Australian port bottlenecks boost Russian, Indonesian coal flows to South Korea

Congestion at Australia's key coal ports has opened the door for rival suppliers, with Russia and Indonesia stepping in to capture a greater share of South Korea's thermal coal market, a trend that is likely to continue given their price advantage and premium quality.

Korean utilities, facing steady summer demand and seeking timely deliveries since June, have increasingly turned to the two origins as vessel delays and weather disruption at Newcastle hampered Australian coal flows.

Russia overtook Australia to become South Korea's largest coal supplier in August, shipping 3.76 million mt, up 54.6% year over year, according to the official customs data seen by S&P Global Energy Sept. 16. Indonesia followed closely with 3.74 million mt, up 50.1% year over year, customs data showed. Together, the two origins supplied nearly two-thirds of South Korea's imports during the month, displacing Australia's long-held dominance.

Australia supplied 2.70 million mt of coal to South Korea in August, down 3.76% year over year and 26.76% month over month.

Price competitiveness added to their appeal. Russian cargoes landed at an average of $89.03/mt in August, while Indonesian shipments were even lower at $68.95/mt. In contrast, Australian coal arrived at a significantly higher $129.9/mt in the same period.

"The congestion in Australia is not easing, and buyers in Northeast Asia are diversifying toward Russia and Indonesia for reliability and cost reasons," a Singapore-based trader said.

A UAE-based trader dealing with Russian-origin coal said competitive prices of Russian 6,000 kcal/kg NAR cargoes compared with Australian high CV prices are driving demand from South Korea, outpacing their current supply.

Loading delays at Australian ports

South Korean imports of Australian coal experienced a notable decline, dropping from 3.1 million mt in April to 2.16 million mt in May and further to 2.08 million mt in June, customs data shows. This decrease was primarily attributed to port congestion in Australia, exacerbated by cyclone Alfred-induced rains during the last week of May, which led to significant loading delays.

While the congestion eased temporarily in July, allowing imports to rebound to 3.7 million mt, the situation worsened again in August. Imports fell by 26.7% month over month as disruptive rains in the first week of August affected coastal regions in New South Wales.

South Korea's overall imports in August rose 6.45% year over year to 11.83 million mt, lifted by persistent power generation needs during peak summer demand. Smaller volumes also came from Canada and Colombia, though both these origins saw sharp declines.

Russian July thermal coal exports to South Korea outpaced Colombian supply for the first time in two months in July 2024 as elevated freight costs and supply disruption hampered Colombian shipments.

Market participants expect Russia and Indonesia to maintain their strong positions in the market as long as Australian port bottlenecks and weather disruptions continue, despite a Russian government directive to state-owned power-generating companies to cap coal purchases in the spot market.

Analysts at S&P Global Energy said in a report that the shutdown of South Korea's 950-MW Kori No. 4 nuclear reactor on Aug. 6, following the expiration of its operating permit, contributed to increased coal burn and thermal coal imports.

Record heat in August, with above-average temperatures in Northeast Asia expected to persist in September, further supports this upward trend, the report said.

The Platts NEAT index assessment for 5,750 kcal/kg NAR delivered to Kinuura, Japan, on a CFR basis averaged $92.93/mt in August, down from $112.68/mt a year earlier. Platts, part of S&P Global Energy, last assessed it at $93.06/mt on Sept. 16. This assessment serves as a popular price reference for cargoes supplied in Northeast Asia, including South Korea and Taiwan.