While we are being told with maniacal persistence about the horrors of "global warming in which mankind is to blame" and urged to abandon not only coal, but also oil, gas and nuclear power plants - the sea transportation of coal has become a key factor in the revival of maritime transport in 2021
Amid all the talk of global warming, climate change disasters, decarbonization and green investment, the global trade in dirty coal is booming.
Heavy ships are busy transporting coal to Asia and an environmentally conscious Europe - increasing freight revenues for some shipowners who publicly brag about their environmental reputation to investors.
"It turns out that the news of the loss of coal was grossly exaggerated," Stifel analyst Ben Nolan said in a new note to clients. "Despite the obscene carbon footprint, the demand for coal is really growing this year."
Coal is transported on large bulk carriers known as capes (vessels with a capacity of about 180,000 dwt or DWT), as well as sub-capes ships such as Panamax (65,000-90,000 DWT) and supramax (45,000-60,000 DWT) …
According to Clarksons Platou Securities, spot rates averaged $ 32,800 per day for Capesize vessels on Monday, $ 31,800 for Panamax vessels and $ 31,600 for Supramax vessels. Rarely are rates on all three segments above $ 30,000 at the same time, as they have been over the past five weeks.
“Strong activity in the coal markets, as well as significant small bulk cargo volumes, remain the driving force behind the increased rates across various asset classes,” Clarksons said.
The Financial Times recently noted that coal prices have outpaced both real estate and financial stock returns this year. According to Argus, the price of high quality Australian thermal coal (used to generate electricity) rose to $ 151 per ton as of Friday, more than three times the price of last September. The price of semi-soft Australian coking coal (or metallurgical coal used to make steel) was $ 127 per tonne, an increase of almost 80% over the year.
"Steam coal exports from the US Gulf Coast, where exports are usually very price and demand sensitive, rose 194%," Nolan said.
Demand factors for steam coal
Some of the extreme weather events that have been attributed to global warming (but when people in Africa and Brazil are making snowmen, many are wondering if a global cooling is coming) are now increasing the demand for sea-going transport of high-carbon coal.
The exceptionally hot weather has increased electricity consumption, which is at the same time driven by growing economic activity. Increased electricity consumption increases demand for thermal coal imports. "This year's hot summer in Asia has meant that some of the big consumers who have given up on coal have not given up at all," Nolan said.
The May drought in southern China reduced the region's access to hydropower, an alternative to coal. Recently, the problem has been the surplus of water in northern China. Tragic floods in Zhengzhou this month are cutting back domestic coal supplies.The Chinese government planner said the transportation of coal from Inner Mongolia and Shanxi via Zhengzhou to eastern and central China was "severely affected."
Hot weather simultaneously raises prices and reduces supplies of natural gas, which competes with thermal coal for power generation. "Even in Europe, which is the epicenter of decarbonization, low reserves of natural gas are driving steam imports soaring in virtually all countries," Nolan said.
Replenishment for the winter
Summer demand will be complemented by restocking for winter demand and restocking in general, as well as demand for coking coal for steel production.
Maritime Strategies International (MSI) said in its monthly forecast, "China's National Development and Reform Commission has announced plans to reserve more than 100 million tonnes of 'deployable coal reserves', but domestic coal reserves are at their lowest level since February."
And it's not just China. According to Braemar ACM Shipbroking, "in preparation for the winter season, South Korea, along with other countries, has increased its coal purchases to avoid power shortages." South Korea's coal imports hit a five-year high in July.
Nolan added: “Since coal prices are currently in regions that have not been seen for a decade or more, there is sufficient motivation to increase production everywhere and everywhere. Obviously, this is good news for dry cargo transport in the winter, as coal is often is stocked in advance, and the motivation for creating such reserves should be very high, given the risk of a shortage of natural gas."
"This should lead to very interesting months starting in September, given how tense the dry cargo market is already."
Decarbonation and Chinese imports
One of the ironies of the current market is that weather events attributed to global warming are driving demand for the transportation of outdated coal. The second irony is that China's decarbonization initiative could further boost coal demand.
During the virtual conference Marine Money Week last month, Magnus Halvorsen, CEO of Norway-registered company 2020 Bulkers, explained: “China consumes about 4 billion tons of coal [per year] and imports no more than 300 [million tons], so any change in the ratio import and consumption will have a dramatic effect on import needs. If China, as part of environmental measures to restrict domestic production, produces significantly less coal, this will have a strong impact on import needs."
According to Aristides Pittas, CEO of EuroDry (NASDAQ: EDRY), “China is going to limit the use of its own coal mines for environmental reasons. transportation ".
“We all know coal is a dirty cargo that will become obsolete at some point in time,” Pittas said during Marine Money Week. “We are all for it. We want the world to be clean and we want to help it. But it won't happen overnight. It won't happen so quickly. And the path to decarbonization will create a lot of inefficiency. And inefficiency usually helps transportation markets.
"I think coal will surprise people," Pittas said. "He hasn't disappeared yet, so be on the lookout."