The coronavirus pandemic has finally caught up with sea-borne thermal coal in Asia, as low demand by major importers India and China sends prices to multi-year lows and dents the relative success of polluting fuel against other energy sources.
The price of low-energy coal from Indonesia, the world's leading exporter of thermal coal, has fallen to the lowest since the start of evaluations by the Argus commodity price monitoring agency in 2008, although higher-quality Australian supplies have sunk to a four-year low.
Indonesian coal with an energy value of 4.200 kilocalories per kilogram (kcal / kg), a common grade of Indian and Chinese utilities, fell to $26.03 per tonne in the week ended April 26, according to Argus. The grade fell 29 percent from its 2020 high of $36.37 per tonne in the week to Feb. 16.
The Weekly Index for Higher-Level Thermal Cargo from the Australian Newcastle Port, which is mainly bound for Japan , South Korea and China, fell to $52.79 per ton in the week of April 26, the lowest since June 2016, and down 24 per cent from this year's peak of $69.59 in mid-January.
Although these drops are relatively drastic, they are still nowhere near as extreme as the collapse in crude oil, with Brent's futures down 72% from its January high this year to the close of $19.99 a barrel on Monday.
Spot Asian LNG-AS was just as poor, with the price plummeting 71.3 per cent from its pre-winter high of $6.80 per million British thermal units in October to just $1.95 per week until April 24, all-time low.
While thermal coal does not compete with crude oil for power generation in most of Asia, there is some overlap in countries such as Japan and South Korea that can switch fuel to relative economics.
The slide in ocean-going coal prices will help maintain the fuel's competitive edge against LNG, but simply being cheaper is unlikely to be enough to keep prices from falling further.
The problem with thermal coal in Asia is that the two largest buyers also have significant domestic industries, and both China and India have shown a willingness to protect local mines from imports in the past.
INDIA LOCKDOWN
India is particularly worrying for Indonesian exporters, with the government actively discouraging imports at present, as the country's economy is hitting massively by a lockdown to try and contain the spread of the new coronavirus.
The lockdown began in March and is due to expire next week, although rumors have indicated that the government is considering extending the restrictions.
India's coal imports already seem to be declining, with the vessel monitoring and port data collected by Refinitiv pointing to around 16.5 million tons arriving in April, down from 17.6 million in March and 20.3 million tons in April last year.
In view of the breakdown, imports from Indonesia 's top supplier are forecast to fall to 5.2 million tons in April from 6.5 million tons in March and 10.4 million tons in April 2019.
Another problem in India is the relatively high level of inventories at mines and power plants, with about 125 million tons in the first two weeks of this month 's fiscal year, up from around 120 million at the end of March, according to industry analyst Charles Worringham of Indiapowerreivew.com.
China's marine imports are currently at a standstill, with Refinitiv expected to reach 25.1 million tons in April, up from 23.5 million tons in March and 21.2 million tons in April last year.
But there are question marks as to how long China will continue to allow imports to remain high, with some traders reporting port restrictions and official incentives to purchase domestic supplies to support local prices.
Ultimately, the current issue for marine thermal coal is that, given the effect of the coronavirus on Asian economies and the preference for domestic supplies in India and China, the usual lower price strategy to boost demand does not work.
