LITTLETON, Colo., Dec 21 (Reuters) – China has played a smaller role in global coal markets in 2022 as the country’s repeated lockdowns to stem the spread of COVID-19 curbed industry and other coal-burning activities.
The country’s total thermal coal consumption remained broadly flat in the first half of the year — a significantly slower growth rate compared to 2021 — while imports are on track for their biggest annual decline since at least 2017, data from Kpler shows.
Lower combined consumption and imports from the world’s top coal producer, consumer and importer helped offset increases in coal demand in Europe and elsewhere this year, and potentially held back the rise in total coal emissions in 2022.
China coal use seasonal
However, recent measures to lift movement restrictions and revive economic activity in China are already fueling increased coal import activity at key consumption hubs, which will impact global coal flows, prices and emissions in 2023.
HOT SPOTS
The areas with the greatest potential for growth in coal demand in 2023 are those that suffered the most notable declines in utilization in 2022.
Guangdong — China’s vast manufacturing hub on the south coast and home to numerous major electronics manufacturers — saw the largest decline in coal consumption of any province in 2022, according to data from Power Gateway.
Between January and October, the province reduced the use of thermal coal by 51 million tons compared to the same period in 2021.
Neighboring Guangxi — a major textile center and producer of fertilizers, diesel engines and steel — reduced its consumption by 45 million tons, while nearby Guizhou reduced coal consumption by another 33 million tons.
The consumption of thermal coal in China fell the most in the main production centers
The country’s Northeast Industrial Corridor — home to several automakers, shipbuilders and chemical plants — also saw several sharp cuts in thermal coal use this year, including by 36 million tons in Liaoning province and by 24 million tons in Heilongjiang.
IMPORTANCE OF IMPORTS
While China meets about 90% of its total coal needs from domestic production, many of the key consumption centers mentioned above are heavily dependent on imports as they are far from major coal mining centers but close to major port facilities.
The port of Guangdong, which was China’s top coal import entry point in 2021, is almost equidistant from the country’s largest coal mines in Inner Mongolia and Indonesia, the world’s largest exporter of thermal coal.
As a result, many southern Chinese coal-fired power plants rely almost entirely on imported coal.
And all major coal ports in that region are now showing signs of a recovery in coal import volumes compared to mid-2022, when lockdowns were common across the country.
Three major coal import ports in southern China are seeing rising coal import volumes
In the first eight months of 2022, coal import volumes via the port of Guangzhou fell 41% from the same period in 2021 as COVID restrictions wiped out demand for energy fuel, Kpler vessel tracking data shows.
Since September, coal volumes in Guangzhou are up 13% year-on-year and look set to end the year strong.
Similar recovery patterns are also underway at the Fangcheng and Qinzhou ports in Guangxi province.
Coal consumption in China by province in 2021
In the north-east of the country, coal traffic has yet to recover to the same extent as in the south, partly due to slower easing of COVID movement restrictions in the colder north than in the south, and also due to better transport links with domestic coal suppliers.
However, greater demand for coal for power generation is expected as authorities across China scramble to ease COVID restrictions and revive economic activity.
And much of this increased coal demand will be met by imports, which will help tighten global coal markets, boost emissions from the coal sector in China, and potentially raise prices for other coal consumers.
Reporting by Gavin Maguire; Editing by Jonathan Oatis
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Gavin Maguire
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