Australia's thermal coal exports in September drops by 19% amid trade tensions with China

The strained bilateral trade relation between Australia and China seems to have taken a toll on Australia's thermal coal exports in Sep'20. The same has plunged by 19% m-o-m from 18.6 mn t in Aug'20 to 15.2 mn t in Sep'20, vessel-line up data with CoalMint reveals.

Thermal coal exports to China have nosedived by 58% m-o-m in Sep'20 and is recorded at 1.52 mn t.

*Qty in mn t

Falling gas prices affects coal demand in Japan and Taiwan

• Australian thermal coal exports to Japan and Taiwan have fallen by 23% and 16% m-o-m to 4.85 mn t and 2.03 mn t respectively.
  
  
• High coal inventory at Japanese utilities and an increased preference for LNG in both Japan and Taiwan has adversely affected coal demand in both these Asian countries.
  
  
• The imported LNG prices in Japan for Sep'20 have fallen by 16% y-o-y basis to $4.5 per mmBTu against $5.4 per mmBTu in Sep'19.
  
  
• This coupled with a forced increase in gas consumption in response to high stocks and an oversupply of contractual import volumes have weighed on seaborne coal demand in Japan and Taiwan.
  
  

Russian coal becomes competitive in South Korea

• Thermal coal exports to South Korea from Australia have fallen by 12% m-o-m at 2.08 mn t.
  
  
• It is learned that Russian coal has become highly competitive in South Korea compared with other origins as implied generation costs for Australian and Indonesian coal has advanced by $2.6/MWh and $1.3/MWh as against only $0.98/MWh increase in cost based on Russian coal.
  
  
• Along with this, coal consumption in South Korea has been hit by competitive gas prices, rising nuclear energy available and weaker power demand.
  
  

Thermal coal exports to India record sharp rise

• Amid poor demand from its key export destinations Australia has had to divert its material to alternate markets like India, which is a major thermal coal importer.
  
  
• In September, Australia's thermal coal exports to India surged by 109% m-o-m at 1.79 mn t against 0.84 mn t in Aug'20.
  
  
• The falling prices and higher CV (calorific value) has made Australian coal an attractive option especially for Indian cement manufacturers and few power producers in the coastal belt. Since Jan-Oct'20, the Australian (5500 kcal/kg NAR) thermal coal prices have plunged by 52%.
  
  

Recent trade deals in India

• In a confirmed deal, an end-user has booked 75,000 tonne 5500 NAR Australian coal from Glencore for $36/t, FoB basis for November shipment.
  
  
• Whereas, another deal was confirmed for 130,000 tonne of 5500 NAR Australian coal to an Indian trader for $36/t FoB basis.
  
  Australia's portwise thermal coal exports

  Port	Jul'20	Aug'20	Sep'20
  Newcastle	11.0	14.3	12.2
  Gladstone	1.4	2.1	1.1
  Abbot Point	0.7	1.2	0.8
  DBCT	0.3	0.6	0.8
  Brisbane	0.5	0.3	0.3
  Port Kemble	0.2	0.1	0.1
  Total	14.0	18.7	15.2

  Qty in mn t
  
  

Outlook ahead

Market experts are of the opinion that there will be increased coal and LNG demand in the winter months. Meanwhile, Australia is likely to continue diverting coal exports to other Asian countries In line with restricted demand from China. Subsequently, Australian coal exports to India are likely to stay firm this year as prices are anticipated to remain at lower levels, making it attractive to the buyers.