The global thermal coal seaborne market faces a surplus of around 19m tonnes in 2019, in part due to a sharp downturn in demand, consultancy Perret Associates said on Thursday.
The forecast, however, is lower than the consultancy’s previous estimate in May, when it pegged the overhang at 24m tonnes. The consultancy anticipates “much tighter supply-demand” in 2020 and 2021.
“Even if the demand outlook for coal remains relatively flat in the coming months… world seaborne supply is now starting to contract on a significant scale,” said the firm’s director, Guillaume Perret, in a report.
While demand in the Atlantic basin is on the wane, import demand from China should remain healthy.
The consultancy anticipates EU 15 imports to drop 25% this year to 72.3m tonnes and broader imports to Atlantic and Mediterranean destinations to fall 16% to 130.2m tonnes.
“The usual offsetting of falling EU imports with rising imports to Turkey will not apply this year, as we expect imports by the latter to fall too,” Perret said, noting Atlantic and Mediterranean imports could fall further, to 125m tonnes, in 2020.
Yet the consultancy increased its Chinese import forecast by 15%, from its previous estimate, to 223.9m tonnes.“Our current forecast incorporates an expected clampdown on Chinese imports in Q4 19, although the degree of any such tightening is increasingly questionable,” Perret said, regarding the world’s biggest consumer of coal.
“In any event, considering that in January-September Chinese imports were up by an estimated 10m tonnes year on year, it is difficult to envisage full-year 2019 imports dropping below their 2018 level of 212.5m tonnes,” he added.
Sluggish exports
Perret also pointed out issues affecting several key coal exporters, notably the US and Colombia.
In the US, “mining companies have started to cut both production and exports [with] some facing financial difficulties as international prices remain well below their cash cost of production,” he said, noting the country’s exports will likely plunge more than 30% this year to 33m tonnes.
And they could decline further, to just 20m tonnes next year, according to Perret estimates.
Exports from Colombia, the world’s fourth biggest supplier of the fuel, are expected to fall 4.5m tonnes this year to 75m tonnes.
“Even more tellingly, Colombian producers, who were able to weather the last two price downturns [in 2008-2009 and 2011-2015], are also under pressure, handicapped by a collapse in western European demand and high freight rates,” Perret said.
