LITTLETON, Colo., Dec 21 (Reuters) – China has played a diminished role in global coal markets in 2022 as the country’s repeated lockdowns to stem the spread of COVID-19 curtailed industry and other coal-burning activities.
The country’s total thermal coal consumption was largely flat over the first half of the year – a sharply slower growth rate compared with 2021 – while imports are on course for their largest annual contraction since at least 2017, data from Kpler shows.
Lower combined usage and imports by the world’s top coal producer, consumer and importer helped offset the increase in coal demand seen in Europe and elsewhere this year, and potentially curbed the climb in overall coal emissions in 2022.
But recent measures aimed at lifting movement restrictions and reviving economic activity in China are already resulting in increased coal import activity at key usage hubs, which stand to impact global coal flows, prices and emissions in 2023.
The areas with the greatest coal demand growth potential in 2023 are those that underwent the most notable usage contractions in 2022.
Guangdong – China’s vast manufacturing hub along the South coast that is home to scores of major electronics manufacturers – had the largest coal consumption contraction of all provinces so far in 2022, according to data from Power Gateway.
Between January and October, the province cut thermal coal use by 51 million tonnes from the same period in 2021.
Neighbouring Guangxi – a major textiles hub and producer of fertilizers, diesel engines and steel – cut its use by 45 million tonnes, while nearby Guizhou cut coal use by another 33 million tonnes.
The country’s northeastern industrial corridor – home to several carmakers, shipbuilders and chemical plants – also saw several steep cuts to thermal coal use this year, including by 36 million tonnes in Liaoning province and by 24 million tonnes in Heilongjiang.
While China takes care of roughly 90% of its total coal needs from domestic production, many of the key usage hubs noted above are heavily import dependent due to being situated far from major coal mining centers but close to major port facilities.
Guangdong’s Guangzhou port, which was China’s main coal import entry point in 2021, is nearly equidistant from the country’s largest coal pits in Inner Mongolia as it is from Indonesia, the world’s top thermal coal exporter.
As a result, many Southern China coal plants are almost overwhelmingly reliant on imported coal.
And all major coal ports in that region are now starting to show signs of a recovery in coal import volumes compared with mid-2022, when lockdowns were common throughout the country.
Over the first eight months of 2022, coal import volumes through Guangzhou port were down 41% from the same period in 2021, as COVID restrictions snuffed out demand for power fuel, ship-tracking data from Kpler shows.
Since September, Guangzhou coal volumes are running 13% ahead of the year-ago pace, and look set to finish the year strongly.
Similar recovery patterns are also underway at Fangcheng and Qinzhou ports in Guangxi province.
In the country’s northeast, coal traffic has yet to recover to the same extent as in the South, in part due to the slower easing of COVID movement restrictions in the colder North than in the South, and also because of better transport links with domestic coal suppliers.
However, as authorities across China move to ease COVID restrictions and resuscitate economic activity, greater demand for coal to generate power can be expected.
And much of that increased coal demand will be fulfilled by imports, which will serve to tighten global coal markets, boost China’s coal sector emissions, and potentially raise prices for other coal consumers.
Reporting by Gavin Maguire; editing by Jonathan Oatis
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