These five countries account for nearly 300 million tonnes per annum of coal imports – or approximately half of total international trade.
The turnaround was reported in Coal Trade, a monthly newsletter produced by Sydney-based coal analyst company Energy Economics.
The indicated growth rate for world coal trade in 2000 of around 10% represents a “remarkable comeback” for coal after four years of single digit growth, the company said. “Even more notable is the estimated 14.1% increase in steam coal imports by these major countries to October 2000,” according to Energy Economics.
This increase has been driven by substantial commissioning of new coal-fired electricity generation capacity in Asia, increased prices of competing fuels gas and oil, and strong global economic growth.
Despite US and Japan inspired slowdowns in world GDP growth, Energy Economics predicts a healthy increase in average coal-fired generating capacity in Asia: “With little new export steam coal production capacity coming on stream over the next two years, 2001 and 2002 are set to be golden years for steam coal exporters.”
Coking coal imports by the "top five" were somewhat more subdued over the first 10 months of 2000, increasing by an estimated 5.2%. This increase in coking coal demand was driven by a 7.1% increase in world blast furnace iron production over the same timeframe. Increased Chinese exports of coke and the ongoing substitution of coking coal by PCI coal in integrated steel mills account for the lower growth rate for coking coal imports than for BF iron production.
BF iron production eased in the last two months of 2000, with the full year growth rate declining to a provisional 6%. World coking coal imports are, consequently, estimated to have grown by around 5% (9 Mt) in 2000, according to Energy Economics.
It is expected that growth in coking coal imports will slow to around 3% this year as blast furnace iron production comes off the boil. A deficit of coking coal to supply the international trade this year is expected to be influenced by several factors. These include reduced Polish exports as unprofitable mines close under the restructuring plan, possible closure of USX’s Oak Grove mine in Alabama, the full year impact of the closure during 2000 of Canadian coking coal mines, and increased absorption of high volatile coking coal into the electricity sector in the US as a result of high gas prices.
“Such factors will reduce supply from these quarters but the latent capacity available from BHP, Fording etc is considered adequate to counterbalance these reductions, as well as providing for the few million tonnes of extra demand expected this year. The hard coking coal market will consequently remain finely balanced this year so long as the major companies adequately manage the rate of additional output being brought on stream and outages at major coking coal mines run at around the usual rate,” Energy Economics said.
In regard to the current price negotiations between Japanese steel producers and their major coal suppliers Energy Economics suggests settlement could be quite close. But delays could be generated as each of the steel mills negotiate individual prices in the wake of the abolishment of the joint purchase system. The system became increasingly unworkable as mills attached differing value to coal brands with regard to their own individual blend requirements.
According to Energy Economics, BHP has tabled an offer of a 10% increase, with the JSM counter-offering with a 5% increase. “Consequently it appears the benchmark Goonyella brand price for JFY2001 will end up somewhat above Energy Economics’ forecast of US$41.80/t FOB, a rise of US$2.05 (5.2%).”
Meanwhile, the Tex Report suggested last week that a price rise of 7.5%-8% was possible, which would increase hard coking coal prices to more than US$42.70 a tonne.
Chubu & Tohoku resumed their "parallel but separate" steam coal reference price negotiations in mid-January, but are still poles apart on price position from their major Australian steam coal suppliers, Glencore, Rio Tinto, and Anglo American, said Energy Economics.
While substantial price rises are predicted over the next few years Energy Economics questions how much will be achieved with regard to this year’s reference price. Some exporting companies have price rises as high as 20% on the table but concrete price proposal have not yet been submitted by either side.
“Chubu has argued that utilities that have imported much of their coal requirements under long-term contracts have paid much more than other consumers of imported steam coal over the past few years. Chubu expects exporters to provide quid-pro-quo now that spot prices have recovered. Spot prices ex-Newcastle for the general industrial market have stabilised around US$28/t but the recent Taipower spot tender for sub-bituminous coal was up 4%.
“Strong steam coal demand and the continued strength of the spot market, has prompted us to revise upward our forecast JFY 2001 reference price to US$31.25/t FOB. This would represent an increase of US$2.50/t (8.7%) from the JFY 2000 level of US$28.75/t.”
