OREANDA-NEWS. Growth in global thermal coal demand is unlikely to make up for the cutback in imports from China in the near term, according to Thai energy firm Banpu.

Indian first-quarter import demand grew by 11mn t year on year, but this was not enough to compensate for a 33mn t fall in shipments to China in the same period, Banpu's Singapore-based head of marketing, sales and logistics, Philip Gasteen, told the IHS European coal conference in Nice this week.

China's import demand is predicted to remain weak in the near-term, while infrastructure bottlenecks will continue to hamper Indian import growth, he said. Although India has added 40GW of coal-fired power capacity in the past two years, the plants are running at low utilisation rates, which has limited import demand.

On supply, Australian producers have cut average unit costs by around 17.7pc since 2013 to around \$58.50/t this year, Gasteen said. The recent cost reductions are mainly as a result of a weak Australian dollar and lower oil prices.

And Indonesian producers could cut costs further this year — despite many having dollar costs and not deriving great benefit from foreign exchange movements. Fuel accounts for the majority of Indonesian costs and if oil prices stay low, producers' unit costs could fall by \$5-8/t this year. The fall in production costs could help producers in the country to maintain their margins despite the fall in seaborne prices.

Indonesian production of higher energy coals is likely to decline this year because of limited reserves, Gasteen said. This could result in the country losing some market share, particularly in China where buyers are showing signs of moving towards high-energy Australian coal as the discount to lower energy coal has narrowed.