China coal market scenario
In addition to iron ore, China has also evolved rapidly in coal trade in the last eight years. China’s increased energy needs have turned the country from a traditional coal exporter to the single largest coal importer in the world in half a decade. Significant coal trade surpluses were up until 2005. During 2013, China had a coal trade deficit of around 300 million tons. What is even more impressive is that coal imports represent only around 7.5% of total Chinese coal consumption.
Despite the recent slowdown in imports during the first half of 2014, Star Bulk Carriers Corporation (SBLK) remains confident that imports will produce strong ton miles growth during the medium term due to substitution of poor quality short-distance imports with high-quality long hauls, and will move away from Indonesia and toward Australia and the Atlantic.
India coal imports
Another major importer of coal is India, which lacks material reserves to satisfy its huge consumption needs. Indian coal inventories have decreased from about 20 million tonnes during March 2014 to 9.5 million tonnes during the first week of August. At the same time, thermal power generation annual growth in India has accelerated about 12% during the last quarter.
Clarksons forecasts that India is expected to reach 195 million tonnes per annum in coal imports in 2014, an increase of about 10% versus 2013 levels.
Major industry companies like Diana Shipping Inc. (DSX), Knightsbridge Shipping Ltd (VLCCF), Navios Maritime Holdings (NM), and Eagle Bulk Shipping Inc. (EGLE) will also benefit from the positive estimates for the coal markets. The Guggenheim Shipping exchange-traded fund (or ETF) (SEA) will also be affected positively.