Pakistan's thermal coal imports drop 34% in 2022 amid elevated global prices

Pakistan's thermal coal imports plunged 34% y-o-y in 2022 to 10.4 million tonnes (mnt) compared to 15.6 mnt in CY21, CoalMint's vessel data reveals.

Elevated global coal prices in 2022 compelled Pakistani importers to look for substitutes like indigenous coal as well as coal from neighboring Afghanistan. Power crisis and surging fuel prices created higher-than-usual demand in the domestic market.

The Pakistani government had allowed entities to import Afghan coal in their local currency. Afghanistan also agreed to carry out deals in the Pakistani currency as the country is already facing severe lack of foreign investments in the mining sector due to sanctions by the US imposed on the country's interim government.

Imports from top coal importing destination, South Africa recorded a significant drop of 59% y-o-y in CY22 to 3.73 mnt. Pakistan's power plants use high-CV South African coal for power generation. But as prices touched all-time highs in 2022 and demand from European countries surged, the utilities switched to alternate-origin fuel from Indonesia and Mozambique.

Subsequently, imports from Indonesia rose 48% y-o-y to 4.84 mnt, whereas imports from Mozambique increased by 33% to 1.22 mn t.

Towards the middle of the year imports from Indonesia took up a major portion of the country's total imports, as Indonesian coal prices fell after touching the peak in March in the absence of Chinese buying interest due to Covid restrictions in that country. This encouraged Pakistani traders to secure supplies from the country.

Imports from Australia dropped 89% and from Russia by 65% y-o-y. In case of Russian coal, only China-backed power plants in Pakistan procured thermal coal from the country, whereas Australian coal had turned costlier because of its sprawling market in South Korea, Japan and Taiwan.

Demand from key sectors

Cement dispatches in Pakistan were hampered during the year due to factors such as rise in fuel prices, economic slowdown, flood impact in southern region, and political unrest.

Amid coal shortage and high LNG prices, the country started facing power outages and long blackouts. In an attempt to save energy, Pakistan's government cut working hours for public servants and ordered shopping malls and factories to shut early in various cities including Karachi.

It also inaugurated two new wind energy projects in the Jhimpir area: a 60 MW plant of Metro Wind Power Ltd. and a 50 MW renewable project of Gul Ahmed Electric Ltd. in Thatta district. This is expected to enable every new capacity installed in the country to avoid imported fuel for the protection of the environment. Also, it is expected that power production by expensive imported fuels would be phased out slowly in coming time.

HUBCO's 330 Mega Watt ThalNova Power Thar has been synchronized increasing the total production of power from Thar Coal to around 3000 MW.

Outlook

Given the high-price outlook for thermal coal in 2023, Pakistan's coal imports are likely to remain at a similar range. The country is focusing more on renewable projects for electricity generation which will limit its coal imports in the coming years.