A capesize bulk carrier has unloaded Australian coal in China, according to vessel tracking data. The discharge would have been unremarkable prior to 2020 but are rare since China instated a ban on imports of coal from Down Under last year. Data from bulker tracking platform Oceanbolt shows that Cosco Shipping Bulk’s 177,878-dwt capesize Nian Feng Hai (built 2008) loaded a 86,200 tonnes of coking coal at Hay Point and Abbot Point in Australia during mid-July. The vessel unloaded at Dalian and departed on Saturday, after arriving at the congested port three weeks earlier. It is, however, unknown whether the cargo has received the necessary customs clearance for the coal to be imported for end-use in China, which is the real sticking point. Shipping analysts don’t expect China’s import ban will be axed in the foreseeable future.

It’s hard to imagine China opening the doors to Australian coal any time soon, but we have seen some of the last vessels waiting since last year discharge in China,” said Nick Ristic, lead dry bulk analyst for Braemar ACM Shipbroking. “We can’t be sure whether these cargoes are destined to be used in China or Taiwan or to be re-exported, as has been the case in the past.” But amending the ban would make sense — China needs to import more coal by any means. Coal supplied about 58% of China’s total energy consumption in 2019. Just over two-thirds of China’s electricity is consumed by the industrial sector.

Harry Grimes, research analyst at Arrow Shipbroking Group, said China’s coal ban is valued highly as a political statement, but “if the shortage becomes even more acute, we could envision a temporary quota opening up“. The ban is more likely to continue because of the strategic defense pact announced last month between Australia, the US, and the UK, according to Russell Thompson, managing director of maritime trade data firm Tradeviews. “The Chinese have not been known to back down even if it works to their advantage, so I expect this dispute will rumble on for some time,” he said.

Like China, India is highly dependent on both thermal and metallurgical coal and is facing an urgent shortage as inventories run short at many of its coal-fired power plants. Data from India’s Central Electricity Authority shows that 97 Indian power plants with around 120,000mW capacity have coal stocks of five days or less. A further 17 plants have zero coal inventory and 59 other power plants have enough of the commodity to last three days or less, according to the data. High commodity prices are incentivizing coal exporters to push out as much volume as possible, resulting in quirky new trades coming to light — such as the capesize fixed to take coal to China from Kazakhstan via the Black Sea. But high prices are also the reason that India’s imports have fallen to record-low levels. “Developed nations with deeper pockets will have an advantage in the market, and this could drive more cargoes into north-east Asia and Europe,” Grimes explained. “Overall, the developments in the coal market remain positive for dry bulk, however the growth in volumes may start to slow.”

China has taken steps to unlock more domestic coal production by relaxing mining safety regulations, but weather issues could make it hard for this increased supply to plug the gap in the short term, according to Ristic. Grimes thinks the big mismatch in coal supply and demand won’t be rectified quickly by a few policy changes. “However, looking forward, Beijing’s call for banks to increase loans to the coal-mining sector will stimulate supply over the medium term, which could dent import demand once the energy market normalizes,” he said. This week, demand for capesizes to carry coal helped push average spot rates north of $80,000 per day. But vessel supply remains constrained by congestion, quarantines, and disruption to trade patterns caused by the coal trade war. “A boost from exports from the US could be very supportive if capacity can be found, given the long-haul nature of the trade, as could an increase in shipments from South Africa, as this will thin the ballaster list for Brazil further,” Nick Ristic from Braemar ACM Shipbroking said.

Supramaxes could be the bulkers that benefit most as India and China boost imports of much-needed coal, according to analysis by Fearnleys. “Segment-wise, supramaxes have not been so strong on the coal side as panamaxes and capesizes, so probably we will see more coal on supramaxes if supply from the major exporters increases,” Fearnleys research analyst Bernhard Baardson told TradeWinds. But port congestion will continue to hamper the trade and could even get worse. “The way we measure it, congestion on supramaxes are currently at all-time highs, whereas on panamaxes and capes it has eased off the last few weeks, ” Baardson explained. “Assuming further records in total shipment volumes the next months due to restocking demand on the coal side, congestion is sure to increase from current levels.” Research by Arrow, however, has found that congestion has so far had a limited effect on seaborne coal trades, unlike iron ore. Congestion of vessels carrying coal is lower than at this point in 2020, Grimes told TradeWinds.