The world’s biggest and second-biggest coal importers, China and India, respectively, have reduced purchases of Indonesia’s lower-grade thermal coal as lower coal prices have made higher-grade coal competitive this year.
China and India have seen declines in their overall coal imports in recent months amid higher local production and an oversupply on their domestic markets.
Yet, imports from Indonesia, the world’s biggest thermal coal exporter, have been falling at a faster pace compared to overall imports, officials in the industry have told Reuters.
Higher calorific value (CV) coal is more expensive than supplies yielding less energy per unit burned. However, the slump in global coal prices has made even higher CV coal competitive.
“One million tons of higher CV coal can replace 1.2-1.3 million tons or even 1.5 million tons from Indonesia,” Vasudev Pamnani, director at India-based coal trader I-Energy Natural Resources, told Reuters.
China is boosting imports of coal from Mongolia, as well as discounted Russian coal, while India is ramping up coal imports from South Africa. These coal exporters have boosted their market shares at the expense of Indonesia.
The situation could reverse if coal prices spike, but for now, the relatively low prices are prompting the biggest coal buyers to look for higher-quality coal supplies.
India’s push to boost domestic coal production and reduce reliance on imported coal has been the key driver of the import decline in recent months.
India cut its imports in 2024 as it began to boost its domestic supply of coal.
While coal is abundant in domestic mines, it is typically of lower quality and contains lower levels of energy when burned compared to most imports.
Last month, India’s federal government eased coal supply restrictions, allowing independent power producers to bid and procure coal supply at auctions for periods of between 1 and 25 years, as the country is boosting power capacity.
In China, record-high domestic coal production and weaker coal-fired power generation have resulted in declining demand for thermal coal imports into the world’s biggest coal market this year.
By Tsvetana Paraskova for Oilprice.com
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