LITTLETON, Colorado - Just four countries account for over half of all thermal coal imports and more than 70% of global power sector emissions from coal use, data shows, underscoring the extent of global dependence on these nations when it comes to cutting pollution.
China, India, The Philippines and Vietnam accounted for 53% of world thermal coal imports during the first four months of 2023, compared to 40% for the same period in 2022, showed data from ship tracking firm Kpler.
The same countries produced 71.4% of all carbon dioxide (CO2) emissions from power sector use of coal during January through April, showed data from think tank Ember, up from around 67% in the same period a year earlier.
The concentration of coal imports and coal-fired emissions among only four nations makes it relatively easy for pollution trackers to identify major climate culprits, and monitor their collective polluting heft relative to the rest of the world.
Yet this consolidated coal dependence also makes it possible to spot any impending trend reversals in coal use as these key economies integrate more renewable power into energy systems, with important implications for global emissions trajectories.
China is the overwhelming coal market giant, topping global rankings for coal output, use and imports by a large margin.
In 2022, when China's economy was hamstrung by repeated and extended lockdowns to slow the spread of COVID-19, China's coal imports underwent a rare contraction from the year before as industrial demand for the fuel waned.
That helped free up coal supplies for other buyers in 2022, most notably across Europe where power producers were hampered by cuts to natural gas supplies from Russia and were forced to find alternative sources of power from international markets.
But China's appetite for coal has come roaring back in the opening months of 2023 thanks to Beijing's measures to revive economic growth, with thermal coal imports over the first four months jumping by 90% from the same period in 2022. That resumption in buying by China has helped push global coal export volumes to new highs so far in 2023, despite widespread efforts elsewhere to wean energy systems off coal in favour of greater use of non-emitting power sources.
TRADE PARTNER TIES
China's greater industrial activity this year has also reinvigorated the economies of major trade partners, especially Vietnam and The Philippines which have strong supply chain ties into China.
In turn, that has led to increased electricity generation in those countries, especially in The Philippines where coal-fired generation has climbed by more than 11% in the first quarter from the same period in 2022.
In Vietnam, coal generation hit its highest monthly total in more than 20 months in March, and looks set to climb further in the months ahead following a jump in coal imports this month to the highest since mid-2020, data from Kpler and Ember shows.
A key determinant of how much additional coal demand will emerge in The Philippines, Vietnam and elsewhere will be the strength or otherwise of China's economic revival over the rest of the year.
While China's recovery from the stunted levels of 2022 was widespread in early 2023, there were signs of industrial slowdown in the latest economic releases that suggest growth rates may be more patchy going forward.
In response, key suppliers to China's industries and factories are liable to slow their own output expansion rates, which may pare energy demand levels and limit overall coal use.
However, industries and utilities are also liable to look to keep costs in check, which may result in increased use of low cost but high-emitting coal over cleaner-burning but more expensive fuels such as natural gas.
India, the world's second-largest coal consumer and fifth-largest economy, is also at a key economic crossroads as its own momentum is checked by a slowdown in global goods demand due to rising interest rates and high energy and living costs.
India's large, young and fast-growing middle class are expected to power the economy to a 5.9% growth pace in the 2023-24 fiscal year, according to the International Monetary Fund (IMF).
However, sluggish demand in key importer economies such as the United States and Europe may slow consumption of items manufactured in India, such as electronics, textiles and pharmaceutical products, and may weigh on India's growth pace.
India is also expected to face growing scrutiny over its practices of importing crude oil and other energy products from Russia despite international efforts to sanction Moscow following the invasion of Ukraine in 2022.
India and Russia have recently suspended efforts to settle bilateral trade in rupees, after months of negotiations failed to convince Moscow to accept the Indian currency as a means of payment.
This may push up India's import costs and potentially undermine economic momentum by eating into foreign currency reserves.
As with the cost-sensitive power producers in South East Asia who are wary of a further slowdown in China's economy, power firms in India may also favour use of coal over more expensive gas given the conflicting signals over India's economic potential.
That in turn may support further Indian coal imports, which are already up 15% through the first four months of 2023 from the same period in 2022.
Slowing economic momentum may also dent India's efforts to boost renewable energy generation, which has been growing sharply in recent years but is highly dependant on major government investments and subsidies that may be imperilled by any economic hiccups.
For climate and coal market followers alike, this means that India, alongside China and key South East Asia trade partners, will be the most important markets to track for guidance on coal imports and emissions over the remainder of 2023 and beyond.
(The opinions expressed here are those of the author, a columnist for Reuters.)
(By Gavin Maguire; Editing by Christopher Cushing)