Seaborne thermal coal demand is likely to increase by 3.8pc, or 35mn t, in 2021 compared with this year, led by an increase in consumption in India and southeast Asia on an expected Covid-19 recovery in economic activity, according to commodity trader Noble Resources.
Global demand for imported thermal coal may rise to 960mn t in 2021, up from an expected 925mn t in 2020, Rodrigo Echeverri, head of research at Noble said at the Virtual Coaltrans Asia conference. But projected demand for this year is down from 1.04bn t seen in 2019 as the pandemic curtailed consumption globally.
India's demand is likely to rise by 13mn t in 2021 from this year to 164mn t although this would still be lower than 2019's 169mn t, Echeverri said.
India is likely to see a steady economic recovery next year which is expected to support demand for seaborne thermal coal. Last week, ratings agency Moody's noted an uptick in economic activity in India during the current 2020-21 financial year that ends in March. It also raised its growth forecast for 2021-22 to 10.8pc from 10.6pc, citing the government's continued fiscal support to the economy.
India's thermal coal imports last month rose for the first time on a year-on-year basis since February on a recovery in economic activity.
Demand from China for seaborne coal is likely to remain broadly flat next year as "Beijing tries to keep things in a tight range", Echeverri said.
"Chinese imports are becoming more policy-driven than economically-driven as end-users play by the quota book and import arbitrages stay wide open," he said. Noble expects a "substantial" quota release in October-December.
Reports that Chinese authorities may issue additional import quotas for this year to help cope with rising winter demand and high domestic prices have lifted sentiment in the seaborne market in recent days. Market participants also expect 2021 quotas to be issued in January.
Tight Chinese import restrictions this year and an unofficial ban on Australia imports have resulted in a steady rise in shipments to southeast Asia, especially Vietnam. This demand growth is expected to continue in the region, with thermal coal imports projected to increase to 136mn t next year from an estimated 126mn t in 2020. The region imported 112mn t of coal in 2019.
Steady demand from southeast Asia, led mainly by Vietnam, has helped to absorb some of the oversupply in the seaborne market this year. This trend may continue to be supported by growing demand from Vietnam, where imports slipped last month to a first year-on-year decline since March 2018. The strong demand outlook for Vietnam is supported by a number of scheduled and under-construction power plant projects that are scheduled to come on line in the coming years.
