Pakistan's thermal coal imports fall sharply by 40% m-o-m in November amid preference for domestic material

Pakistan's thermal coal imports declined sharply by 40% m-o-m in November after having seen a slight increase in October. Imports were recorded at 0.49 million tonnes (mnt) in November compared to 0.83 mnt in October, CoalMint's vessel line-up data reveals.

This sharp fall in imports can be attributed to rising dependence on domestic coal and increasing local movement of Afghanistan coal.

Imports from Indonesia recorded a significant drop of 71% m-o-m in November to 0.15 mnt whereas imports from South Africa rose by 48% m-o-m to 0.16 mnt.

Alternate coal-sourcing by Pakistan buyers

Amid elevated global coal prices and currency depreciation, coal buyers in Pakistan started opting for domestic material. In fact, in October, the country's government and independent power producers (IPP) had come to an agreement on the use of 10% domestic coal to produce electricity. Thar coal is the preferred fuel source for IPPs, according to the Private Power and Infrastructure Board (PPIB).

Also, the country has been importing higher volumes of Afghan coal since past few months and the movement is taking place via trucks. Under the trade, the Afghan government is awarding contracts to all domestic sellers who transport the extracted coal through trucks owned by Afghans. The coal-laden trucks cross over into Pakistan after paying toll tax and an export duty to the Afghanistan government.

Cement sales take a hit in November

Pakistan's cement industry has recorded a 17% y-o-y contraction in sales in November. Sales declined by 22% y-o-y in the first five months of FY23 (July - November 2022). Subsequently, lower cement sales have also impacted demand for imported coal.

Cement sales were disrupted due to several factors, including increased fuel prices, overall economic slowdown, flood impacts in the southern region, political unrest and multiple hikes in interest rates.

Pakistani companies' efforts to reduce imported coal

Thar Energy Limited (TEL) power plant commenced operations as on 1 October 2022, with an aim to reduce dependence on imported fuels to produce electricity in line with the indicative generation capacity expansion plan (IGCEP).

Presently, there are three power plants configured to use domestic coal with a combined capacity of 1,650 MW.

Pakistan's Lucky Cement also plans to increase its capacity from 12.15 mnt to 15 mnt by December 2022. The company uses about 80% thermal coal and 20% green energy. However, after the completion of 34 MW solar plant in Q2FY23 in Pezu and the addition of 25.3 MW in Khyber Pakhunkhwa, the thermal substitution rate would reduce to 62%, and green energy would increase to 38%.

Two new wind energy projects have been inaugurated - a 60 MWs plant of Metro Wind Power Ltd and a 50 MWs renewable project of Gul Ahmed Electric Ltd in Jhimpir, district Thatta.

Commenting on this, Pakistan's Federal power minister Khurram Dastgir Khan said, The launching is to enable every new capacity installed in the country to avoid imported fuels for the protection of the environment. Also, power production on the basis of expensive imported fuels would be phased out slowly in the upcoming time.