Asia thermal coal imports hit record, but supply keeps prices muted

LAUNCESTON, Australia, Jan 8 (Reuters): Asia's imports of seaborne thermal coal rose to a record high in December as top buyer China sucked up cargoes amid peak winter demand.
But the robust demand did little to move prices as Indonesia and Australia, the two largest shippers of the fuel used mainly to generate electricity, saw strong gains in exports.
Asia's imports of seaborne thermal coal reached 83.69 million metric tons in December, up from 78.87 million in November and the highest in records compiled by commodity analysts Kpler going back to January 2017.
The strength was led by China, with seaborne thermal coal imports of 32.08 million tons, another record high according to Kpler data, and up from 29.57 million in November.
China's appetite for imported thermal coal soared in 2023 as coal-fired power generation rose amid lower hydropower output and rising electricity demand as the economy posted a modest recovery from the weakness caused by Beijing's previous strict zero-COVID policy.
It's also worth noting that China's domestic coal production has also been rising, with November output hitting a record high on a daily basis of 13.8 million tons, besting the previous peak of 13.5 million from March last year.
In the first 11 months of last year China, the world's biggest coal producer, consumer and importer, saw production rise 2.9 per cent to 4.24 billion tons.
Despite the rising domestic output, imports have remained competitive because of lower prices for the main grades of Indonesian and Australian coal that form the bulk of China's imports.
Indonesian coal with an energy content of 4,200 kilocalories per kilogram (kcal/kg) , as assessed by commodity price reporting agency Argus, dropped to $57.82 a metric ton in the week to Jan. 7, a two-month low and 36 per cent below the level at the start of 2023.
Australian coal with an energy content of 5,500 kcal/kg also dropped last week, falling to $93.23 a ton, a five-week low and 30.1 per cent weaker than in the same week in 2023.
Indonesia's exports of thermal coal hit 48.05 million tons in December, the most since March last year, with China taking the lion's share at 20.99 million, also the most since March.
One of the reasons why the strong demand for Indonesian thermal coal isn't showing up in higher prices, is that India, the second-biggest coal importer, has been trimming purchases.
India imported 15.53 million tons of seaborne thermal coal in December, down from 17.65 million in November and the lowest since September. It's also worth noting that India has been diversifying its coal suppliers somewhat, taking higher volumes from South Africa, with imports from the swing supplier to both the Atlantic and Indian basins rising to 2.78 million tons in December from 2.67 million in November.
In December, South Africa's share of India's imports was 17.9 per cent, while in July last year it was 9.6 per cent.