The Dry Bulk Weekly Review in Shipfix Data
Global cargo order volumes for coal have been trending lower in recent months, indicating lower demand for the fossil fuel. The forward-looking qualities of the data set indicate that lower quantities of coal will be discharged in China and India in the coming weeks and months. At the same time, rising natural gas prices have supported demand in Europe.
Global Demand for Seaborne Coal Under Pressure
After gaining ground during the second half of September and early October, the November Newcastle coal futures have declined by around five per cent over the past fortnight. Still, the recent decline is not out of the ordinary as the contracts have barely left the 135-155 dollars per tonne interval over the past eight months. The futures ended last week at around 146 dollars per tonne, about halfway between the past six weeks' high and low. Weaker global demand and higher Chinese production have contributed to the price decline over the past two weeks.
In recent months, global cargo order volumes for coal have developed along a different path than during the same period last year. Since reaching a high for the year in April, monthly volumes have been trending lower. While Chinese demand for seaborne imports has been relatively stable in recent months, volumes have been significantly lower than during the same time last year. Headwinds for demand have also affected the cargo ordering activities for other major Asian importers.
With only a few days left of the current month, the aggregate for October looks set to fall well short of the volumes recorded a year ago and during September. The month’s year-on-year decline in global demand is likely to be around a third, and compared to the previous month, the gap looks set to be around seven per cent. While China imports an increasing portion of its coal from its neighbour Mongolia, the overall pressure on seaborne coal volumes suggests that the recent upward momentum for coal prices may have run its course amid weaker demand and lower volumes due for discharge in the coming month.
Indian Coal Imports Look Set for Further Headwinds
As highlighted above, softer Indian demand for seaborne imports of coal has weighed on global cargo order volumes for the fossil fuel. Given the forward-looking properties of the data set, the recent weakness suggests that the discharged volumes will decrease in the coming month.
While Indian demand for seaborne imports of the dirtiest of fossil fuels has been showing signs of a limited recovery over the past two weeks, the weekly cargo order volumes remained significantly lower than recorded earlier in the year. Additionally, the average weekly volume over the past month is 46 per cent lower than a year ago.
Unlike last year, demand for seaborne transportation of coal to Indian ports has been trending lower since the beginning of the second quarter. While the year began with robust monthly cargo order volumes, the total for the year’s first nine months is two per cent lower than during the same period last year.
Cargo order volumes for coal due for discharge in India remained stable from June to August but have since resumed the decline. September recorded a month-on-month decrease in demand by around sixteen per cent. The current month is on course for another monthly drop, albeit at a lower rate. Hence, Indian demand is unlikely to support coal prices in the near future.
In absolute terms, the lower Indian demand has seen volumes from Indonesia decreasing the most. Still, the island nation has broadly maintained its market share in the Indian seaborne coal trade. On the other hand, South Africa and, to a lesser extent, Mozambique have seen volumes above the average for the past two years, while the US and Australia have lost market share.
European Coal Demand on the Rise Amid Higher Natural Gas Prices
Over the past week, the coal futures for delivery in Rotterdam have outperformed the contracts for delivery in the Australian port of Newcastle. The November futures for delivery in the Dutch port have gained nearly ten per cent since the middle of September. Higher natural gas prices in the continent have supported the recent development. The November TTF futures have gained almost 25 per cent during the same period, triggering some switching between the two fossil fuels.
While cargo order volumes for coal due for discharge in Europe remain well below the levels recorded in 2022 following Russia’s assault on Ukraine, recent months have seen weekly volumes trending higher. Still, the aggregate for September fell around three per cent short of the total recorded for the same month last year. The current month is on track for an even more significant year-on-year decline, possibly as large as a third.
The past week saw demand for seaborne transportation of coal bound for Europe rising, with the total for the week at the highest since the middle of September. In addition to higher demand, a greater appetite for coal from more distant shores was also observed. Demand for seaborne transportation of coal from Australia and Indonesia accounted for nearly half of the cargo order volumes at the expense of the market share of the trans-Atlantic coal trade. The development could prove supportive of the tonne-mile demand in the European coal trade.
Still, as European natural gas prices remain well below the levels recorded a year ago, the upside for cargo order volumes is likely to be limited. Hence, unless we see a significant surge in natural gas prices, continued interest in Australian and Indonesian coal among European buyers will only partially offset soft demand for seaborne transportation.
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