ENERGY | China and India are Influencing The Current Dynamics of Global Coal Trade by Mike Mellish

Global trade of coal grew dramatically from 2008 to 2013, but in 2014, it declined for the first time in 21 years. China and India accounted for 98% of the increase in world coal trade from 2008 to 2013, but declines in China's import demand have led to declines in total world coal trade in 2014 and, based on preliminary data, in 2015 as well.

By Mike Mellish

Global trade of coal grew dramatically from 2008 to 2013, but in 2014, it declined for the first time in 21 years. China and India accounted for 98% of the increase in world coal trade from 2008 to 2013, but declines in China's import demand have led to declines in total world coal trade in 2014 and, based on preliminary data, in 2015 as well.

Image Attribute: Coal Mine in Dhanbad, Eastern India / Source: Wikimedia Commons

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. Coal trade in the rest of the world declined over the same period. However, data for 2014 and 2015 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.

Source: U.S. Energy Information Administration, based on SSY Consultancy and Research Ltd, International Energy Agency, U.S. Department of Commerce, and Indonesia Central Bureau of Statistics

Note: Other regions include Eurasia, the Middle East, and Africa, but Europe makes up the majority of trade. Graph does not include small balancing volumes used to reconcile discrepancies between reported exports and imports. With the exception of North America, non-seaborne coal trade, which accounts for about 10% of total world coal trade, is not shown in the graph.

China imported 341 million short tons of coal in 2013, up from 45 million short tons in 2008, while India imported 203 million short tons, up from 69 million short tons. About 75% of China's coal imports and 90% of India's coal imports were steam coal, used primarily for electricity generation. Coking coal, used in the manufacture of steel, made up the remaining volumes.

While China's coal imports have been declining in 2014 and 2015, India's imports continued to rise in 2014 and through the first half of 2015 as coal demand increased at a faster pace than domestic supplies. In China, rising output from domestic mines, improvements in coal transportation infrastructure, and slower growth in domestic coal demand have resulted in lower domestic coal prices and reduced demand for coal imports.

Additionally, the Chinese government introduced a number of measures in late 2014 and early 2015 aimed at supporting China's coal industry. These measures include reestablishing taxes on coal imports; placing limits on allowable sulfur, ash, and trace elements for imported coal; and issuing a directive to major utilities to reduce their annual coal imports by approximately 55 million short tons.

In India, 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. Although India's coal producers have already increased domestic production in 2014 and through the first few months of 2015, the first of India's three major coal railway projects, the Jharsuguda-Barpali railway link, is not scheduled to be completed until approximately 2017.

Source: U.S. Energy Information Administration, based on SSY Consultancy and Research Ltd, International Energy Agency, U.S. Department of Commerce, and Indonesia Central Bureau of Statistics

Note: Graph does not include small balancing volume used to reconcile discrepancies between reported exports and imports. With the exception of North America, non-seaborne coal trade, which accounts for about 10% of total world coal trade, is not shown in the graph.

Increases in exports from Indonesia and Australia met most of the expansion in international coal trade between 2008 and 2013. Indonesia's exports increased by 247 million short tons, accounting for 56% of world coal export growth. Australia's exports increased by 106 million short tons, accounting for an additional 24% of the global increase. Additional exports from Eurasia (49 million short tons) and the United States (36 million short tons) accounted for almost all of the remaining increase in coal exports during this period.

Lack of growth in global demand for coal imports in 2014 and 2015 has led to significant declines in coal export sales from Indonesia and the United States. Export sales from other countries/regions, including Australia, Eurasia, southern Africa, and South America, are on track to be near or slightly higher in 2015 compared with 2013. U.S. coal exports are down primarily because of their higher production costs relative to other coal exporting countries. The decline in Indonesian exports is attributed primarily to China's reduced demand for imported coal accompanied by reduced demand in both China and India for Indonesia's lower-quality export coals.

Source: EIA.gov