Ocean-Bound Coal Shipments Reach An All-Time High!

Credit: Freight waves

Contrary to the narrative of coal’s decline, the IEA reveals that coal production, consumption, and shipping are at record highs in 2023.

“Demand to ship coal has been a good support for the dry bulk market over the first half of the year,” said ship brokerage BRS on Thursday. “Despite coal demand in Europe and North America resuming its downward trend, Asia has provided an offset as demand continues to grow there.”

Record Consumption and Production

“As Europe cuts down on its coal-fired power generation to be in line with its green energy transition, China and India have continued to add further capacity at levels that far exceed the current pace of power plant retirements,” said ship brokerage SSY on Monday.

SSY noted that 86% of Chinese coal plants are less than 20 years old, and 52% are 10-20 years old. “Considering that the average lifetime of a coal power plant is 40 years, a full capacity phaseout like the one targeted by Europe is unlikely to be replicated,” said SSY.

IEA forecasts 8.39 million tons of global coal demand in 2023, primarily in China, India, and Southeast Asia, while China’s share accounts for 56%. Worldwide coal production, led by China, India, and Indonesia, is set to exceed last year’s 8.63 million tons.

Indian production cuts coal imports by 7%, impacting Indonesian coal on Capesize bulkers, while China’s increased domestic production pairs with a 77% surge in coal imports, led by Indonesia, Russia, and Australia, according to BRS.

US Export

  • The U.S. was once the world’s largest coal producer but has fallen down the ranks. Current production is less than half the 2008 peak.
  • The U.S. Energy Information Administration (EIA) predicts that the U.S. will export 90 million tons of coal this year, up 16% versus 2022. Exports are projected to rise further, to 94 million tons, in 2024.
  • The EIA expects 22% of U.S. production to be exported next year. In 2008, when U.S. coal output peaked, only 7% of production was exported.

US Coal CEOs Focus On Exports

“What we’ve seen is an ongoing, significantly increased amount going to Asia,” said Lang. “It wasn’t all that long ago that we had minimal volumes going into the Asian market.”

According to Deck Slone, Arch Resources’ senior vice president of strategy, “We focus a huge amount of attention on building out that Asian presence. That’s where the growth is going to be.”

Lang added: “If we ultimately have to, we’re ready to go 100% exports.”

Mitesh Thakkar, CEO of Consol Energy, said exports accounted for 78% of Consol’s second-quarter recurring revenue. Consol is pursuing “a strategic shift toward export demand growth,” he said.

Bob Brathwaite, Consol’s senior vice president of marketing, said, “We’ve shipped cargoes to new end users into India, into China and also into Indonesia.” 

Joseph Craft, CEO of Alliance Resource Partners, said, “We’re totally focused on the international markets.”

According to Jim Grench, CEO of Peabody Energy, “We see the seaborne markets as the growth markets in demand, for both metallurgical and thermal coal. As we’ve stated many times — and it hasn’t changed — our focus is on the seaborne markets.”

Canal Delays Positive For Shipping Rates

Most U.S. coal exports headed to Asia are loaded aboard Panamaxes (bulkers with capacity of 60,000-99,000 DWT) and routed through the Panama Canal.

Braemar expects bulkers returning from Asia to avoid the Panama Canal and instead go via the Suez Canal or Cape of Good Hope on their ballast (empty) legs. “These longer ballasts should tighten the supply of tonnage in the Atlantic and provide support [to rates] in the coming months, particularly as grain enquiries in the U.S. Gulf pick up going into September.”

BRS reported earlier this month that “coal-laden ships out of the Atlantic are deviating from their preferred Panama Canal route due to increasing transit times. Any changes to the fronthaul trade routes will increase voyage days from about 35 days via the Panama Canal to 50 days via the Suez Canal for coal loaded at the U.S. port of Burnside [Louisiana] to discharge in Rizhao, China.”

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Source : Freight Waves


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