters. The tight world market in energy supplies, exacerbated by the repercussions of the war in Ukraine starting in early 2022, appears set to continue for some time, reinforcing coal consumption and import demand.

According to provisional estimates, last year’s world total for seaborne steam and coking coal trade probably was close to the preceding annual volume at around 1,220mt (million tonnes). European imports reflecting a regional energy crisis rose strongly and India’s imports also were stronger, but these positive elements were offset by a decline in China and by several other buyers. Among suppliers, Russia’s exports decreased while Indonesia’s rose.

Energy consumption during the past year was restrained by a slowdown in economic growth around the world, an expected pattern after the initial economic upsurge from the effects of the pandemic. However, while the slowdown was greater than initially envisaged, global energy supplies became much tighter when pipeline imports of natural gas into Europe were heavily restricted. Coal became a more valuable energy source, although a continued shift towards cleaner energy implies that longer term prospects remain unfavourable.

Economic Activity Foundations

Last year’s deceleration in world economic growth affected many energy-consuming industries and activities. An especially large impact was seen in China where the negative consequences of the ongoing coronavirus pandemic were especially marked. Based on the broad indicator of gross domestic product (GDP), the world economy’s growth in 2022 as calculated by the International Monetary Fund was 3.4%, just over half of the previous year’s 6.2% advance. Estimates suggest a further slowing could be seen this year.

Energy importing countries buying coal experienced varying performances in the past twelve months. While China’s GDP growth was reduced to a relatively low 3% from 8.4% in the previous year, India’s decreased much less rapidly from 8.7% to 6.8%. Decelerations were also seen in Japan from 2.1% to 1.4%, and in the European Union from 5.5% to 3.7%. Over the year ahead India, Japan and the EU are expected to see further slackening but China potentially could achieve an upturn if the pandemic is controlled and recedes.

A recent (January) update published by the IMF suggests that the downwards pattern of GDP growth seen last year in many countries will continue during 2023, resulting in a 2.9% world average, half a percentage point lower. An exception is China where a much stronger 5.2% is forecast. IMF analysts commented that the global outlook is now “less gloomy” than it appeared a few months ago, and “could represent a turning point, with growth bottoming out and inflation declining”.

Economic activity probably will be broadly reflected in energy demand, although partly dependent on the level of energy prices. In the past twelve months exceptionally high energy costs have resulted in some ‘demand destruction’, as consumers cut usage and closures of industrial capacity were seen as a response. Tight global supplies of natural gas may persist, supporting demand for alternatives such as renewable energy and nuclear power, as well as underpinning coal consumption and imports.

In the year ahead energy consumption patterns with implications for coal are likely to be affected not only by broad economic trends, but also by political decisions reflecting decarbonization priorities and the move towards cleaner energy supplies. Government measures in some countries, especially among the largest coal importers, to limit and eventually eliminate carbon emissions and also cut air pollution are having increasingly large effects.

Evolving Trade Trend

World seaborne coal trade appears to have been flat in 2022, based on provisional calculations, after resuming growth in 2021 when the total reversed about two-fifths of the preceding year’s large downturn caused by the impact of the pandemic. Volumes in both steam and coking coal segments last year evidently remained similar to those recorded in the previous twelve months.

The table shows trends among the largest importers and for world trade as a whole based on historical data compiled by Clarksons Research and calculations for 2023 by Bulk Shipping Analysis. In 2021 world seaborne coal trade grew by 49mt or 4% to 1228mt, followed by a minimal 4mt decrease in 2022. Expectations for 2023 suggest a 16mt or 1% increase to 1,240mt.

An estimate published in late December by the Australian Government’s Depart- ment of Industry, Science, Energy and Resources is slightly more optimistic, suggesting a 2% increase for the current year. This calculation is based on all international coal trade including movements on overland routes (although the majority is seaborne), and so is not directly comparable.

Last year coking coal, the smaller category comprising around one-fifth of all seaborne coal movements, was affected by lower steel production in many countries relying on imported fuel. Within the dominant steam coal category, comprising the remaining four-fifths of trade, import volumes were supported by solid demand from power generation and other industries.

Contrasting changes in purchases during 2022 in the two largest importing countries are shown by the provisional figures. In China the effects of diminished economic activity, accompanied by higher coal output from domestic mines, was reflected in reduced coal imports including low quality lignite, down by 45mt or almost a fifth, to 236mt. India’s imports at a similar 236mt were 28mt (13%) higher, amid strong economic growth and shortfalls in domestic coal supplies.