SteelMint Events

Category: 2nd Asia Coal Trade Summit

  • How will increasing Indonesian met coke capacities impact Asian trade dynamics?

    How will increasing Indonesian met coke capacities impact Asian trade dynamics?

    Indonesia, the world’s largest coal exporter with a global share of around 45%, is on the verge of becoming a major supplier of metallurgical (met) coke thanks to hefty investments by Chinese companies. As per CoalMint estimates, over 17 million tonnes (mnt) of coke production capacity is coming onstream in Indonesia, which will play a key role in feeding the growing steelmaking needs of the region.

    Indonesian coal is mainly thermal or steam coal, and availability of metallurgical (coking) coal is limited due to the resources being located in remote hinterlands of the country which are largely unexplored. Only a part of the thermal coal production is consumed domestically – mainly for power generation – while the major portion is shipped abroad.

    Indonesia’s Energy and Mineral Resources Ministry has projected that 695 million tonnes (mnt) of coal will be produced in 2023 out of which around 518 mnt will be exported.

    Steel scenario

    The coking coal produced in Indonesia is consumed in small-scale coke plants for use in steelmaking but the domestic ironmaking industry in Indonesia is still underdeveloped. South Kalimantan has estimated iron ore resources of around 500 mnt. The plan for development of the iron and steel industry in South Kalimantan is an effort at securing independence of a national strategic industry based on local raw materials.

    Indonesia’s steel production, less than 15 mnt, is higher than domestic demand, which stood at around 8-9 mnt in 2021, as per SEAISI estimates. The rest was exported.

    The downstream construction and automobile industries in Indonesia are heavily reliant on imports of carbon steel, which is why the average domestic steel mill capacity utilisation has remained roughly at around 45-50% over the last decade or more. Indonesia imports steel majorly from China, Japan and South Korea.

    The Indonesian government is seeking to liberalise laws around scrap steel imports into the country to boost domestic billet production in order to feed the steel-using downstream sectors and restrict imports.

    However, with the shifting of the country’s capital, steel demand is expected to receive a boost over and above the general growth premised on infrastructure and construction as part of the progression towards higher levels of urbanisation.

    PT Krakatau Steel along with POSCO, PT Gunung Raja Paksi and Dexin Steel have set up, and are expanding, blast furnace steelmaking capacities in the country which will require higher volumes of met coke.

    Global met coke dynamics

    In 2022, around 569 mnt of met coke was consumed by steel mills across the globe in 2022, as per data available with CoalMint. While a total of 1,885 mnt of steel was produced worldwide, production of hot metal through the blast furnace route stood at around 1,338 mnt, as per estimates. Most of the coke was used in captive steel production, with only around 30 mnt traded in the global market.

    China was the major exporter at over 8 mnt. Strict environmental norms in China have already had a significant impact on the oversupplied coke market. Moreover, environmental regulations have also impacted coking coal mining. Coke-making operations have come under official scrutiny and so investments have flown towards Indonesia, although there are import tariffs for coke in China even as coke-making capacity in Indonesia gathers pace.

    Why is China investing in Indonesia?

    Indonesia is ramping up its met coke capacity. China being the world’s largest steel consumer is heavily dependent on met coke to support the higher generation of liquid steel through the primary route. Over 80% of Chinese crude steel production is still through the oxygen route. Chinese investors have identified Indonesia as an ideal site for setting met coke plants which would be helpful in catering to their surplus requirement.

    Currently, five mega coke plants with a cumulative capacity of 17.5 mnt are in the pipeline. Amongst these, the biggest facility is coming up under Nanjing Steel comprising two sets of plants with a capacity of 6.5 mnt/year.

    Tsingshan Group is a shareholder in all these proposed projects, while China’s Delong Steel Group is funding two of these projects.

    Implications

    Since Indonesia has limited demand for steel, the surplus met coke produced would be shipped to India, China and other global markets. Indonesian companies will also gain the opportunity of fetching higher prices from coke sale compared with standard steam coal grades.
    Current capacity in ASEAN is about 71.8 mnt, as per SEAISI. The new capacities that the Institute has tracked are roughly about 90.8 mnt. With all these capacities coming in, total steel capacity in the ASEAN (Vietnam, Thailand, Singapore, Philippines, Malaysia and Indonesia) will rise to 162.6 mnt sometime towards 2030, SEAISI informed in November last year. Actually overcapacity stems from rapid capacity expansion in Indonesia, Vietnam and Malaysia.

    Increasing Indonesian met coke capacity is expected to be geared towards meeting this huge demand as most of the new steelmaking capacities to come onstream will be based on the integrated BF-BOF route.

    The evolution of global climate policy is unmistakably towards clean energy sources and thermal coal’s long-term outlook is obviously dismal. The opportunity to diversify exports, especially of high-calorific value coal as well as coke, will naturally channelise the energies of Indonesian coal exporting companies.

    2nd Asia Coal Outlook & Trade Summit

    As Indonesia comes up with coke plants in a big way will global met coke market dynamics be impacted? Keen to know more? Book your seat at CoalMint’s 2nd Asia Coal Outlook & Trade Summit in Bangkok, Thailand, on 24-25 April, 2023.

  • India: Record coal production in FY23 fails to rein in imports

    India: Record coal production in FY23 fails to rein in imports

    • Govt mandates imports to meet peak power demand
    • Shipments from Indonesia, Russia increase sharply
    • Imports likely to remain high in Q1FY24

    India’s coal imports increased sharply by around 18% y-o-y to over 237 million tonnes (mnt) in financial year 2022-2023 (FY23) from 202 mnt in FY22, data maintained with CoalMint reveals.

    Interestingly, imports surged despite record domestic coal production in FY23. The country recorded historic growth in its coal output at 892.21 mnt in FY23, Union Coal Minister Pralhad Joshi informed recently. Total coal production was 15% higher from 777 mnt in FY22.

    Out of total import shipments in the recently concluded fiscal, those of non-coking or thermal coal stood at over 166 mnt, which is roughly 70% of total imports. Non-coking coal imports edged up by 23% y-o-y on higher demand from power producers and with the government mandating imports to meet peak power demand.

    On the other hand, total imports in FY23 of coking coal and PCI coal stood at over 69 mnt compared with 65 mnt in FY22. While hard coking coal imports increased by just around 3% y-o-y, imports of PCI coal for usage mainly in blast furnace steelmaking rose sharply by 22% on the year.

    Why imports increased?

    *High power demand: Government data shows India’s power consumption surged 10% to 1,375.57 billion units (BU) during the April-February period in FY23, thereby already surpassing the level of electricity supplied in FY22.

    Power consumption in April-February of FY22 stood at 1,245.54 BU. In FY22, power consumption was 1374.02 BU, which is less than 1,375.57 BU recorded during the April 2022- February 2023 period. So, the imported coal-based power plants had to raise imports.

    *Govt mandates imports: To ensure adequate power availability, the Ministry of Power (MoP) has instructed power plants to import 6% (by weight) of their coal needs for blending purposes till September, 2023. A similar mandate had been issued last year too. That time, the blending ratio was kept at 10%. As a result, India’s State-owned power producers as well as major miners raised coal imports till June-July 2022 although shipments fell post September as peak summer demand subsided along with monsoon-related logistical disruptions.

    This year, too, the government has asked the imported coal-based (ICB) power plants to carry on operations at full capacity. In addition, a tender has been floated to procure electricity from ICB plants for April-May when power availability is expected to be less than demand.

    *Steel production rises: India’s steel production edged up to nearly 125 mnt in FY23, as per government data, from around 118 mnt in FY22, an increase of 6% on the year. In the absence of quality domestic coking coal reserves, imports naturally increased. Besides diversifying import sources amid historic-high coking coal prices, Indian steelmakers also ramped up usage of PCI coal to increase furnace efficiency even while reducing the usage of costly metallurgical coke. This saw volumes from Russia increasing sharply y-o-y.

    Trade flows

    The top exporter to India was Indonesia, with total shipments standing at 112 mnt -up 55% on the year. Indonesia is the world’s largest seaborne exporter of coal, accounting for 32.3% of the global seaborne coal market in 2022. The country has set an export target of over 500 mnt of coal in 2023. India purchases mainly high-to-low-CV non-coking coal from Indonesia.

    With the rise in Russian supplies, it is expected that only low-CV Indonesian coal will henceforth be attractive for Indian buyers, said a miner source based in Indonesia. After persistent pandemic disruptions and temporary export bans, Indonesian exports surged in FY23.

    Imports from Australia, however, fell by over 20% to around 55 mnt, out of which over 36 mnt was coking coal. Even coking coal imports from Australia dropped 13% on the year as a result of India’s efforts to diversify coking coal sourcing amid record-high global prices following the outbreak of the Russia-Ukraine war in February last year.

    Similarly, India increased its met coal imports from the US and Canada sharply to around 10 mnt from less than 5 mnt in FY22. Marked growth in Canadian coal production and easing of disruptions in key US coal terminals supported higher shipments.

    Notably, imports from Russia surged by over 170% on-year as the country stepped up shipments of cheaper cargoes to Asian consumers to amid sanctions imposed by the EU and US as well as G7 allies. Imports from South Africa, on the other hand, decreased by 33% as Mozambican and Russian exports to India surged. Imports from Mozambique rose by 97% y-o-y to nearly 11 mnt in FY23, with Indian DRI producers ramping up sourcing due to record-high South African coal prices amid global energy inflation.

    However, with subsequent correction in global coal prices, trade flows seem to be returning to settled patterns.

    Outlook

    Experts say power consumption is expected to grow in double digits in the coming months in view of forecasts of unprecedented high demand, especially in summer. The power ministry has estimated peak power demand in the country at 229 GW during April this year, which is higher than 215.88 GW recorded in the same month a year ago.

    Following the government’s mandate, NTPC, India’s largest power producer, has decided to import around 5.4 mnt of coal during the first half of FY24. So, imports are expected to remain high through till July-August this year.

    Interestingly, India’s coal imports have returned to the pre-Covid levels of around 240 mnt seen in FY19 and FY20.

    Despite the government’s aim of augmenting domestic washery capacity and achieving coking coal production of 140 mnt by FY30, imports are likely to grow parallelly with India’s fast-expanding steelmaking capacity. Imports are projected to reach 75-80 mnt by 2025-2026.

    Logistical bottlenecks and high freight rates have increased dependency on imports by impeding pit to plant coal transport. Total coal loading by the Indian Railways in FY23 increased by over 11% to 653.36 mnt and total freight earned rose by 22% y-o-y. The allocation of more rakes, special lines and dedicated freight corridors for coal transportation and rationalization of freight rates are expected to increase domestic availability of coal.

    2nd Asia Coal Outlook & Trade Summit

    There has been no let-up in India’s coal imports of late and 2023 may be another year likely to witness sustained growth. How is the government planning to rein in imports by 2025-26? To follow the discussion, book your seat at CoalMint’s 2nd Asia Coal Outlook & Trade Summit in Bangkok, Thailand, on 24-25 April, 2023.

  • India’s coal imports to surge again on peak summer demand?

    India’s coal imports to surge again on peak summer demand?

    The massive surge in coal consumption led by ever-expanding power demand has left India scrambling to secure adequate supplies despite a significant push seen towards increasing domestic production.

    In FY2022-23, the country scaled new heights in coal production. Till February, total coal production increased by 15% to 784.41 million tonnes (mnt), thereby surpassing the previous high of 777.26 mnt recorded in the previous fiscal.

    Leading from the front, state-run miner-Coal India Ltd (CIL) has maintained higher production and is well on course to meet the fiscal target of 700 mnt. In addition, gradual opening of new captive mines has also provided remarkable contribution in production growth.

    India’s dependency on coal imports, particularly of thermal coal, hit a low on the backdrop of Covid-induced demand disruption. However, improvement in economic activities paved the way for higher imports last year, and there is an increasing likelihood that the pattern would be followed again in a situation where present demand outstrips domestic coal supply.

    Govt intervenes to ensure energy security 

    Reinstating its stance towards imports, the Ministry of Power (MoP) has instructed power plants to resort to imports by procuring 6% (by weight) of their needs for blending with domestic coal till September, 2023 failing which curtailment in domestic supply has been proposed.

    The decision has been taken to ensure smooth operations at thermal power stations. Interestingly, similar provision was also introduced last year. That time, the blending ratio was kept at 10%.

    In this regard, India’s largest power producer, NTPC, has decided to import around 5.4 mnt of coal during first half of next fiscal (FY2023-24). The company has already floated two separate tenders seeking a total of 2 mnt of imported coal. The due date for bid submission is 18 April, 2023.

    Also, for the second time, the ministry has asked imported coal-based (ICB) power plants to resume operation at full capacity this year by invoking the emergency law under Section 11 of the Electricity Act, 2003.

    In addition, a tender has been floated to procure electricity from ICB plants for April-May when power availability is expected to be less than demand.

    These provisions would provide ICBs an avenue for power sale, due to which these utilities will need to explore the global market for running their operations.

    Challenges facing non-power sector

    In India, the power sector accounts for a lion’s share of domestic coal supply. Hence, at a time when coal demand from the power plants had increased this year, domestic miners were left with no choice than to lower the supplies meant for the non-power sector.

    Incidentally, CIL had diverted additional production volumes towards sales against Fuel Supply Agreements (FSA), which refers to long-terms contracts initiated with the power utilities. On the other hand, allocations via regular e-auctions, which constitute 20% of CIL’s sales, were curtailed.

    Under these circumstances, CIL’s coal dispatches to the non-power sector are set to decline for the second straight year in FY23.

    Moreover, CIL’s decision not to renew long-term contracts for coal supplies under linkage auctions meant for the non-power sector, has further escalated the supply crunch for this sector at a time the demand for power is showing no signs of slowing down.

    Price factor 

    In the aftermath of the Russia-Ukraine war, coal supply chains had altered which resulted in prices touching record highs. However, prices have started to decline since the second half of 2022 amid reduced appetite from China and rise in production seen from the major exporter Indonesia.

    Meanwhile, reduced Russian coal exports to Europe were balanced by hike in supplies from Colombia and South Africa.

    In India, domestic prices touched unprecedented levels due to factors arising from geopolitical turmoil and prevailing supply cuts. Notably, healthy competition was seen amongst the buyers to procure the limited material offered at auctions. In addition, the introduction of the single window auction, which brought the entire gamut of customers on to a common platform, also pushed bid prices higher.

    Upon improvement in supplies, prices have seen significant correction, but still are assessed above year-ago levels. In the scenario where both global and domestic prices have come down, but the latter is still overpriced given its low energy-content, the Indian buyer will be banking more on seaborne material as it provides greater value in terms of quality.

    Thrust on steel production 

    Augmenting steel production is essential to supporting economic growth. At the same time, the government’s thrust on import substitution in the steel sector has resulted in the Performance-Linked Incentive Scheme (PLI) being introduced.

    Moreover, there is a strong case for increasing output after the government had lifted the 15% export duty imposed on finished steel. This move might prompt the steelmakers to explore the export market to fetch higher price realisations.

    Therefore, the dependence on coking coal as well as PCI imports is bound to increase with the higher generation of liquid steel through the primary route. Given that India has scarce coking coal reserves, of which only a meagre portion has low ash content, the big steel companies are not in a position to reduce their dependence on imports in the foreseeable future.

    Outlook 

    Stepping up the plan to increase domestic coal availability, the government has introduced several policy reforms to support the mining sector. These include extension of mining lease period, eliminating prior approval required for capacity expansion, along with creation of a single window system.

    Moreover, regular auctions are being conducted for allocation of coal blocks under the commercial mining scheme. In view of the dwindling response from the prospective bidders, the sale was made lucrative by providing relaxation in payment terms and improving the feature of blocks offered in the lot.

    These measures paid off as a total of 25 blocks were sold in the recently concluded sixth tranche, marking the highest allocation recorded for a single tranche.

    CIL is also exploring opportunities to re-open abandoned mines which had been closed mainly on account of difficult mining conditions and financial losses.

    With elections round the corner and the pressing need to avert a power crisis, imports are likely to play a key role in satiating rising demand.

    2nd Asia Coal Outlook & Trade Summit 

    There has been no let-up in India’s coal imports of late and 2023 may be another year likely to witness sustained growth. Will imports continue on an upward trajectory or will government intervention and the projected rise in domestic coal output help to rein in imports? To follow the debate, make sure you attend CoalMint’s 2nd Asia Coal Outlook & Trade Summit in Bangkok, Thailand, on 24-25 April, 2023.

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  • Will China’s coal imports from Australia rise post lifting of ‘unofficial’ ban?

    Will China’s coal imports from Australia rise post lifting of ‘unofficial’ ban?

    In a significant development, Chinese authorities have allowed all domestic companies to import Australian coal, thereby putting an end to ‘informal’ trade restrictions imposed in late 2020. Ports and customs offices have been told to allow Australian coal cargoes.

    Earlier this year, the authorities had given four State-owned companies permission to resume purchases of Australian coal. Of the four, State-owned Baowu Group was the lone steel producer, while the rest were power companies.

    It is believed that more than 1 million tonnes (mnt) of Australian coal cargoes are set for Chinese shores in March. Due to the rise in global coal prices after Russia’s invasion of Ukraine, the price difference between China’s domestic coal and Australian coal had substantially decreased. As a result, the withdrawal of the ‘unofficial’ ban on Australian coal will bring marginal economic benefit to China.

    Imports from Australia

    CoalMint data reveal that China’s imports of non-coking coal from Australia, mainly high-energy coal, decreased by about 90% in 2021 from 2020. China’s imports fell to 5.5 mnt from over 42 mnt in the previous year. Imports were recorded at zero in 2022.

    As regards coking coal, China’s imports from Australia declined sharply by over 80% y-o-y in 2021 to just about 6 mnt compared with more than 35 mnt in 2020.

    However, volumes are sure to surge after China’s move to resume imports. The decision to resume coal imports from Australia is partly driven by the need to tame domestic coal prices amid global volatility.

    But China’s coal imports from Mongolia and Russia increased significantly on-year in 2022, as Covid restrictions were slowly eased along the China-Mongolia border allowing for free vehicular movement, as well as cheap Russian coal offers amid global energy inflation.

    Impact on coking coal market 

    Sources believe that with the full reopening of Australian coals into China, the increase in supply of seaborne imported material will exert some downward pressure on the coking coal market. China’s domestic raw coal production in Jan-Feb’23 also increased by around 6% y-o-y to 735 mnt, as per NBS data.

    In fact, coking coal and coke futures on China’s Dalian Commodity Exchange (DCE) edged down after news came in of permission being granted to all Chinese companies to resume Australian coal purchases. FOB Australian prices of premium low-volatile coking coal are still higher than CFR China prices by around $6-10/t. In the CFR China market, prices inched lower on weaker sentiments, with the DCE futures market observing May coking coal and coke contracts dropping by 4.53% and 3.04% yesterday.

    Outlook 

    Domestic met coal production in China is set to face hurdles going forward as environmental restrictions push authorities to clamp down on mining activities in coal-rich provinces. At the same time, high steel industry capacity utilisation at times may drive met coke imports from SE Asian countries with surplus capacities.

    Demand for Australian high-energy Newcastle coal may remain rangebound in the near term even though new domestic coal mining capacity is approved.

    In the short term, however, Australian premium low-volatile hard coking coal may continue to attract buying interest, despite competitive offers from Russia, even as uncertainties persist over pricing and logistics from Mongolia.

    CoalMint’s 2nd Asia Coal Outlook & Trade Summit

    China’s coking coal imports increased by over 15% on the year in 2022. Will imports increase in 2023, too, with the resumption in inflow of Australian cargoes? Would Chinese buyers have appetite for Australian thermal coal given other low-priced alternatives?

    Follow the discussion at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held at the Grand Hyatt Erawan, Bangkok, Thailand on 24-25 April, 2023, where Mr. Jiyuan Wang, Marketing Manager, Shaangu Group from China, will share his insights.

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  • Chinese coke plants to cut production by 30% to raise prices

    Chinese coke plants to cut production by 30% to raise prices

    Chinese coke plants are trying to increase prices of their products by cutting down production, as per recent reports. Chinese coke chemical companies plan to cut production by 30% to raise coke prices. This proposal was discussed at a recent meeting held by the market committee of the China Coke Industry Association.

    Higher supplies impact prices  

    According to data from Shanghai Metals Market (SMM), in December 2022 China had increased coke production by 8.3% y-o-y – up to 39 million tonnes (mnt).

    After the Chinese New Year (CNY) holidays, many local governments issued policies to promote economic growth and the real estate market continued to benefit, fuelling market optimism. However, high inventories of finished steel at mills and muted recovery of end demand weighed on the coke market.

    On the supply side, however, surveys showed that only a few coking companies had reduced production during the CNY holidays, which had little impact on overall supply. The capacity utilisation rate of coke ovens was basically flat compared with pre-CNY level.  Therefore, production cut has become necessary to boost prices.

    Plants announce hikes  

    Coke producers will extend coking periods to reduce capacity utilisation, reduce or stop purchases of expensive coking coal to cut production costs. Coke chemical enterprises will give priority to those customers who agree to increase coke prices.

    In particular, Shanxi Coking Coal Group in Shanxi province as well as Inner Mongolia-based Yangdong Coal and Chemical Group announced coke price hikes from 7 March, 2023. Shanxi Coking expects further growth amid increased loading of production capacities in the steel industry.

    Ban on Australian coal lifted 

    Resumption of coking coal exports from Australia in the first week of February has weighed on domestic coal and coke prices. The Chinese government has now lifted the unofficial ban on Australian coal for all companies compared with just four State-owned companies previously.

    Although cargoes have started arriving on Chinese shores, sources informed CoalMint that stiff Australian coal prices will find few takers in China at the moment, especially when supplies from Mongolia and Russia are stable. However, China’s imports of high-energy Newcastle coal could be supportive for thermal coal prices and, in turn, keep met coal prices supported.

    Mongolia shifts to auctions 

    The Mongolian government is moving to an auction system for coal sales that will replace the long-term contracts favoured by Chinese buyers and impose additional transport costs on customers. China has sought to expand its coal trade with Mongolia in recent years, particularly after halting shipments from Australia. However, investments in infrastructure, particularly railway infrastructure, are expected to reduce logistics costs in the coming years.

    The Mongolian government is planning to sell 12 mnt via auctions by July this year. The government intends to use auctions for all its coal sales – including the coking variety for steel mills and thermal coal for power plants – in 2024 and 2025. The full-scale impact of this move by the Mongolian government on China’s coal and coke markets will unfold in the coming time.

    Outlook  

    China’s steel output is set to rise in the coming months, helped by a seasonal upturn in construction activity, although excess steel stocks will limit the ramp-up in production. Notably, the Chinese government has reviewed import duties on coking and thermal coal to support domestic producers. From 1 April, the import duty on coking coal will be 3%, and for thermal coal 6%.

    At the same time, zero import duty on coke will be maintained this year. So, coke imports to China may increase this year amid rising production in Indonesia and other countries of South East Asia.

    2nd Coal Outlook & Trade Summit  

    How will the met coke and coking coal scenario evolve in China in 2023 and beyond? What is the outlook on the anticipated increase in met coke exports by Indonesia on the back of rising capacities in that country? Will exports to China rise significantly? How might this affect domestic prices of met coke in China in 2023 amid constrained crude steel production?

    Find answers to these and other queries at CoalMint’s 2nd Asia Coal Outlook & Trade Summit in Bangkok on April 24-25, 2023, where Mr. Yang Lu, General Manager and Executive Director, China Risun Group, will share his insights.

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