Thermal coal imports into China, Japan and South Korea, three of the world’s biggest coal users, reached their highest combined total in 16 months in December, as North Asian manufacturing powerhouses braced their economies for the growth in 2023.
The economic boost in these countries, which together accounted for nearly half of all thermal coal imports in 2021, moderated in 2022 as China’s strict zero-COVID measures stifled industrial activity in the world’s largest manufacturing base. .
Japan and South Korea have extensive supply chain ties to China, which meant each country suffered a slowdown in both productivity and demand growth in 2022 as China’s COVID-19 restricted movement. of goods and people for much of the year.
But thanks to a series of stimulus and easing measures passed by Beijing that are designed to revive China’s economy this year, factories and industries across North Asia are now poised for a rebound as well.
PREPARING
To fuel that anticipated sustained increase in production and consumption, each country has increased imports of thermal coal, which generates power for electrical grids and plants that produce everything from cement and ceramics to refined metals, chemicals, heavy machinery and fertilizers.
Combined thermal coal imports from the three countries totaled 43 million tonnes in December 2022, the highest monthly tally since August 2021, Kpler ship-tracking data shows.
In turn, that collective increase in coal use will lead to an increase in the combined coal emissions of China, Japan and South Korea, which together accounted for 36% of global carbon dioxide emissions from energy use. in 2021, according to BP Statistical Review. of World Energy.
From January to October 2022, combined emissions from coal-fired power generation in China, Japan and South Korea totaled 4.03 billion tonnes, marking an increase of 1.3% over the same period in 2021, according to show Ember data.
In 2023, it looks like that emissions burden will rise further amid the synchronized increase in manufacturing centers in all three countries.
SIGNS OF RECOVERY
While Beijing’s stimulus measures will take months to take full effect, there are already signs of recovery in key areas of the North Asian manufacturing economy.
Data on China’s production of key industrial inputs, including refined fuels, plastics, resins and metals, show a rebound in several sectors reflecting improving demand from end-users such as home appliance makers and food lines. production.
One such key end-user is the Asian auto production industry, which started to show signs of growth as of the latest late 2022 data in China, Japan, and South Korea.
The auto sector has been hit hard by shortages of key components over the past two years, most notably microchips, so any sustained recovery in China’s factory operating rates should encourage a further rebound in vehicle production in North Asia in the coming months.
Increased economic activity in China should also stimulate higher demand for manufactured goods, including automobiles.
That should benefit the world’s top auto exporter Japan, which has struggled to lift exports to pre-COVID levels despite strong demand for new vehicles in both North America and Europe over the past year.
A major factor constraining overall auto exports has been sluggish demand in Asia, primarily China, which should start to see a recovery in 2023 as increased industrial activity coupled with Beijing’s stimulus measures take hold. and stimulate more spending.
In short, the combination of greater freedom of movement in China and increased industrial activity in North Asia should fuel an improvement in global economic growth in 2023.
But it appears that the associated additional production from factories and heavy industry will come with increased fossil fuel pollution, which could undermine efforts to curb climate change and limit overall emissions.
Source: Reuters (Reporting by Gavin Maguire; Editing by Himani Sarkar)
