Due to an increase in domestic costs for the polluting fuel and a rise in electricity demand, China’s growing hunger for thermal coal exports has sparked a flurry of deal-making at the largest industry convention in the world, which is taking place in Indonesia.
The three-day Coaltrans conference, which finished on Tuesday, attracted traders supplying China and representatives from mining companies in top exporter Indonesia who were keen to make agreements.
According to a presentation delivered at the conference, Rodrigo Echeverri, head of commodities research at Noble Research, China’s imports of the fuel used to generate electricity are anticipated to increase by another 49 million tonnes in 2024, reaching a record 329 million tonnes.
“They (Chinese purchasers) believe that demand will increase. On the fringes of the conference, Ramli Ahmad, President Director at Indonesian coal miner Ombilin Energi, said that demand is also extremely high in non-power sectors like the chemical industry.
The world’s largest user and importer of coal, China, is expected to maintain its demand, which, according to traders, might postpone the peak in global coal usage anticipated under climate targets. Miners will be able to supply coal for longer at competitive rates.
A struggling real estate market in China is slowing down economic growth, while adverse weather conditions and increased economic activity in other sectors have increased demand for coal and energy.
According to six Chinese traders contacted by Reuters, the fourth quarter of 2023 would see an increase in overall imports due to bad weather. A sixth trader predicted that imports would be lower than 2023 levels, while five of them predicted that they would be greater than 2023 levels but lower than Noble’s projection.
Because they are more concerned about the economy than the skies, they will burn more coal. Therefore, I believe that the rate of growth in Chinese demand will remain the same, said a seventh trader from a significant global trading company.
A significant coal consumer in China predicted increased government intervention to spur economic growth, notably in the real estate industry, and added that the addition of new coal-fired capacity to balance the grid could cause imports to increase marginally by 2024.
According to Coalshastra, an event partner, the number of attendees from China at the conference this year was more than previously. For many Chinese traders, whose overseas travel was prohibited due to severe Covid controls, it was their first international meeting.
I have had individuals question me, “Can we close, can we close the deal?” “This particular CoalTrans already has a lot of deals happening,” stated Ahmad.
Power demand has increased due to excessive heat and increased industrial activity as a result of Covid regulations being relaxed, but hydropower generation has decreased at the fastest rate in more than three decades due to insufficient rainfall.
Echeverri claimed that a decline in the average calorific value of domestically mined coal, a measure of quality, was also a factor in the increased imports. For power plants to generate the same amount of energy as they would by burning coal with a greater calorific value, more coal of lower quality must be burned.
“China has numerous fundamental challenges with the production, availability, and quality of coal. Because of these problems, China may have a structural coal shortage in the upcoming years, he added.
References :
Varadhan, S. (2023, September 26). Chinese demand drives deals at world’s largest coal conference. Reuters. https://www.reuters.com/markets/commodities/chinese-demand-drives-deals-worlds-largest-coal-conference-2023-09-26/
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