Pakistan's coal imports surge over 30% in August on sharp rise in Indonesian shipments

Pakistan's thermal coal imports rose for the second straight month by 33% month-on-month (m-o-m) to 1.2 million tonnes (mnt) in August, CoalMint vessel data reveals.

The rise in imports came with the sharp spurt in shipments from Indonesia on relatively cheaper prices of coal from the country as well as other origins amid elevated Afghan coal prices.

Indonesian coal prices for 5800 GAR grade averaged at $165/t FOB whereas South African 5500 NAR grade coal prices were at $210 FOB in August.

Following the Russia-Ukraine conflict in March this year, global thermal coal prices surged and Pakistani buyers switched to neighbouring Afghanistan due to its relatively cheaper coal. However, amid increased demand, the Afghanistan government increased its high-CV coal price from $90/t to $280/t by mid-July.

Prices of coal in Afghanistan continue to trade higher with elevated custom duties, as it is the key source of revenue for the cash-strapped country. In July, the Pakistani government approved the purchase of Afghan coal in the local currency.

"Traders have expressed their concern at high Afghan coal prices and have urged the Afghan government to reduce taxes and duties on coal exports to Pakistan," said a Pakistani trader.

Trade flow

*Qty in mnt

Strong demand from power sector

Pakistan's currency witnessed devaluation by 30% against the USD between March-July but appreciated by 9% in August, motivating the country's buyers to opt for imports once again, especially buyers in the power sector.

The energy crisis in Pakistan continues to deepen (amid higher coal prices) as the electricity shortfall widened to 6,800 megawatts, causing outages of 5-6 hours in cities and 8-10 hours in the rural areas.

According to the country's Ministry of Energy, Power Division, electricity demand in the country surged to 28,200 megawatts last month, while the power supply stood at 21,800 megawatts.

Weaker Chinese demand for overseas coal last month kept Indonesian coal prices rangebound which resulted in buyers in Pakistan increasing their purchases from the country.

Demand from cement sector weakens

The Pakistan Cement Manufacturers Association (APCMA) has estimated a decline in the country's' cement dispatches in August as the country is experiencing economic challenges, currency devaluation, rising inflation, political unrest and floods due to heavy rains.

The country's total coal dispatches fell by 24% y-o-y to 3.3 mnt in August. While domestic dispatches fell by 24% y-o-y to 2.9 mn t, exports fell by 26%.

In all, in the first two months (July-August) of the current fiscal year, total cement sales stood at 5.3 mnt, which were 35% lower than sales of 8.2 mnt in the corresponding period of last year.

Outlook

Despite high prices, Pakistan's coal imports are likely to remain within a similar range in view of the need to cater to domestic power demand. However, if there is any depreciation in Pakistan's currency, imports may be impacted once again.