Virus to cut coal demand 9% this year – mining association
The Covid-19 pandemic will result in a reduction of at least 9% in global seaborne thermal coal demand this year, the chairman of Indonesia’s Coal Mining Association (APBI) said.
Demand would total an estimated 895m tonnes this year, down 85m tonnes from forecasts made prior to the pandemic, as a direct impact of coronavirus-linked “demand destruction”, Pandu Sjahrir said in a Coaltrans webinar.
The total represents around a 10% drop from the 2019 demand total.
India accounted for 40m tonnes of the downward revision, followed by China and South Korea, each with 10m tonnes, APBI estimates showed.
“There is a possibility for further downside to these demand numbers, if lockdowns are extended or reinstated,” he said.
Sjahrir said the world’s largest thermal coal exporter, Indonesia, had been “majorly impacted”, given around 65% of its exports were to China, India and the Philippines.
Philippines imports were revised down 5m tonnes to 25m tonnes.
“Out of the money”
At the same time, the ensuing slump in coal prices had driven nearly 50% of global supply “out of the money”, he said.
More than 50% of Indonesia’s production was now unprofitable, which was an “unsustainable position”.
Indonesia’s energy ministry set its June coal reference price at a multi-year low of USD 52.98/t, down 35% on the year.
And the country’s exports this year were now seen at 420m tonnes, down 20 tonnes from APBI forecasts made in January and 8.5% lower than the 2019 total.
Yet other producers were experiencing an even greater share of uneconomical production, with estimates showing 83% for Colombia and 61.5% for Russia.
“Australia and South Africa are the most comfortable from a production cost perspective and we don’t expect major planned production cuts from these origins,” he said, adding, however, some reductions in supply had already commenced for other producing nations.
Up to 52m tonnes of cuts had been announced in the past 6-8 weeks, he said.
But he added these cuts – from Colombia, Indonesia and Russia – would not be sufficient to balance the global market.
“The oversupply situation could worsen should we witness further demand destruction due to lockdown extensions.”