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Bangladesh, Pakistan capacity additions fuel seaborne thermal coal demand

Seaborne thermal coal demand is set to grow in the near to medium term in South Asia as Bangladesh and Pakistan add more coal-fired power plants to cater for their growing populations.

The first shipment of about 20,000 mt of Indonesian 5,050 kcal/kg GAR grade thermal coal is expected to arrive in the first two weeks of September for a new coal-fired power plant in Bangladesh, a source familiar with the matter said.

“It is only a small volume as the plant is running checks for the unit,” the source said.

The coal will be supplied to Bangladesh-China Power Company Limited for its Payra power plant in Patuakhali, southern Bangladesh.

BCPCL is a joint venture formed by Bangladesh’s North West Power Generation Company Limited and China National Machinery Import & Export Corporation in October 2014.

The first unit of the 1,320 MW power plant is likely to start production in December, said the source.

The plant is expected to take around 4 million mt/year of coal, and the utility is exploring other thermal coal imports from Indonesia as well as Australia in future for blending purposes, the source added.

Market sources said the shipment should be the first for the power plant there, as previously Bangladesh thermal buyers procured cargoes mainly for industrial purposes, including brick making.

“The procured cargoes are usually not big as sometimes a few buyers will share the shipments too,” said an Indonesia-based supplier.

BAYAN CONTRACT

Indonesian producer Bayan Resources signed its first long-term coal supply contract with BCPCL in June.

The agreement has an initial 10-year term from the date of commencement of delivery, expected in June 2020, to supply 23 million mt for the period, Bayan stated.

With expected economic growth, the Bangladeshi government has been targeting long-term energy diversification, as the country mainly depends on domestic supply of natural gas.

Coal accounted for 4% of the energy mix in 2014 and is expected to reach 20% by 2041, according to Bangladesh Power System Master Plan 2016, with annual growth rate of 12.7% per year. Imported coal was projected to reach 60 million mt/year in 2041, the report stated.

The country imported about 9.8 million mt of coal in 2014, according to the 2016 Master Plan, with more recent official import data not available.

“Demand in South Asian countries like Bangladesh and Pakistan is set to grow in [the] coming years, but the growthmight not be sufficient to absorb the oversupply … in the market,” said a Singapore-based market source.

“Bangladesh is at an earlier stage of growth than Pakistan in terms of energy development,” S&P Global Platts Headof Coal Analytics Joe Aldina said.

He added that even if imports from Pakistan and Bangladesh rise strongly as projected, there are concerns that slowing coal demand growth in China and a clear desire to use domestic production will weigh overall on seaborne coal markets.

Another Singapore-based analyst added that the South Asian market will also see competition from South African thermal coal suppliers, which might have a freight advantage due to the geographical proximity.

PAKISTAN DEMAND

Pakistan imported 10.5 million mt of thermal coal in 2018, according to UN Comtrade data, and this figure has beenforecast to rise to more than 20 million mt/year by 2020, and as high as 30 million mt/year by 2022-2024, when most of the power projects are expected to be completed.

Pakistan’s 1,320 MW coal-fired power project by China Power Hub Generation Company is now operational, the government website states.

The plant will require about 4 million mt of thermal coal per year, which will imported from South Africa and Indonesia, according to the company website.

This follows the trend of Pakistan’s two other power plants which burn imported coal – the Port Qasim power station and the Sahiwal power station – both with a nameplate capacity of 1,320 MW.

As well as these projects, several power plants are being constructed around the country’s Thar coalfield, which produces mainly lower-grade thermal coal and lignite.

Aldina added that most of the power plants in Pakistan have been designed for Indonesian coal, but buyers could source for coal from other destinations for blending.

“South Africa has had to sell into India and Pakistan and other places since they cannot place much coal into Europe,” he said.

For other coal producers, the additional demand from South Asia will likely open up new markets in years to come.

“It is not easy to enter into these markets, and new entrants will need time to build connections, but it is stilla positive sign, which means there will be new export markets for us,” an Indonesia-based supplier said.
Source: Platts

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