MOVES by China to increase coal imports from near neighbours Indonesia and Russia are set to affect ‘tonne-mile’ demand, analysts Banchero Costa report.
A revenue tonne mile is calculated by multiplying the weight in tonnes of the shipment transported by the number of miles transported.
BC noted predictions from Thomson Reuters Supply Chain that China was on track to have increased coal imports around 14% year-on-year to 126.6 million tonnes in the first half of 2018.
“However, the increase in tonne-mile demand could be less significant this year, as the gains come from shorter haul supply sources Indonesia and Russia, while volumes from the US fall,” BC reported.
Indonesian coal exports to China were estimated to reach 61.8m tonnes or about 49% of Chinese imports in the first six months of 2018, up from 46.3m during the same period in 2017.
Imports from Australia were estimated at 42.8m tonnes or 34% of China’s imports in the first half year, slightly higher compared with the 42.6m tonnes shipped during the same period in 2017.
“The increase in Indonesian coal imports appear to run counterintuitive to China’s measures of reducing air pollution from coal burning, as Indonesian supplies are typically of lower grade with a low calorific value, these same supplies also tend to be low in sulphur,” BC reported.
“Indonesian coal, which trades at less than half the value of higher-quality thermal coal from Australia, is thus useful for blending with higher-sulphur domestic supplies or imports.”
The Australian government says Australia provides about 30% of the world coal trade, being the largest exporter of metallurgical coal (for making steel) and the second largest exporter of thermal coal (for power stations).
Australia is understood to be the fourth largest producer and have the fifth largest resources of black coal in the world.
According to the Department of Industry, Innovation and Science, major importers of Australian metallurgical coal are Japan, India and China, while Japan is the dominant importer of Australian thermal coal.
However the use of fossil fuels remains controversial, with critics pointing to it as a key factor in human-driven climate change.