Global coal imports heading for second year of ‘dramatic’ drops

Global coal imports heading for second year of ‘dramatic’ drops

Nearly all of the 47% growth in total world coal trade between 2008 and 2013 was driven by rising coal import demands by countries in Asia, specifically China and India… Not anymore.

This has been a particularly bad week for the global coal industry, already battling multi-year low prices for the commodity.

On Monday, the Institute for Energy Economics and Financial Analysis (IEEFA), set off fresh alarm bells by announcing that consumption of the fossil fuel was on track to drop an additional 2% to 4% before the end of the year. This as China, the top consumer, is stepping up efforts to battle against pollution, and global efforts to promote renewable energy are on the rise.

Now is the U.S. Energy Information Administration’s (EIA) turn, which said Friday it expected coal imports and exports to dramatically fall in 2015 for the second year straight.

The agency pointed the finger at China and India, which from 2008 to 2013 accounted for 98% of the increase in world coal trade. In the rest of the world, exports and imports of the commodity declined over the same period.

Preliminary data for 2014 and this year indicate a reversal of this trend, with declines in China's coal imports currently on pace to more than offset slight increases in other countries in both years, said the EIA.

Global coal imports heading for second year of ‘dramatic’ drops

Coal imports by China, responsible for about half of global coal demand, has already fallen by 31% in the period between January and August this year. The EIA attributes this to rising output from domestic mines, improvements in coal transportation infrastructure, and slower growth in domestic demand of the fuel, which have resulted in lower domestic coal prices and reduced demand for coal imports.

In India, domestic coal production has been on the rise, but the EIA doesn’t think that trend will be sustained for long.

Global coal imports heading for second year of ‘dramatic’ drops“Efforts are underway to substantially increase domestic coal production over the next few years and to complete three major rail transportation projects for facilitating increased shipments of coal from major producing regions in northeastern India to demand centers in other parts of the country,” it said.

Coal producers, however, have a two-year window, based on the report. While India's coal miners increased domestic production last year and through the first few months of 2015, the first of three major coal railway projects, the Jharsuguda-Barpali railway link, won’t be completed until approximately 2017, it said.