Southeast Asia only accounts for around 12% of global thermal coal imports, so is often overshadowed by China and India in discussions about key coal consumer markets and the associated impact on emissions.
However, the region routinely imports well over 100 million tonnes of coal annually, and has outpaced other major importers in terms of annual growth rates since 2018, expanding at an average rate of 14% per year, flows data from Kpler shows.
That growth pace compares to 3% for China and 13% for India, and if sustained means that the region could soon emerge as a powerful driver of global coal use that could offset coal usage declines that are expected in other markets.
What’s more, due to the varied nature of the area’s economies, political systems and demographic trends, the Southeast Asian region as a whole may be less likely to comply with global targets to reduce coal use, and less susceptible to international pressure to reverse emissions trajectories.
HIGH DEPENDENCY
Central to the region’s coal import appetite is the area’s high reliance on coal to generate electricity.
Indonesia, the largest economy in the region and top global thermal coal exporter, does not actually need to import much coal but relies on it for over 60% of electricity generation, data from Our World in Data shows.
The Philippines is the largest coal importer in the region, and along with Malaysia, Vietnam and Cambodia relies on coal for over 40% of electricity, while Thailand uses coal for around 20% of electricity generation.
The cumulative use of the region is estimated at around 200 million tonnes per year, according to the U.S. Energy Information Administration.
PEAK PERIOD
While coal use across the region is fairly constant, the summer months when the weather is hottest tend to be when coal imports hit their highest.
In 2022, Southeast Asia’s total thermal coal imports jumped to more than 10 million tonnes per month from May through August, from a monthly average of roughly 8 million tonnes during the opening four months of the year.
For the first four months of 2023, Southeast Asia’s thermal imports are running 18% above where they were at the same point in 2022, which suggests that utilities may be better stocked this year than last ahead of the pick up in demand for air conditioning over the summer.
Economic growth across the region also slowed over the opening quarter of 2023 compared to late 2022 as global goods consumption wavered, which may result in reduced industrial power demand over the coming months.
However, the ongoing economic recovery in China is having supportive effects across the region.
Revived manufacturing activity in China is leading to increased demand for parts and raw materials sourced from key supplier nations such as Malaysia, Indonesia and The Philippines, which all have strong supply chain links to China.
PENNY PINCHING
Despite the mixed economic signals, the International Monetary Fund projects most Southeast Asian economies to undergo robust expansions in 2023, with real gross domestic product (GDP) expected to grow by 5% in Indonesia, 6% in The Philippines, and 5.8% in Vietnam, according to a regional outlook published this month.
That said, some of those projections have been trimmed since late 2022 as the health of the global economy soured due to rising interest rates and the continuing fallout from the Russia-Ukraine war.
As a result, power producers across the region are likely to take a conservative approach to power generation additions, and will likely favour the lowest cost option for baseload power production.
In turn, that should support continued strong use of coal in electricity generation mixes, and limited expansions to use of costlier natural gas which remains well above long-term average prices on international markets.
If Southeast Asia’s power producers continue to favour coal as the primary source of electricity while the regional economies expand, the area’s coal imports could push steadily higher, and pose a fresh concern for climate trackers who are advocating for reduced coal use in all regions.
Source: Hellenic Shipping News
