Last updated: August 12. 2014 5:12AM - 1252 Views
By - fpace@civitasmedia.com

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Even though global coal production has swelled up, there have been no signs of production slowing down in major coal-exporting countries, stretching the already oversupplied market.

Global coal oversupply has been a major contributing element to the current weak coal market conditions, according to a report by SNL Energy.

According to data available with SNL Energy, coal shipments from seven major exporting countries during the January-May period were roughly 40 percent of the total coal export targets estimated for these nations during full 2014.

A Reuters report said global market for seaborne thermal coal will be oversupplied by roughly 10 million tonnes in 2014. Bank of America Merrill Lynch has forecasted a global surplus in metallurgical coal over the next several years despite an estimated 20 million tonnes of announced production cuts, the report stated.

The growing surplus and slowing demand is prompting some to forecast a shift in Asian import-export trends.

“China, which had turned into a net coal importer in the recent years, could return to being an opportunistic coal exporter within the next couple of years, as the country looks to hit its peak coal consumption in 2016, declining thereafter,” Tim Buckley, director of energy finance studies at Institute of Energy Economics and Financial Analysis, told SNL Energy.

Coal shipments to China, the current largest coal importer in the world, totaled 327.1 million tonnes in 2013, almost 192 million tonnes more than what was shipped in during the same period by the next big importer, India, according to the report.

In May, China’s coal imports were 24 million tonnes, compared to 15.6 million tonnes imported by India, the report said.

“China still consumes 50 percent of the world’s thermal coal and forms 20 to 30 percent of all the coal import demand today, making it the driver of the global seaborne coal demand,” Buckley said. “On the other hand, there have been numerous factors signaling India was still way behind in steering the global coal export market.”

India recently got a new prime minister, who has been focusing on revitalizing domestic energy production rapidly, including of coal, Buckley added.

“The Indian government recently increased coal customs duty to 2.5 percent from 2 percent for importing thermal coal,” said Buckley. “For coking coal imports, the customs tax has been increased to 2.5 percent from none previously. Also, a tax has been doubled on all coal consumption to 100 Indian rupees/tonne to fund the country’s energy goals.”

In addition, there have been already calls from climate experts and environmentalists pressing India for the use of renewable and nuclear energy sources in order to satisfy the country’s power needs, a news report suggested.

Another factor that may slow down Indian imports is domestic electric utilities, the largest consumers of imported coal in India, were not stepping up coal purchases despite global prices hovering at multiyear lows.

A report from The Economic Times said Indian utilities were unwilling to pay for costly power generated by plants running on imported coal.

Keep reading the full report and analysis here: http://www.snl.com/InteractiveX/Article.aspx?cdid=A-28748533-11052

(Fred Pace is the Editor for the Coal Valley News. He can be contacted at fpace@civitasmedia.com or at 304-369-1165, or on Twitter @fcpace62)

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