Bartlett reported in late 2022 that Russia’s invasion of Ukraine and the resulting disruption to energy supplies has pushed global coal consumption to a new record this year, according to the Paris-based International Energy Agency (IEA). The world will consume more than eight billion tonnes of coal this year, climbing 1.2% and exceeding the previous record year of 2013, the IEA said in a report at the end of last week. Indian coal demand is set to climb by the biggest margin – 7% – followed by the European Union at 6% and China, 0.4%.
The Agency’s director of energy markets and security, Keisuke Sadamori, commented: “Coal demand is stubborn and will likely reach an all-time high this year, pushing up global emissions … The world is close to a peak in fossil fuel use, with coal set to be the first to decline but we are not there yet.”
But Russian coal exports down, tonne-miles up (more). The world’s three largest producers – China, India, Indonesia – will all set production records this year. However, increases in domestic consumption account for much of the extra production. Despite high prices and significant margins for coal producers, there is no sign of surging investment in export-driven coal projects, the IEA noted. Meanwhile, European coal demand has risen sharply this year because of disrupted gas supplies from Russia. Global coal-fired power generation is likely to hit a new peak of 10.3 terawatt hours in 2022 as global coal production also sets a new record, rising by about 5.4% to 8.3 billion tonnes.
Menwhile NYK orders LNG-fuelled coal carrier pair from Oshima (here).
Changes to the world’s energy supply chain have significant implications for shipping. Increases in dry bulk tonne-mile demand relating to global coal movements are significant, according to shipping analysts, with volumes up on coal trades from South Africa, South America, and Australia. Meanwhile, latest market reports indicate that Turkey has ramped up its imports of Russian energy, both coal and oil.
Howard reported in October, 2022 that in the two months since the EU banned coal imports from Russia, export volumes have fallen 7% on-year, according to Bimco. The EU’s import ban began on August 10, 2022 and in the almost two months since, Russia’s coal export volumes were down 7% year-on-year and 5% year to date, the association said. With the EU off-limits, Russia has had to look further afield for coal consumers, leading to a near-30% increase in tonne-mile demand, despite the lower volumes. The average haul for Russian coal has risen by almost 50% since sanctions were announced in April.
But weaker dry bulk market forecast in 2023 (here).
“So far, capesizes have seen the biggest increase in tonne miles following the ban, largely due to India’s increased interest in discounted Russian coal. India’s government mandated an increase in coal imports over the summer, due to a surge in energy demand and low coal inventories. This resulted in a boost to tonne miles as capesizes laden with Russian coal from European ports sailed around Africa,” says Filipe Gouveia, Shipping Analyst at Bimco.
“As import demand from India normalises, it is unclear whether the country will continue to buy Russian coal shipped from primarily Black Sea, Baltic and Arctic ports,” Gouveia said.
Meanwhile, the case for investing in 10-year-old dry bulk ships (here).
Although China has imported 25.7% less coal year-to-date, volumes from Russia rose by 3.5% due to bargain prices. China is Russia’s largest coal buyer, supplying over a fifth of China’s importsa
“In the coming months, panamax and supramax ships should continue to see demand from China for Russian coal. However, the country’s ambitious coal mining target and increasing investments in renewable energy could cool the appetite for coal imports. In the first eight months, coal mining increased 13.8%, while electricity production from renewables rose 16.7%,” adds Gouveia.
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