China and India may increase imports of coal by 78 percent to 337 million metric tons next year, further driving up prices from the highest in two years and diverting supplies from Europe to Asia.
China may buy 233 million tons more of the fuel than it exports next year, up from net imports of 143 million in 2010, Citigroup Inc. said in a Nov. 29 report. India faces a shortfall of 104 million tons in the 12 months ending March 2012, mjunction Services Ltd., a Kolkata-based commodity trader, said in a note on Dec. 6, citing Coal Minister Sriprakash Jaiswal.
Asia’s two fastest-growing major economies are burning more of the fuel as economic expansion raises demand for electricity. The International Monetary Fund forecasts that China’s gross domestic product will next year expand 9.6 percent and India 8.4 percent. China added about 51 gigawatts of coal-fired capacity last year, more than half the total capacity of the U.K., according to data from Daiwa Capital Markets and the U.S. Energy Department.
“All the indications are for increased demand in 2011,” Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney, said in a Dec. 9 interview. “China has become much more important especially because of the expectations that they will be unable to meet their own needs from domestic supply.”
China’s appetite for the commodity sent benchmark domestic prices at the port of Qinhuangdao to a two-year high of $129 a ton for the week ended Nov. 26, according to data from IHS McCloskey, a Petersfield, U.K.-based researcher.
Power-station fuel at the Australian port of Newcastle, the world’s biggest coal-export harbor, and South Africa’s Richards Bay climbed to the highest since October 2008, according to data compiled by IHS McCloskey on Bloomberg.
China will need 2 billion tons of coal over the next 10 years to fuel the country’s industrial development, the China Securities Journal reported today, citing Dai Yande, deputy head of China’s Energy Research Institute.
“The thermal-coal market will remain tight as strong demand from emerging markets, particularly China and India, drives record levels of imports,” said Daniel Brebner and Xiao Fu, London-based analysts at Deutsche Bank AG. “Supply is anticipated to be constrained in key producing regions such as China, Indonesia and Australia.”
Prices at Australia’s Newcastle port, a benchmark for Asia, rose to $114.50 a ton in the week ended Dec. 10, according to IHS McCloskey.
Export prices at Richards Bay Coal Terminal gained $2.89 to an average $110 a ton in the week to Dec. 10, IHS McCloskey data showed. Benchmark European coal derivatives closed at $113 a ton yesterday, the highest closing price this year. Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year fell $1.50 to $111.50 a ton as of 11:52 a.m. London time.
The Indonesian government raised the reference price for sales in December by 8.3 percent from a month earlier, the steepest gain since it was introduced in February, the energy ministry said Dec. 8. The price benchmark for the fuel with a gross energy value of 6,322 kilocalories a kilogram increased to $103.41 a ton this month, according to the Directorate General of Coal and Minerals.
Coal use in Asia climbed 6.4 percent last year, more than a 0.8 percent increase in oil consumption, according to BP Plc.
Prices have also surged because of supply disruptions from heavy rain and flooding at mines in Indonesia, Colombia and Australia, while South Africa’s export growth has been crimped by a lack of rail capacity.
Xstrata Plc, the world’s largest exporter of thermal coal, has declared force majeure on some Australian shipments on Dec. 7 because of flooding of mines. PT Bumi Resources, Indonesia’s largest coal producer, revised down its coal output target by 6 percent this year as heavy rains hampered mining, Director Dileep Srivastava said Nov. 11.
South Africa’s Share
Such disruptions have prompted South Africa and Colombia to divert supplies from traditional markets in Europe to higher-paying Asia.
South Africa accounted for about 30 percent of India’s thermal coal imports this year, according to ministry data. Shipments in the first nine months of this year increased 16 percent to 15.2 million tons, while China’s purchases surged to 5.1 million tons until October compared with 1.52 million tons it imported for the entire 2009, according to mjunction Services, which is backed by Tata Steel Ltd. and Steel Authority of India Ltd., and Chinese customs data.
“Robust Chinese coal demand and import growth will continue throughout 2011,” Jeffrey Landsberg, president of New York-based Commodore Research & Consultancy, said Dec. 10 in an e-mailed response to questions. “China still has many decades left to develop. Only a fraction of the population, and really just the eastern part of the nation, has experienced profound growth. The rest of the country needs to develop as well.”