Analysts expect weaker demand for coal from India and China in the coming months and loadings are already taking a hit.
Winter in the northern hemisphere has in recent years sparked strong demand for this cheap and freely available energy source for power generation, particularly during periods of high natural gas prices.
But the upcoming winter could be different. Analysts think it will be challenging for any growth to offset the gradual attrition seen over the past year in the coal trade.
BRS believes that for a generally strong dry bulk market during the balance of this year, China and India need to ramp up their appetite for coal — quickly.
“However, this is likely to be a tall order,” analysts wrote in a recent report.
“When we look at current thermal coal inventories in both countries, it does not inspire much confidence.
“Whether the restocking or the coal burn can happen fast enough, in the next nine to 12 months in order to provide the conditions for a furious rally in this fourth quarter, remains up in the air.”
Meanwhile, coal imports in Europe have pretty much died off altogether, making Asian demand the trade’s last stronghold.
For instance, the UK recently closed its last coal power plant and one of its two remaining blast furnaces for steel production.
Coal imports to the UK have declined from more than 50m tonnes in 2006 and have effectively ceased since mid-2024, according to data cited by Clarksons.
The broker expects China to increase its annual coal intake by 8% and India by 3% this year, while annual Japanese coal imports will decline by 5%.
However, TradeViews noted that the growth of renewable energy in China is beginning, according to Chinese customs data cited by the trade data firm.
China’s coal imports totalled 45.84m tonnes in August, down from July’s seven-month high of 46.21m tonnes, it cited.
“However, coal imports in the first eight months of this year still hit 342m tonnes, up 11.8% year on year,” the firm observed.
Additionally, coal mining in major importing countries has shown slight growth in 2024.
Domestic coal production in China has increased by just under 3% year on year, and by 6.4% in India, according to government figures.
Demand for seaborne transportation of coal fell by over 25% in August and could do the same in September, according to Shipfix data.
“Contrary to the patterns usually developing during the year’s third quarter, weekly global cargo order volumes for coal have been under pressure for some time,” Shipfix said in a recent market report.
“While there were tentative signs of a recovery during August, the development failed to maintain the positive momentum into the current month.”
It’s happening
A slowdown in global coal trade has significant implications for panamax bulk carriers.
Panamaxes have carried just under 60% of all seaborne thermal coal loaded this year to date, while capesizes accounted for about 29%, according to data from bulker tracking platform Oceanbolt.
Around half of the seaborne coking coal has been carried on panamaxes this year so far and around 41% of it is on board capesizes, the data shows.
These proportions are all much the same as last year in terms of market share.
But volumes are slightly lower than in 2023 and tonne-mile demand has taken a hit.
Oceanbolt data shows tonne-mile demand for coking coal by sea is down by 7.5% for capesizes and by 2.6% for panamaxes this year to date, compared with the same period in 2023.
The loading data shows a 4% decline in panamax tonne-miles for thermal coal and a 4.5% fall for capesizes so far this year.
Thermal coal volumes by sea are down by just over 4% and coking coal volumes show a 2.3% decrease year on year.
All this being said, the coal trade is currently a bright spot in an otherwise mediocre panamax market, as the east coast of South America and US Gulf regions stay quiet.
Fronthaul coal cargoes from the US East Coast bound for India have been a driving force in the Atlantic market over the past week.
Spot rates in the Baltic for panamax coal cargoes from Latvia to Rotterdam have shown strong growth of around 20% over the past week or so.
