“The seaborne coal market is potentially at its highest level of oversupply since 2016,” said Rodrigo Echeverri, head of research for Noble Resources, at a Coaltrans conference in Bali.
He attributed the glut to lower imports from several key Asian buyers, particularly China and South Korea, as well as European countries’ efforts to phase out the fuel in coming years.
The prospect of oversupply has already weighed on global seaborne prices, with the Asia-Pacific benchmark Newcastle index averaging USD 89/t so far this year, down 14% against the same period last year.
“We estimate [China's] thermal coal imports will decline 5% in 2019,” the analyst said, in part citing increased domestic production.
“And the South Korean [coal import] market has entered into a structural decline as it [is purchasing] less and less coal but ramping up the nuclear power [generation levels],” he said.
South Korea’s nuclear power capacity is projected to increase 5% this year, according to Noble estimates.
Echeverri said India offered a “glimmer of hope” to the coal market, as relatively strong industrial production growth had triggered a 2% increase in coal-fired generation in the first half of 2019.
“We are still forecasting growth for India’s coal imports this year,” he said, albeit noting a likely “deceleration” in the second half.
The extent of oversupply in the remainder of the year also largely hinged on developments in the world’s two biggest exporters of coal – Indonesia and Australia.
“If nothing changes in Indonesia, there will be an oversupply of 25m tonnes,” he said, adding he anticipated some reduction in Australia production.
Indonesia’s coal exports rose 16% year on year in April to 1.28m tonnes/day.News Source: Montel