Seaborne coal market to be undersupplied in 2022: Noble

Seaborne thermal coal demand is expected to hold steady this year, supported by increased demand from India and Europe, with the market expected to be undersupplied, according to commodity trader Noble Resources.

Noble projects this year's global thermal coal demand at 996mn t, against a supply of 983mn t. This scenario could further support international coal prices, which are hovering at multi-year highs. Argus most recently assessed Indonesian GAR 4,200 kcal/kg coal on 16 September at a four-month high of $87.35/t fob Kalimantan.

Indian thermal coal imports this year have remained strong from a year earlier, led by restocking demand by utilities, while gas-coal fuel-switching dynamics favoured European demand for seaborne thermal coal with sharp rises in natural gas prices after the Russia-Ukraine conflict. Noble expects gas prices to remain high, supporting coal demand, said Noble's head of research Rodrigo Echeverri at the Coaltrans Asia 2022 conference.

The European LNG demand is expected to rise further next year but supplies are only expected to increase meaningfully from 2025 onwards, he added. Several European countries including Germany, the UK, and France are bringing mothballed coal-fired units back on line.

Indian authorities have directed the country's utilities to replenish inventories, especially after the April-May heatwave exacerbated stock drawdowns and brought the country to the brink of large-scale blackouts. India is expected to import 171mn t of thermal coal this year, up from 149mn t a year earlier, Echeverri said.

Imported thermal coal demand from the Atlantic region, including European countries, appears to be strong. Thermal coal imports by the Atlantic region — including purchases by European as well as north and south American countries — are expected to end the year at 180mn t, up by 39mn t from last year, he said.

Demand from north and southeast Asian countries is also strong this year, with Japan and South Korea expected to raise imports this year, he added. Rising imports in other markets would partly offset the expected decline in receipts of seaborne coal by China, although demand from Chinese buyers has recovered sharply in the last three weeks.

Chinese thermal coal imports is expected to drop by 45mn t to 210mn t this year, Echeverri said, underscoring weak industrial activity. Slowing economic growth in the second quarter, spurred by renewed Covid-19 lockdowns, is a headwind to demand for the rest of the year. China's domestic output has been steady with January-July production hitting a record 2.6bn t, up by 14.3pc on the year, National Bureau of Statistics data showed.

Indonesia to lead supplies

Seaborne thermal coal supplies this year will be predominantly led by increased shipments from Indonesia, although overall global coal supplies are expected to continue lagging demand.

Indonesian coal exports are expected to rise by 20mn t in 2022 to 467mn t, Echeverri said, still short of the government-set target of 497mn t. Indonesian coal exports rose in July from a year earlier, driven by strong demand from India. It shipped around 44mn t of coal in July, up from 40mn t a year earlier and 41mn t in June, customs data showed. Shipments have recovered from a low of 13mn t in January during the country's export ban.

The increase in Indonesian exports will offset the expected decline in shipments from Australia. Australian thermal coal exports are expected to fall by 13mn t from 2021 to 183mn t this year, he said.

By Saurabh Chaturvedi