Australia: Thermal coal exports up 20% in April as Indian demand recovers

Australia's thermal coal exports, which had been falling on a month-on-month (m-o-m) basis since the last three months, have recorded a noticeable jump of 20% in Apr'21. These stood at 15.7 million tonnes (mn t) in the month under review against 13.1 mn t in Mar'21, CoalMint's vessel line-up data revealed.

While Australia's thermal coal exports to its top two destinations of South Korea and Japan fell marginally by 2% and 0.4% respectively, exports to India surged by 117% to 2.04 mn t. Exports to Taiwan rose by 60% m-o-m to 2.77 mn t.

Why Indians resorted to Australian coal bookings?

In Mar'21, disruption at Newcastle Port and rail lines due to heavy rains resulted in its subsequent shut-down for a few weeks, which resulted in supply constraints from ports and reduced exports during the month.

But, by the first week of April, when the supply constraints had eased, India, a key importer of Australian coal, was back to booking in good volumes despite the high freights.
The major buyers of Australian coal have been cement manufacturers who increased their bookings due to the ongoing restocking season (Apr-May) before the monsoon kicks in in India.

Another reason behind the higher levels of Australian coal bookings was the escalation in South African (SA) coal prices. SA coals are used by power plants and cement manufacturers located especially on the coastal belt of India.

The difference between the landed cost of South African and Australian 5,500 NAR grade coals averaged at $10/tonne (t) in Apr'21. The current price for 5,500 NAR grade Australia coal is trending at 55/t, FoB basis whereas South African 5,500 NAR has touched a high of $80/t, FoB RBCT.

Other countries update:

South Korea's thermal coal imports from Australia fell amid an expected drop in coal-fired generation, driven by restrictions imposed on state-owned coal-fired plants as a measure to control air pollution. Also, gas-fired generation costs were generally lower in April while coal-fired costs rose, which, in addition to the coal restrictions, weighed on coal burn and supported gas-fired generation.

In the case of Japan, an increase in coal-fired capacity constraints and recovering nuclear availability capped its thermal coal demand in April. Nuclear availability was reduced in Japan in previous months due to outages.

Vietnam, which became a key importer of Australian thermal coal when the latter's prices corrected last year, saw an increase in imports by 33% in April due to containment of Covid cases and revival of industrial activities.

Outlook

In the ongoing scenario of increased freight and slowed-down construction activities due to rising Covid cases, Indian importers are shying away from import bookings, whereas in the case of South Korea and Japan, restrictions on coal-fired generation would cap any increase in Australian coal imports.