Heatwaves in parts of Asia have buoyed demand for imported coal as power generators prepare for a sharp increase in coal burn to cater for the seasonal uptick in electricity consumption.

Summer temperatures are hovering close to 40°C in some regions, with the potential to rise further during the peak summer season in countries including China, India, Japan, South Korea and Vietnam. This has prompted utilities from these countries to replenish coal stocks as power demand could remain elevated at least in August.

Asian buying is also influenced by the prevailing prices in the international market. The prices have recovered from four-year lows in June but are still subdued compared with a year earlier. Argus last assessed the GAR 4,200 kcal/kg market for Supramax cargoes at $42.73/t fob Kalimantan on 15 August, down by 16pc from a year earlier.

China

The uptick in temperatures in some parts of the country could lead to higher air-conditioning demand, exacerbating overall power consumption. China's electricity load hit new records for three consecutive days in early August. Total power generation in July rose by 3pc on the year to 883TWh, with thermal power — primarily coal-fired — rising by 5pc to 575TWh from a year earlier, according to the country's National Bureau of Statistics.

Combined coal burn at utilities across China's eight coastal provinces averaged 2.37mn t/d in the week to 18 August, up from 2.41mn t/d the previous week but below the 2.44mn t/d during in same period last year, according to industry association the CCTD.

Demand from utilities could support some recovery in China's thermal coal imports in August. China might have imported around 26mn-27mn t of thermal coal in July, up from 22.8mn t in June, according to Argus calculations based on the customs data. It imported 34.4mn t of thermal coal in July last year.

India

Demand from India, the world's second-biggest coal importer, also tends to be affected by the monsoon weather pattern around this time of the year. The humidity following the seasonal rainfall has aggravated cooling demand, and many buyers are also seeking to secure post-monsoon cargoes, expecting a sharp rise in power demand in coming weeks in line with a uptick in economic activity after the rains subside.

India's power demand has increased this month with temperatures in some parts of the country hovering above 35°C, supporting overall coal-fired generation and coal consumption at utilities.

India's coal-fired generation, which accounts for the bulk of the country's generation mix, rose to 56.47TWh during 1-17 August, from 54.78TWh a year earlier, according to data from the Central Electricity Authority (CEA). Combined coal inventories at Indian power plants stood at 51.97mn t as of 18 August, down from 54.2mn t as of 30 July, the CEA data show.

The uptick in power demand has prompted some utilities to seek imported cargoes. The utility demand along with preparation for post-monsoon rebound could support India's thermal coal imports in August, after the imports dropped last month. India imported 11.46mn t of thermal coal in July, down from 13.76mn t a year earlier, and down from 14.11mn t in June according to estimates from trade analytics platform Kpler.

Japan, South Korea

Authorities have forecast prolonged hot weather conditions in South Korea and Japan, with temperatures hovering around 33-34°C in some regions. Average temperatures in July–August have been 50pc above historical norms and above-average temperatures could persist in August–September, according to the Korea Meteorological Administration, with a similar trend being observed in Japan.

Coal-fired power remains South Korea's second-largest energy source after nuclear power, and an uptick in power demand during the summer could support utility coal consumption and demand for imported cargoes. South Korea imported 8.2mn t in July, up from 7.6mn t a year earlier, and from 5.5mn t in June, according to customs data.

The Japan Meteorological Agency expects high temperatures to persist for another month, potentially leading to an increase in coal-fired power generation to meet cooling demand, and in turn supporting the outlook for coal imports. Japan's thermal coal imports in July totalled 9.7mn t, up by 1.2pc from a year earlier, according to preliminary data from the Ministry of Finance. This was also up from 5.98mn t in June.

Vietnam

Demand from Vietnam has led the growth in imports in southeast Asia this year, with utilities and coal companies actively looking to restock cargoes for blending to cater to power demand.

Persistent hot weather in northern Vietnam has boosted power demand as well as coal-fired generation, particularly in capital city of Hanoi, which has in turn supported utility demand for imported coal.

Vietnam's coal imports reached 43.46mn t in the first seven months of the year, up from 40.48mn t in the same period a year earlier, according to the customs data.

By Haridas and Saurabh Chaturvedi