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Home » Growth in Coal Market Has Been Boon to Dry Bulk Shipping Industry

Growth in Coal Market Has Been Boon to Dry Bulk Shipping Industry

June 6, 2013
Drewry's

Dry bulk trade grew by an impressive 7 percent in 2012 with steam coal proving to be the saviour of the freight market, which otherwise would have seen a complete bloodbath. Steam coal trade increased by about 18 percent from 665 million tonnes in 2011 to 784 million tonnes in 2012, supported by high availability and low prices.

The U.S. is gaining increasing importance in the steam coal export market. Increased availability of cheap natural gas means it has more thermal coal to sell in the international market. In 2012, the U.S. exported 47.4 million tonnes of thermal coal, up from 31.4 million tonnes in 2011 and 16.6 million tonnes in 2010.

Australian exports have also been on the rise, increasing to 168 million tonnes from 148 million tonnes in 2011, given the proliferation of coal mines in the country.

Indonesian exports, on the other hand, have been steadily declining. From as high as 181 million tonnes in 2010, Indonesian thermal coal exports dropped to 131 million tonnes in 2012. Struggling with shrinking profit margins in the international market, Indonesian traders are shifting their focus towards the domestic market.

Colombia has faced disruption to its coal supply resulting from a ban on night-time railing through urban areas for most of February. There was also a ban on coal loading at Drummond and strikes at Cerrejon's mines. Furthermore, a bomb attack derailed 17 of Cerrejon's coal wagons. This resulted in as much as 5 million tonnes of output being lost. Production is expected to recover from the second quarter of the year.

Of all the bulk commodities in the dry bulk sector, steam coal has the brightest outlook. Steam coal trade is expected to keep rising, driven more by abundant supply than high demand. High availability of coal will keep prices low enough to ensure steep increases in imports. Moreover, freight rates are not expected to recover by much in the next few years, which will further cap CIF prices, thereby supporting buying. Despite having a strong mandate favouring greener fuels, low prices have persuaded Europe to switch to coal.

India and China are expected to drive growth in coal trade. India in particular, is expected to be pivotal to thermal coal trade as its power sector expands rapidly. Given the increase in population and very low per capita power consumption, big expansion plans have been laid out by private power companies. To fuel these power plants, India has been increasingly dependent on imported coal. In fact, by the end of this decade, India's thermal coal imports are projected to surpass those of China.

Source: Drewry's

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KEYWORDS Chemicals & Energy coal & dry bulk shipping coal & energy production coal & ocean transportation Drewry's global coal trade Global Logistics Global Supply Chain Management international trade Logistics Logistics Management: Ocean Transportation Logistics Outsourcing management Ocean Transportation Supply Chain Analysis & Consulting sustainability Transportation & Distribution
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