Coal trade underpinnings may fade

A strong global coal trade performance unfolded during the past twelve months, contrasting with a flat outcome in the previous year. But signs suggest that a continuation of the resumed growth may not be seen in 2024 and a downturn seems more likely to occur. An especially significant reason is that the huge boost from additional imports into China last year could be partly reversed in the period ahead.

Provisional estimates based on incomplete information suggest that the world total for seaborne steam and coking coal trade was about 80mt (million tonnes) higher in 2023, reaching well over 300mt. Imports into China, one of the largest buyers on the world market, apparently increased by more than half. This additional volume was partly offset by lower imports into the European Union and a weakening pattern among other buyers. Among export suppliers many benefited from growth but Russia’s exports evidently decreased.

Import demand around the world last year derived continued support from emphasis on coal as a valuable contributor to energy security, enhanced by great upheaval in the previous year when Russian pipeline natural gas supplies into European countries were curtailed. Nevertheless numerous buyers reduced purchases. This trend was influenced by the priority of cutting carbon emissions and shifting energy supplies towards cleaner energy sources, as part of a longer term process likely to diminish coal consumption and trade.

Mixed Energy Supports

During the past twelve months the progress of economic activity affecting energy use varied among coal consuming and importing countries. In China and Japan economic growth accelerated, while in India and Europe slowdowns were recorded. The broad indicator of gross domestic product (GDP) for the world economy as a whole grew by 3.1% in 2023 from the previous year, based on International Monetary Fund calculations, below the 3.5% seen in 2022. Estimates suggest a similar 3.1% growth rate could be seen this year.

Widely varying performances were a feature of the past year. After the ending of strict pandemic controls, China’s economy rebounded in 2023 from a low 3.0% GDP increase in the preceding twelve months, to a 5.2% growth rate. Japan also achieved a marked acceleration from 1.0% to 1.9%. By contrast, the European Union’s growth in 2023 plummeted from 3.6% to a minimal 0.6% and India’s progress slackened by half a percentage point to 6.7%. In the year

* Bulk Shipping Analysis 2023 estimate ** 2023 estimate compared with previous year source: Clarksons Research and Bulk Shipping Analysis, January 2024 ahead a recent IMF forecast indicates a modest pickup in Europe accompanied by slowing tendencies in China, India and Japan.

Influences that could prove supportive are indicated by the IMF’s update report published last month, entitled ‘Moderating inflation and steady growth open path to soft landing’. After some difficulties encountered in the past twelve months IMF analysts suggest that “the clouds are beginning to part”. World GDP this year could maintain the 3.1% growth seen last year. While the global performance deteriorated in 2023, recovery from events including the pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis is proving “surprisingly resilient”.

Broad economic activity patterns are likely to be reflected in energy demand. Assuming that energy costs remain well below those seen previously (especially in

2022 and into last year, when gas prices rose to exceptionally high levels), energy consumption trends may be firmly supported. Nevertheless an ongoing emphasis on renewable energy supplies — particularly wind and solar, but also nuclear and hydro-power — implies that any benefits for coal consumption and import demand will be limited.

Energy usage with implications for coal is likely to be affected in the year ahead and longer term by national and regional policy implementation resulting from political decisions in numerous countries. The move towards an increasing embrace for zerocarbon fuels and power sources, amid the decarbonization imperative to counteract global warming, is having a very prominent impact. Government measures, especially among the largest coal importing countries, to limit and eventually eliminate carbon emissions while also cutting air pollution in urban areas is having increasingly large repercussions.

Trade Trends Evolution

Provisional calculations show world seaborne coal trade growing robustly last year, compared with the preceding twelve months, following the previous year’s almost unchanged volume. In 2023 resumed expansion was facilitated by rapid growth in China’s imports, contrasting with weakness elsewhere among importers. Volumes of trade in both steam and coking coal segments increased, although extra steam coal quantities comprised most of the advance.

Trends in the largest importers and for world trade as a whole are shown in the table above, based on historical data compiled by Clarksons Research and calculations by Bulk Shipping Analysis. During 2022 world seaborne coal trade

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