LAUNCESTON, Australia, Aug 27 (Reuters) – Asia’s imports of seaborne thermal coal increased in August to the highest level in eight months, driven primarily by the developed economies of North Asia rather than the usual heavyweights, China and India.
Data from commodity analysts Kpler shows that 79.87 million metric tons of thermal coal, mainly used for electricity generation, will reach Asian ports in August. This is an increase from July’s 77.1 million tons and marks the highest volume since December’s 80.54 million tons.
The rise in thermal coal demand in Asia has been largely fueled by warmer-than-usual summer weather, which has led to higher demand for air conditioning. The most significant increase in coal consumption has been observed in the developed economies of North Asia, particularly Japan, South Korea, and Taiwan.
Japan, Asia’s third-largest coal importer after China and India, is expected to import 9.09 million tons of thermal coal in August, down slightly from July’s 9.53 million tons, according to Kpler. However, July and August have been Japan’s strongest months for thermal coal imports since the peak winter month of January, with August’s imports also surpassing the 8.91 million tons imported in the same month last year.
South Korea, Asia’s fourth-largest coal importer, is on track to import 8.27 million tons in August, the highest since July 2022, up from 6.58 million tons in July. Taiwan’s imports are estimated at 4.13 million tons in August, a slight decline from July’s 4.46 million tons, but these two months represent the strongest imports since September last year.
A common trend among Japan, South Korea, and Taiwan is their preference for higher-grade thermal coal. The benchmark for this grade is Australian coal loaded at Newcastle port, with an energy content of 6,000 kilocalories per kilogram (kcal/kg). According to commodity price reporting agency Argus, the index for this grade reached $146.03 per ton in the week ending August 23, the highest since late December. This represents a marginal increase from $145.92 per ton the previous week and a 11.7% rise from its mid-year low of $130.68 per ton in the week ending June 28.
While demand for high-quality Australian coal has been driven by North Asia, the same cannot be said for lower-grade fuel, preferred by China, India, and Southeast Asian buyers like Vietnam and Malaysia. Australian coal with an energy content of 5,500 kcal/kg fell to $86.41 per ton last week, marking its fourth consecutive weekly decline and the lowest price since April. Similarly, Indonesian coal with an energy content of 4,200 kcal/kg dropped to a one-year low of $50.64 per ton in the week ending August 23, its fifth consecutive weekly decline.
Indonesia remains the world’s largest exporter of thermal coal, followed by Australia, with China and India as the primary buyers of Indonesian cargoes and lower-grade Australian fuel.
China’s imports of seaborne thermal coal slightly increased in August to 29.97 million tons, up from 28.52 million tons in July. However, for the past four months, China’s thermal coal imports have remained stable, hovering around 30 million tons, suggesting that the strong growth in demand over the past two years is beginning to plateau.
India is expected to import 13.45 million tons of seaborne thermal coal in August, slightly down from July’s 13.67 million tons. Like China, India’s imports have remained steady over the past three months, around 13.5 million tons.
The stable import figures for China and India help explain the recent downward trend in the prices of lower-grade coal. In contrast, rising imports in North Asia’s developed economies have driven up prices for higher-quality coal.
However, North Asia’s demand for coal is typically seasonal and may decline as the region moves between its summer and winter peaks. This seasonal shift could place downward pressure on the Newcastle Index price. Nonetheless, much will depend on whether utilities in these countries choose to maintain ample stockpiles ahead of the winter peak, potentially leading to stronger-than-usual demand during the shoulder season.