Cashing in on lower global prices, China and India, the world’s top coal consumers, significantly increased their imports of thermal coal shipped by sea in March. This surge reflects their ongoing need to meet high domestic demand for electricity generation.

Data from commodity analysts Kpler shows that China, both the world’s largest producer and importer of coal, received significant shipments of thermal coal transported by sea in March. The total amount reached 29.7 million metric tons.

China’s coal imports in March were considerably higher (29.7 million tons), than both the previous month (23.03 million tons) and March 2023 (28.62 million tons).

China’s imports of thermal coal, the type primarily used for power generation, surged in the first quarter of 2024. They brought in 80.64 million tons by ship, reflecting a 17.2% increase compared to the 68.82 million tons imported during the same period in 2023.

China’s increased coal imports are fueled by two factors: a rise in domestic electricity demand and attractive prices for seaborne coal compared to domestically produced coal.

China’s demand for electricity is booming. Official figures show that in the first two months of 2024, power consumption surged 11% compared to the same period in 2023. This increase outpaces the overall economic growth rate (5.2%) and even the growth in power generation itself (6.9% in 2023).

China’s surging electricity consumption can be attributed to several trends. One is the growing number of electric vehicles on the road, requiring more power for charging. Additionally, there’s a rise in demand for air conditioning, appliances, and industrial processes that are shifting towards electricity, such as certain smelting techniques.

Lower hydropower generation due to drought conditions has also played a role. This shortfall is being filled by increased fossil fuel generation, mainly from coal-fired power plants, which has further driven up demand for coal.

Adding to the pressure to import coal, domestic prices in China remain comparatively expensive. For instance, thermal coal in Qinhuangdao reached 825 yuan (around $114).

While domestic coal prices have come down slightly from a peak of 940 yuan per ton in late February (currently at 825 yuan or $114), the price of imported coal grades favored by China has also been dropping, making them a more attractive option.

According to commodity pricing experts Argus, the price of Australian coal (with an energy content of 5,500 kcal/kg) fell to $87.37 per ton in the week ending March 28th. This represents a decrease from the previous high of $96.66 per ton in the week ending March 1st.

Similar to Australian coal, Indonesian coal prices have also decreased. Prices for coal with an energy content of 4,200 kcal/kg dropped to $55.70 per ton by the last week of March. This is down from a recent peak of $58.17 per ton in the week ending March 8th.

Despite transportation costs, import taxes, and variations in energy output, seaborne coal is currently a more economical option for some power plants, particularly those in southeastern China. This is because the landed price (including freight and duties) of imported coal with a specific energy content is currently slightly lower than domestic coal prices.

The increased attractiveness of imported coal is reflected in China’s rising import figures. In March, they received 20.24 million tons of Indonesian thermal coal, a significant jump from 16.96 million tons imported in February.

China’s growing appetite for imported coal extends to Australia as well. They brought in 5.08 million tons of Australian thermal coal in March, representing a three-month high. This is a substantial increase compared to the 3.45 million tons imported in February.

India’s prowess

India’s situation mirrors China’s. Strong growth in electricity demand is driving up coal imports, which reached 15.21 million tons in March, according to data from Kpler. This represents a steady rise from 14.09 million tons in February and 13.41 million tons in March 2023.

India’s thermal coal imports for the first quarter of 2024 surged by 23.8% compared to the same period in 2023. This translates to a total of 42.79 million tons imported, reflecting a significant increase from the 34.57 million tons brought in during the first quarter of last year.

India is expected to see continued high demand for coal in the coming months. This is because the South Asian country anticipates hotter-than-usual weather with more heatwaves between April and June.

Mrutyunjay Mohapatra, director-general of the India Meteorological Department, said that India’s weather department predicts a significant rise in heatwaves this coming summer.

Indonesia is the number one country exporting seaborne thermal coal to India. In March, they delivered the highest amount in four months, reaching 10.23 million tons.

Most of the coal trade between Australia and India focuses on metallurgical coal, used in steel production. Australia isn’t a big supplier of thermal coal, the kind used for power generation, to India.

The US is emerging as a key supplier of thermal coal to India, with shipments on the rise. March imports hit a three-month high of 1.10 million tons, and an even higher record of 1.62 million tons is expected to arrive in April.

While US thermal coal shipments to India are on the rise, imports from Russia are declining. March arrivals of Russian coal were only 730,000 tons, the lowest since November.

Getting Russian coal to India has become more expensive for two reasons. First, Western countries have imposed sanctions that make shipping it difficult and costly. Second, there are safety worries about transporting the coal through the Red Sea, which adds another layer of complication. As a result, the final price of Russian coal delivered to India has increased.

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