Japan's coal imports hit 20-month high; exploring alternative markets

Strong power demand and an unusually hot summer have driven Japan’s coal imports to a 20-month high, as the country turns to additional suppliers to meet energy needs. In September, Japan imported 15.90 million mt of coal, marking a 17.35% year-on-year increase, according to the latest trade statistics data from the Ministry of Finance.

This surge in coal consumption defies typical seasonal trends, which usually see demand decline toward the end of summer in Japan. However, this September brought the country its second-hottest weather on record for the period, with some regions setting new temperature highs. Across the archipelago, the month’s average temperature was 2.52 degrees Celsius above normal, according to the Japan Meteorological Agency. This spike in temperatures drove up electricity demand, prompting power plants to restock their coal supplies.

“Many power generators bought November-loading cargoes on a spot basis to cover the additional demand. Higher coal consumption will likely continue through the end of the year at least,” a Japan-based trader said. Market participants suggested that Japan’s increased coal consumption is not only due to warmer temperatures but also due to underwhelming nuclear power generation, which is expected to continue through November as the country anticipates above-average temperatures.

A month-long weather forecast issued by the Japan Meteorological Agency on Oct. 31 predicts temperatures above the 30-year average across all regions from Nov. 2 to Dec. 1. Kyushu Electric increased its coal consumption by 3.6% to 2.547 million mt for thermal power generation during the April-September period, as heat waves pushed up power demand, according to S&P Global Commodity Insights.

Japan’s rising interest in alternative suppliers

Although Australia remains Japan’s top coal supplier with 10.5 million mt imported in September (up 18.2% year on year), imports from other countries have also increased amid elevated prices for Newcastle high-CV coal (6,000 kcal/kg NAR), supply constraints. Rising Australian thermal coal prices and limited stocks have led Japanese buyers to seek alternative suppliers, including South Africa and Colombia. Imports from Colombia rose 143.35% to 147,538 mt, and imports from South Africa increased by 16.63% to 239,808 mt in September, Japanese customs data show.

Increasing sanctions on Russian coal-producing entities, and reduced availability from the East Coast are other reasons why Japan sought alternative markets. Ola imports from Russia in September were 107,970 mt, down 34.2% year on year.

Japan also imported coal from Kazakhstan (74,800 mt), Peru (11,000 mt), and New Zealand (44,000 mt) in September—volumes that were nil in the same month last year. JERA, Japan’s largest power company, has reportedly been sourcing South African coal since peak summer as nuclear power generation fell short of expectations, increasing reliance on coal. JERA also restarted its 650 MW No. 2 coal-fired unit at the Yokosuka thermal power plant in Tokyo Bay on Sept. 17, according to Commodity Insights.

In 2022, South African thermal coal exports to Japan totaled 1.3 million mt, increasing by 146% to 3.2 million mt in 2023, according to Commodities at Sea data. In Q3 2024, South African thermal coal exports to Japan reached 800,000 mt, up from 600,000 mt in Q3 2023, the data show.

While South African thermal coal is competitively priced, Japanese buyers are cautious about quality consistency. Although some major South African miners have been able to meet Japanese quality standards, the issue of consistency remains a critical factor. Japan’s coal buyers, known for their loyalty, prioritize a reliable supply of high-quality coal.

“Japanese buyers are interested in South African thermal coal, but South African miners are working to meet the quality standards required. With Australia long dominating the Japanese thermal coal market, it may take South Africa several years to position itself as a comparable supplier,” a South Africa-based trader said.

The average FOB Richards Bay price for 5,500 kcal/kg NAR coal was $88.60/mt for January through October, down from $101.07/mt during the same period the previous year. Platts, part of Commodity Insights, last assessed the grade at $88.25/mt on Nov. 6.

By diversifying its suppliers, Japan aims to mitigate cost and supply risks amid volatile global coal prices. As winter approaches, Japan’s energy landscape depends on successfully securing affordable and reliable thermal coal supplies to meet its needs.