The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the International Energy Agency’s Coal 2023 report. The changing dynamics of coal consumption, production, and trade patterns have seen a notable shift eastward.
Traditionally dominated in those basins, coal trade is now seeing a surge in volumes across the Indian Ocean. The decline in demand from Europe is juxtaposed with the increasing appetite for coal in India, Pakistan, and Bangladesh.
“Through to 2026, we expect global coal trade to decline by about 12%, driven by growing domestic production in coal-intensive economies such as China and India and coal phase-out plans elsewhere, such as in Europe,” said the report.
China has emerged as a pivotal player in the global coal market, consuming more than half of the world’s coal and producing an equal share.
The country’s dominance extends to being the largest importer, accounting for nearly one-third of the global coal trade. However, the IEA notes that India and ASEAN countries are exerting a growing influence, contributing to the gradual shift of the coal market towards Asia. By 2026, China and India are projected to account for over 70% of global coal consumption, highlighting a stark contrast with the European Union and the US, each expected to contribute around 3%.
Thermal coal peak
The report anticipates that global thermal coal imports will peak in 2023 and are then set to decline through 2026, mirroring the overall decrease in global demand. China leads this decline, with a substantial 31% reduction in imports, while India, Japan, and the European Union also contribute to the downward trajectory. Total thermal coal exports are forecasted to fall to 941 million tonnes in 2026, a notable decrease from the levels observed in the Covid-19 year of 2020.
Seaborne thermal coal exports are expected to surpass the 2019 record in 2023, driven by increased trade in the Pacific Basin.
Indonesia, with a projected 21% decrease in exports, is expected to face the most significant decline, followed by Australia with a 12% decrease. The shifting dynamics of seaborne trade emphasise the evolving patterns in coal consumption and demand on a global scale.
Looking at the analysis for this year, global coal exports are expected to reach an all-time high of 1,466 million tonnes, with Asia Pacific receiving about 83% of imports. China and India will have strengthened their positions, collectively constituting 47% of global imports.
“China especially benefits from cheap coal imports from neighbouring countries such as Russia – trading coal at a discount due to sanctions – and Mongolia, which lacks alternative buyers,” said the IEA. “We estimate China’s overall coal imports to have increased by 50% to 451 million tonnes in 2023, although final numbers can change as China’s imports in December are historically very volatile. At the same time, Russia’s dependency on customers in China and India is increasing. In the first nine months of 2023, about 60% of coal exports from Russia were directed to China and India.”
Meanwhile, thermal coal imports into the European Union are expected to decline significantly in 2023, falling by 44% to 46 million tonnes. Germany, the largest importer in the EU, is estimated to have reduced its imports by 38%, signalling a departure from the increasing trend observed in the previous two years. The second-largest importer, Poland, is expected to more than halve its imports. The IEA attributes these declines to a combination of factors, including the performance of domestic mines.
The IEA’s projections for 2023 highlight a decline in coal demand in almost all advanced economies, with record annual drops of around 20% expected in the European Union and the US. Meanwhile, China and India, along with Indonesia, Vietnam, and the Philippines, are anticipated to offset these decreases, contributing to a slight global growth in coal demand of 1.4% to around 8.54 billion tonnes, a new record.
Uncertainties and plateauing
However, uncertainties linger: “India, Indonesia and other emerging and developing economies are expected to rely on coal to power strong economic growth, despite commitments to accelerate the deployment of renewables and other low-emissions technologies. By contrast, due to their different economic and energy context, we do not see a major risk of coal use rising again among advanced economies.
“Coal power plants are being regularly shuttered in these economies, and industrial coal consumption is set to decline due to weak industrial output, improved efficiency, and increased switching to other fuels.”
Global coal consumption in 2026 is set to be 2.3% lower than in 2023 – although China, said the IEA, “will have the last word”.
Source: Baltic Exchange
