The global economy’s rapid recovery in 2021 led to a strong increase in coal demand, which in many countries had to be met by higher imports. International trade in thermal coal increased by 43 Mt (+4.3%) and in metallurgical coal by 4 Mt (+1.3%).

Indonesia, the world’s largest exporter of thermal coal, is also the most flexible. In 2021, it increased its exports by 27 Mt to 434 Mt, exporting more than twice as much as Australia (199 Mt). The United States, a swing supplier in the Atlantic market, increased exports by 12 Mt to 36 Mt. At the same time, South Africa’s exports fell 9 Mt to 66 Mt because of problems with its rail system.

In the metallurgical market, lower production in some Australian mines was mostly offset by higher exports from Russia, which increased by 3 Mt to 32 Mt, and by the United States, which added 3 Mt to reach 41 Mt.

International trade flows had already shifted in 2020 when China stopped importing coal from Australia, but change accelerated in 2022 because of sanctions and bans on Russian coal and the need for EU countries to find new suppliers. Despite Europe’s rush for thermal coal, we expect global coal trading volume1 in 2022 to be slightly below 2021 levels, as higher prices dent import demand in price-sensitive markets, particularly in China.

After coal and power shortages led to high coal prices in October 2021, the Chinese government gave orders to boost domestic production, which reduced the need for imports. In the first six months of 2022, China’s coal production increased by 11%. At the same time, we estimate that its coal demand declined by 3%. As a result, coal imports fell by 18% year-on-year to 115 Mt. For the full year, we expect China's coal imports to decline by 18%, or 45 Mt.

India also started 2022 with reduced imports, but government measures to prevent coal shortages will likely increase import volumes in the second half. Overall, we expect India’s coal imports to increase slightly compared with 2021. Increased purchases of Russian coal by Indian utilities and sponge iron producers could free up South African supplies for other markets. The new patterns for international coal trade flows are still to be defined.

Russia is expected to experience the biggest drop in coal exports in 2022 as a result of international sanctions and the EU’s import ban. South Africa and Australia’s exports are set to decline as well because of disrupted railways and unfavourable weather conditions, respectively. We expect Indonesia to increase exports by 15 Mt. However, even with more exports from the United States and a few other countries, such as Mozambique and Tanzania, the market is set to remain very tight.

The underlying trends in global coal markets – increasing self-sufficiency in China and India, weak economic outlook, high import demand in Europe, and very tight supply for coal with high calorific value – are set to persist in 2023. We forecast that China’s coal imports will decline by another 20 Mt as higher prices and efforts to increase domestic supply continue. However, Chinese imports are always subject to uncertainty.

Indian coal imports are set to continue to grow, but less rapidly than in 2022, as Coal India, the largest state-owned coal company, and captive producers (who produce coal for their own use) are expected to boost domestic coal production to record levels. High gas prices are expected continue to push up demand for coal imports, particularly in Europe and Northeast Asia, in 2021. However, the supply of coal with high calorific value is forecast to remain tight because of the difficulties other exporters face in compensating for the volumes that Russia will not supply due to bans and sanctions.