SteelMint Events

Category: 2nd Asia Coal Trade Summit

  • China may reduce coking coal consumption in steelmaking by 20-25% by 2030

    China may reduce coking coal consumption in steelmaking by 20-25% by 2030

    China, the world’s top steel producer, is seeking to cut down on its consumption of coking coal for steel production in sync with its ‘dual carbon’ goal of peaking emissions by 2030 and attaining carbon neutrality by 2060.

    In line with this objective, the steel industry in China is expected to reduce consumption of coking coal by 20-25% by 2030, reports indicate. It is predicted that the share of predominantly scrap or green DRI-based electric arc furnaces (EAF) in China’s total crude steel production will rise to 22% by 2030 from 12% at present.

    However, the task is huge, considering the fact that the Chinese steel industry is predominantly coal-based. As per CoalMint data, out of 1.01 billion tonnes (bnt) of steel produced in China in 2022, 88% was churned out through the BF-BOF route. This required mammoth consumption of coking coal: in 2022 China’s coking coal production stood at 676 mnt, while another 64 mnt was imported, IEA data reveals.

    Due to the heavy reliance on the coal-based BF-BOF route, a polluting steelmaking pathway, steel production accounts for about 20% of the country’s total annual carbon emissions making it the largest industrial emitter, as per Global Energy Monitor (GEM) data. When emissions from electricity used by the sector are included, the share goes up to 24%. Thus, it is a key target in the government’s efforts to curb carbon emissions and improve air quality.

    Why might coking coal consumption fall?

    1. Steel production to drop: It is expected that steel production in China has almost plateaued. Many experts reckon that the 1.059 bnt of crude steel production in 2020 represented the peak. In 2022, crude steel production fell by 2% y-o-y. It is projected that crude steel production will drop to around 850 mnt by 2030.

    The capacity swap scheme is the most important policy intervention in the Chinese steel industry first introduced by the Ministry of Industry and Information Technology (MIIT) in 2014. The 2021 version of the capacity swap scheme revised measures for certain regions, raising swap ratios to 1.5:1 from a previous 1.25:1 in key air pollution control regions.

    The new version was also carefully designed to encourage EAF capacity and non-BF capacity expansions. If new iron ore and steelmaking facilities are environmentally friendly, such as EAFs, Corex, Finex, HIsmelt or hydrogen-based ironmaking plants, capacity can be swapped equally. Thus, coking coal consumption in steelmaking will naturally fall.

    2. Scrap/DRI share in steelmaking to rise: Higher steel scrap usage expectations could eat into coking coal demand. The National Development and Reform Commission (NDRC) sees China’s 2025 steel scrap usage rising to 320 mnt on carbon neutrality goals.
    During the 2021-25 period, Chinese crude steel output could plateau, which would cut molten iron output by 50 mnt and trim 21 mnt of coking coal demand in the period, Baosteel Group’s research arm Hwabao Securities has stated. The scrap ratio in steelmaking is expected to increase to 34% by 2030.

    In 2021, as per GEM data, China approved 39 new EAFs with a total capacity of 28.7 mnt/year through capacity swaps which is more than the sum of 2018-2020. The development of EAF is forecast to play a big role in reducing China’s steel industry carbon emissions.

    3. Hydro gen likely to replace PCI coal: An early use of green hydrogen in the steel industry will be in existing blast furnaces to replace pulverised coal injection (PCI) coal. Experts contend that reducing carbon emissions from blast furnaces will involve the use of higher-grade iron ore and the replacement of PCI coal with hydrogen.

    Therefore, apart from the use of hydrogen in production of fossil-free DRI which is gaining increasing prominence in China, the move towards higher efficiency in BF-BOF steelmaking will see producers transition from low-grade coking coal (PCI coal) to coke oven gas (COG) first and then hydrogen. Therefore, overall coking coal demand is likely to drop.

    Outlook

    At this stage of the global energy transition, high coal prices – as well as energy security concerns – are likely to hasten the transition towards alternative technology, including the replacement of PCI coal with hydrogen. Therefore, the long-term demand scenario for coking coal remains bearish, although it will take another decade or so before the final signs of decline become visible.

    2nd Asia Coal Outlook & Trade Summit

    Want to follow the discussion on how Chinese steelmakers are expected to cut coking coal consumption? Be a part of the discussion on technological breakthroughs in the Chinese steel industry at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held at the Grand Hyatt Erawan in Bangkok, Thailand on 24-25 April, 2023

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  • Global coking coal trade volumes rise nearly 8% in 2022. Know why?

    Global coking coal trade volumes rise nearly 8% in 2022. Know why?

    Despite the slump in world crude steel production in 2022, global seaborne trade in coking coal remained strong with imports of Coking coal and PCI increasing by 8% y-o-y to around 319 million tonnes (mnt) from 295 mnt in 2021, as per provisional data maintained with CoalMint.

    Leading importers

    India was the leading coking coal importer at 69 mnt in 2022, accounting for 22% of total global imports. India’s imports were almost stable y-o-y compared to 2021 China was the second-largest importer at 63 mnt. Imports by China rose 17% y-o-y, although crude steel production fell around 2%. Imports by Japan and South Korea remained largely stable y-o-y at 57 mnt and 22 mnt, respectively. Sentiments remained bearish on a gloomy global steel export outlook amid high inflation, supply chain problems in the auto industry and natural disasters. Europe’s coking coal imports fell by 15% y-o-y due to high energy inflation affecting steel production and demand following the outbreak of the Russia-Ukraine conflict. After Europe imposed a complete ban on Russian coal imports from 10 August global trade flows altered. The EU traditionally sourced 55-60% of its coking coal requirement from Russia and Australian and US coking coal made their way into the continent.

    Top exporters

    Australia was the largest coking coal exporter in CY22, although its share in global exports fell by 8% compared to 2021 due to bad weather. The La Nina event in the country led to heavy rains in the mining regions which affected operations, leading to supply disruptions. In addition, strikes by mine workers and unavailability of labour weighed on production. The US and Canada emerged as an alternative to Australian coal due to supply disruptions. Russia emerged as the second largest exporter with 47 mnt, an increase of 48% y-o-y. The war between Russia and Ukraine affected seaborne trade dynamics of coking coal. As more Russian coal found its way into China and India, Japan and South Korea reduced sourcing of Russian coal in response to Western sanctions.

    Why trade volumes increased?

    1. India’s crude steel production increased by around 6% y-o-y to over 124 mnt. Similarly, hot metal production also increased by 4% to 80 mnt from 77 mnt in 2021. For Indian importers of coking coal there was no major change in the demand scenario. Demand did not fluctuate much since the steel export duty fiasco but remained generally steady.

    2. The war with Ukraine took a toll on Russia’s steel production as well as exports. Data show that hot metal production in 2022 decreased by over 7% y-o-y to 50 mnt from 54 mnt in 2021. This left Russian miners with higher volumes for exports. After sanctions were imposed by the European countries on Russia following its invasion of Ukraine, the country started exporting coal at cheaper prices to Asian countries like China and India, resulting in a hike in export volumes. It may be mentioned that India imported 9.7 mnt of Russian coking coal in 2022, up 154% on-year, while China imported 21 mnt, an increase of 90% y-o-y.

    3. Global energy inflation drove steam coal prices to record highs across the globe, while steel production in many parts of the world suffered owing to high inflation and currency volatility. So, thermal coal prices soared way above coking coal prices globally forcing thermal coal users to switch to coking coal in many cases. This, in part, contributed to higher coking coal trade volumes.

    4. Although China’s crude steel production declined 2% 2022, domestic production of coking coal also fell marginally, thereby creating room for exports. Moreover, pandemic restrictions impeded the movement of domestic scrap for steelmaking, impacting EAF steel production. Higher shipments by Russia and Mongolia also account for higher imports by China. Mongolian shipments doubled y-o-y in 2022 as COVID-related restrictions were eased enabling truck movement across the border, while Russian cargoes were available at much cheaper rates since sanctions against Russia came into force in August.

    Outlook

    WSA has predicted steel demand to increase by 1% in 2023 to over 1.8 billion tonnes. Steel markets are expected to normalise in 2023, excluding China. Fitch expects global steel consumption to shrink by 60-65 mnt in 2022, with capacity utilisation dropping from 80% to 77%. China’s targeted reduction of steel production will account for 20-30 mnt of this, with the rest coming from demand destruction outside China. Incremental growth in steel consumption in 2023 is expected in India, Southeast Asia and the US.
    Therefore, coking coal demand will remain stable. Coking coal imports by India from Australia are also expected to remain stable in 2023, with the FTA between the countries leading to duty-free inflow of coal. Prices remained strong after a bumper 2022, driven largely by global energy prices and shortages cause by the Russia-Ukraine war. The other big-ticket item in January was the news that China is set to end its unofficial ban on importing coal from Australia, which is largely positive for global coking coal prices.

    Three central government-backed utilities and China’s top steelmaker would be allowed to resume imports. A recent report in the Australian Financial Review also indicates that Australian coking coal imports might displace lower quality and higher cost Chinese domestic or US coking coal, particularly for Chinese steelmakers in the southern region. Note that China’s proposed import duty on coal leaves Australia and Indonesia unaffected.

    Australia had diversified its coal exports to non-traditional buyers and ramped up supplies to traditional ones in the absence of China from the seaborne market. But now Chinese inquiries are expected to rise which may push prices higher. However, the continuing recovery of supplies from Australia will lead to an eventual correction, even if not significantly.

    Interestingly, Mongolia’s recent move to auction coal through the country’s stock exchange instead of direct sale by producers and traders at the border will directly impact Chinese buyers of Mongolian coking coal. We have to wait to see whether auction sales by Mongolia result in rationalisation of prices. Also, easing coal supplies via road from Mongolia after the withdrawal of pandemic restrictions and new investments in railway infrastructure are expected to reduce logistics costs and, therefore, coal prices.

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  • Russia: Coking coal exports rise nearly 50% in 2022 on higher shipments to China, India

    Russia: Coking coal exports rise nearly 50% in 2022 on higher shipments to China, India

    Russia’s seaborne exports of coking coal and PCI coal are estimated to have increased by a sharp 48% y-o-y to 47 million tonnes (mnt) in 2022 from around 32 mnt in 2021, as per provisional data maintained with CoalMint. Although sanctions on Russia cut off seaborne supplies to traditional importers such as the EU, Japan and South Korea, increased exports to China and India contributed to the growth in export volumes.

    The EU has hitherto been heavily dependent on imports of Russian coal, which accounted for 46.7% of all EU imports of solid fuel last year, according to Eurostat data.

    Leading importers

    Russian PCI and coking coals saw stronger demand in China, and also into India, trading at prices lower than for alternative coals from Australia and North America.

    Data reveal that Russia’s met coal exports to China increased by nearly 100% y-o-y to over 21 mnt in the year gone by. Despite China’s crude steel production falling around 2% y-o-y in 2022 and relatively low domestic coal prices due to extensive COVID-induced lockdowns, imports from Russia surged due to high discounts offered by Russian suppliers post imposition of trade sanctions.

    Russian met coal exports to India edged up even more sharply by over 140% y-o-y to 9.3 mnt. The country’s crude steel production increased by 6% y-o-y to over 124 mnt in 2022 while coking coal imports were stable at around 70 mnt. Cheaper Russian cargoes were lapped up by Indian coal importers amid high global coal prices following the outbreak of the Russia-Ukraine war.

    On the other hand, Russia’s exports to traditional markets such as Japan and South Korea fell by 40% and 59%, respectively amid sanctions.

    Moreover, the ban on the transport of Russian coal was amended in September and allowed for the provision of services like shipping, financing and insurance needed to transfer coal and other products by ship to destinations outside the EU in order to alleviate the energy crisis worldwide. Since then Russia’s seaborne coal exports jumped sharply, with many of the shipments going to Asia.

    Outlook

    Russia’s production of met coal increased by 4.5% to 105 mnt in 2022, as per Rosstat data. However, higher export shipments may not be possible due to logistical bottlenecks. Cancellation of discounts on coal freight levied by the RZD may exert pressure on suppliers to curtail discounts. Also, China’s lifting of an unofficial ban on Australian coal imports, higher shipments by Mongolia and enhancement of domestic production are likely to affect China’s imports of Russian coal.

    However, Russian suppliers looking to ramp up exports to China know that higher discounts are likely to increase the attractiveness of Russian cargoes, even for Indian buyers. Going forward, India’s coking coal demand is likely to increase and – quality considerations apart – if Australian supplies become costlier post China’s re-entry into the Asian seaborne met coal market, Indian buyers may have to fall back on Russia.

    2nd Asia Coal Trade Summit

    Will Russian met coal exports to Asia increase in 2023? How will trade dynamics pan out with the continued sanctions on Russian exports? How is Russia gearing up to consolidate its logistical networks to channel increasing volumes to Asian buyers in the coming years? For in-depth insights on such pressing issues and more, sign in for CoalMint’s 2nd Asia Coal Trade Summit to be held in Bangkok, Thailand on 24-25 April, 2023

  • Indonesia’s coal exports rise 10% in CY22. Will the momentum sustain in CY23?

    Indonesia’s coal exports rise 10% in CY22. Will the momentum sustain in CY23?

    Indonesia’s thermal coal exports increased by 9% y-o-y to 341.3 million tonnes (mnt) in calendar year 2022 (CY22), CoalMint data shows. Exports to India rose by 57% y-o-y. However, shipments to China and Vietnam recorded a decline in 2022.

    Indonesian shipments to India stood at 109.43 mnt in 2022. India faced a sultry summer in the year gone by, compelling the government to mandate power utilities to import 10% of their coal requirements for blending with domestic coal. Of the total volume of Indonesian coal imported by India last year, about 60% was imported during March-July when summer was at its peak.

    India apart, Indonesian coal shipments to South Korea and Japan increased by 30% and 37% y-o-y to 25.84 mnt and 17.65 mnt, respectively.

    In a significant development, Indonesia turned out to be the preferred destination for thermal coal imports by some Asian countries amid altered global trade dynamics. Sanctions on Russian coal imposed by the European countries resulted in increased demand for Australian coal from Europe. This played a crucial role in keeping Australian coal prices elevated. As a result, key buyers of Australian coal such as Japan and South Korea opted for more Indonesian coal.

    High-CV Indonesian 5800 GAR coal prices averaged $170/t FOB in CY22, an increase of 53% y-o-y. In contrast, Australian 5500 NAR coal prices averaged $196/t FOB in CY22, 14% higher than Indonesian thermal coal prices.

    Indonesian coal exports to Vietnam dropped as the country used more of domestic coal and avoided importing coal due to high prices.

    Outlook

    Indonesian thermal coal exports are likely to remain under pressure in the coming months as rising COVID-19 cases in China – a possible fallout of the Lunar New Year celebrations – may impact logistics, industrial activity and power demand. In India, demand from the power, textiles and cement industries may remain subdued due to increasing domestic production. However, the government’s recent mandate to power plants to import 6% of their overall requirements as a safeguard measure for the peak summer season is most likely to drive imports in the short term.

    2nd Asia Coal Outlook & Trade Summit

    Will Indonesian coal imports grow in the short-to mid-term due to cost competitiveness amid changing global trade flows? Or will rising domestic power generation by PLN tilt the policy focus towards conserving more fuel for domestic use? Follow the discussion at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held in Bangkok, Thailand, on 24-25 April, 2023.

  • Bangladesh banking on coal imports as energy demand soars

    Bangladesh banking on coal imports as energy demand soars

    The ever-growing demand for electricity has increased the reliance on coal globally, especially in emerging economies with underdeveloped renewable energy infrastructures and pressing energy security concerns. Bangladesh is a case in point.

    The country has increased procurement of imported coal in a significant way to make up for domestic scarcity of the fuel. Besides, commissioning of new coal-fired power plants has also pushed up demand for coal.

    As per data compiled by CoalMint, the country’s coal imports surged 44% y-o-y to 8.83 million tonnes (mnt) in CY22. Indicating strong demand, the total volume of imports in CY21 was already surpassed during the first 10 months of CY22.

    At the same time, tight supply and high prices of coal in the global market forced Bangladesh to re-work its procurement strategy.

    The sharp growth in imports was mainly driven by higher sourcing from Indonesia in CY22. On the other hand, intake from other traditional markets such as South Africa and Australia plunged 39% and 35%, respectively.

    Inadequate domestic supplies

    The Barapukuria Coal Mining Company (BCMCL), operator of the first and sole coal mine in Bangladesh, reported a decrease of 7% in annual coal production in FY21 (July 2020-June 2021). The company recorded 753,973 t of output in FY21 as against 811,137 t in FY20, thus attaining its lowest output in the past six fiscals.

    Given this subdued performance, the company suspended sales to local buyers from 19 March, 2018, in order to secure supplies for the power units of the state-run Bangladesh Power Development Board (BPDB).

    Of the total output, almost the entire volume was delivered to BPDB, while a nominal 610 t was supplied externally during FY21, as per the company’s report.

    In a fresh setback to the fuel security of power plants, the company is mulling to increase its coal pricing to compensate for the upward revision in royalty payable on coal. Moreover, the price hike was also necessitated to adhere to the proposed mining agreement that will require additional land acquisition to extract coal from the northern part of the mine.

    It is important to note that BCMCL has been selling coal at a fixed price of $130/t to BPDB since May 2015.

    Coal: A cheap option

    Due to availability of gas reserves, the gas-based plants in Bangladesh hold a majority share in total power generation capacity.

    Total installed capacity of BPDB-owned plants was 22,482 MW in FY22, of which gas-based plants’ capacity was 11,476 MW, whereas capacity of coal plants stood at a mere 1,768 MW. Plants based on diesel, furnace oil, renewables, etc. made up for the remaining share of power capacity.

    A comparative cost analysis indicates that gas is the cheapest source of power generation. However, coal was still economical than other

    alternative power sources – another reason for the country’s growing reliance on coal.

    Coal demand accelerates

    Fuelled by the commissioning of the two 660 MW units of the Payra power station, coal imports have started increasing at Payra port, which was established in order to facilitate coal imports for the power sector.

    Meanwhile, at least six other coal-fired power projects are expected to be commissioned, three of which, with a total capacity of 2,800 MW, are expected to be completed soon.

    As per a study by the International Energy Agency (IEA), coal consumption in Bangladesh declined by 0.8 mnt to 3.8 mnt in CY21 but is expected to grow by 2.8 mnt in CY22.

    The report suggests that the country’s coal power fleet would increase to around 5,000 MW by CY25, boosting annual coal demand to 19 mnt.

    2nd Asia Coal Outlook & Trade Summit

    Is Bangladesh’s energy security at a crossroads with the withdrawal of foreign investments from the country’s power sector? Does the country share this predicament with other emerging economies in Asia that are grappling with energy security concerns amid global inflation and depleting investments in coal-based assets? Want to be a part of the discussion? Check out registration details for CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held at Grand Hyatt Erawan in Bangkok, Thailand on 24-25 April, 2023.