China to continue fueling Asia's thermal coal appetite: REQ report

The world will continue to trade about 1.1 billion mt of thermal coal a year, with Asia importing around 950 million mt annually over the next two years, thanks to robust Chinese appetite, according to the latest Resources and Energy Quarterly report published Dec. 20.

The report, published by Australia's Department of Industry, Science and Resources, revised upward its forecast of China's imports at 330 million mt for 2025 and 295 million mt for 2026, tracking the highest-ever thermal coal imports expectation in 2024.

However, forecasts for India's imports have been lowered marginally to 191 million mt for 2025 and 193 million mt for 2026, amid a plan to reduce import dependency. China and India are set to remain the leading importers, followed by Japan, South Korea, and Taiwan.

Despite advancements in renewable energy and a greater reliance on nuclear and gas, thermal coal markets have consistently faced unexpected demand surges and supply disruptions that have maintained demand throughout 2024, and the trend is likely to continue, the report said. The expected rise in electricity consumption driven by greater demand from data centers presents potential upward risks to the forecasts, it added.

Asian thermal coal is poised to experience sustained demand, driven by forecasts of a colder winter that is expected to increase consumption levels. The total thermal coal imports in the region are expected to top one billion mt in 2024, up from the previous forecast of 962 million mt.

China's hydroelectric output rose in April and May following heavy rains in the region and fell thereafter. Prolonged heatwaves caused power demand to surge, leading to an increase in imports. Domestic coal production in China decreased in the first five months of the year due to stricter safety protocols, the report said, adding that China's imports are expected to moderate, with increased winter demand partially supported by high stock levels and increased domestic production.

Australian 5,500 kcal/kg NAR averaged $89.61/mt FOB so far this year, down sharply from $103.93/mt FOB in the same period a year ago, Platts data from S&P Global Commodities Insights showed.

Indian thermal coal demand increased in the first eight months of the year due to extreme heatwaves. Imports have subsequently fallen, with the arrival of monsoon having boosted hydroelectric output. The imports are expected to rise again due to restocking demand for winter.

"With rapid urbanisation and the shift to electrification, demand on the power grid is expected to outpace growth in domestic production," the report said. "India remains one of the few large markets expected to see growth in coal consumption and imports over the next decade," it added.

For Japan, South Korea, and Taiwan are concerned, the department foresees a slight decline in imports. Both Japan and South Korea are expanding their nuclear capacity, despite ongoing community concerns in Japan following the 2011 Fukushima disaster. Additionally, these countries are increasing their reliance on renewable energy as part of their decarbonization efforts.

Export trends

Indonesian thermal coal exports are expected to decline to 518 million mt in 2025 and further to 515 million mt in 2026 due to a rise in domestic consumption. The country's goal of achieving energy self-sufficiency, along with plans to expand its energy-intensive metals processing industries, is likely to shift more thermal coal production toward the domestic market, the report said.

Thermal coal exports from Australia are projected to remain stable in 2025, with a slight increase anticipated in 2026. Australian coal exports rose by 4% year-on-year in the first nine months of 2024, driven by a 52% increase in shipments to China following the end of informal import restrictions, the report said. However, protests at the Newcastle coal port in late June and November caused significant delays in shipping. Most producers reported increased production in the September quarter compared to June, with any reductions aligning with planned activities.

The quarterly report anticipates that Russian coal exports will remain steady at approximately 120 million mt in 2025, with a modest increase to 124 million mt in 2026. Russian exports saw a year-on-year decline of 20% in the first eight months of 2024 due to increasing sanctions and reduced access to rail capacity. Kuzbass, the country's largest coal-producing region, cut output by 11% due to sanctions, restricted rail access, and rising costs. Additionally, costs are anticipated to rise further in 2025, as Russian Railways has announced a 13% increase in rail tariffs for that year, the report said.