China has usurped India as the premier importer of lower-grade Australian thermal coal, but there are questions as to whether the shift is structural or driven by temporary price factors.
China's imports from Australia of the fuel used to generate electricity are estimated by commodity analysts Kpler at 4.44 million tonnes in April, more than double March's 2.21 million and the most since China ended its unofficial ban on Australian coal earlier this year.
The April volumes are also largely in line with what China, the world's biggest coal importer, was buying prior to the imposition of the ban in mid-2020, which subsequently saw arrivals from Australia drop to zero by early 2021.
To be sure, China's imports of thermal coal from Australia, the world's second-biggest coal exporter, still lag well behind the 19.29 million tonnes in April from top supplier Indonesia.
However, Australian and Indonesian thermal coal serve different markets within China, with Indonesian supplies largely consumed in southern coastal power plants, where they are often blended with higher-ash domestic coal.
Australian thermal coal also tends to head to southern ports, but the grade most often imported by China has a higher energy content than those from Indonesia, meaning Australian fuel tends to compete directly with local supplies.
This means that Australian thermal coal has to be price competitive with domestic supplies, something that has been the case in the past few months, but also a situation that may be coming to an end.
Australian coal with a 5,500 kilocalorie per kg (kcal/kg) energy content, as assessed by commodity price reporting agency Argus, ended at $117.81 a tonne in the week to April 21.
This was slightly higher than the previous week's $116.65, which was the lowest price since January last year.
The price of thermal coal at China's Qinhuangdao port , as assessed by consultants SteelHome, was 995 yuan ($143.78) a tonne on Wednesday.
The price has lost 17.1 per cent since its high so far in 2023 of 1,200 yuan a tonne on March 9.
The price advantage for Australian coal is largely eroded once freight costs and customs duties are factored in, meaning utilities and traders will be taking a higher risk of losses if they import Australian cargoes in coming months.
This is especially the case if the availability of domestic coal improves, with production hitting a record high in March of 417.22 million tonnes, according to official data released on April 18.
While maintenance work on a key railway in April may reduce the volumes of domestic coal during the month, once that is completed in early May it's likely that more coal will be available.
India switches to South Africa
While China has been snapping up Australian thermal coal, volumes being shipped to India, the world's second-largest importer, have been slipping.
India's imports of Australian thermal coal are estimated by Kpler at just 297,697 tonnes in April, the lowest monthly total since June 2020 and a sharp decline from volumes that often exceeded 1 million tonnes a month from October 2020 to February 2023.
India's total imports of thermal coal are expected to rise to 14.77 million tonnes in April, with Indonesia taking the lion's share at 9.66 million tonnes.
As Australian thermal coal has left India's import mix, imports from rivals such as South Africa have moved higher.
India's imports from South Africa are estimated by Kpler at 2.28 million tonnes in April, a 13-month high and a fifth consecutive monthly gain.
South African thermal coal is competitively priced against its Australian equivalent, with globalCOAL quoting 5,500 kcal/kg cargoes from Richards Bay port at $106.33 a tonne on Wednesday, about 10 per cent below the same grade at Australia's Newcastle port.