Turbulence in Advanced Economies: Seaborne Coal Shipments Plunge by 17% in 2023

Renewable Energy Surge and Economic Slowdown Drive Unprecedented Decline

source-bimco-145743

“In the initial ten months of 2023, there has been a notable 17% year-over-year decline in coal shipments to advanced economies, a trend attributed to a multifaceted confluence of factors, as elucidated by Filipe Gouveia, a Shipping Analyst at BIMCO. The primary contributors to this downturn include a dip in electricity demand, propelled by diminished economic activity and soaring energy prices. Concurrently, the upsurge in renewable energy adoption has curtailed the relevance of coal in electricity generation.

During the January to August period, advanced economies witnessed a 4% year-over-year reduction in electricity production, according to data sourced from the International Energy Agency. The proactive measures taken to combat high inflation have adversely impacted economic growth in these economies. The International Monetary Fund’s projections underscore this, forecasting a mere 1.5% GDP growth in advanced economies for 2023, down from 2.6% in the preceding year, with some European economies even facing the prospect of negative growth. Consequently, industrial production has waned in several of these economies, exerting additional downward pressure on electricity demand.

Thermal coal, constituting 68% of coal shipments, experienced a substantial 22% year-over-year contraction from January to October. This decline reflects the ongoing shift away from thermal coal for electricity generation, aligning with the broader global push towards renewable energy sources. Coking coal imports by advanced economies also dwindled, albeit by a more modest 2%, attributed to decreased steel production in the European Union, Japan, and South Korea.

Gouveia anticipates a potential historical low in seaborne coal imports by advanced economies in 2023, a level not witnessed since 2002. The European Union, experiencing the most pronounced decline after a surge in imports in response to an energy crisis in 2022, now registers volumes below 2021 levels. Advanced economies, collectively importing 32% of the world’s seaborne coal, are led by Japan, Korea, the European Union, and Taiwan, accounting for a substantial 94% of all coal shipments.

Australia emerges as the dominant source, contributing 40% of these cargoes, thanks to the high energy content in its coal. Other significant exporters include Indonesia, Russia, the United States, Canada, Colombia, and South Africa. Despite the ebb in shipments to advanced economies, global coal shipments are poised to grow by 4.5-5.5% in 2023. This growth is sustained by heightened demand in certain parts of Asia, notably China, coupled with a 1.5-2.5% increase in the average haul, bolstered by sanctions on Russian coal.

Looking ahead, Gouveia anticipates a continued decline in coal shipments to advanced economies in the coming years, propelled by the escalating prominence of renewables in electricity generation. While increased demand in emerging Asian markets may partially offset these losses, a global downturn in coal shipments is prognosticated to commence around 2024.”

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