LITTLETON, Colorado- South Korea’s thermal coal imports over the first three months of 2023 are on track to hit their highest since 2018 as heating demand rose during a cold snap and industrial use recovers from the stunted levels of 2022.
South Korea – Asia’s fourth-largest economy and fifth-largest coal consumer – cut coal use by more than 8 percent in 2022 to its lowest level since 2008, data from Ember shows, as slowing global goods consumption dealt a heavy blow to South Korea’s export-oriented economy.
Lower coal use in turn resulted in lower emissions from South Korea’s power sector, with total discharge of carbon dioxide (CO2) and equivalent gases in 2022 dropping by just less than 8 percent to 248.2 million tons, and the lowest since 2011.
However, concerted efforts to revive South Korean export earnings, alongside an economic recovery in South Korea’s top trade partner, China, will likely trigger a reversal in Korea’s coal use and emissions trends in 2023, undermining global efforts to cut fossil fuel use and pollution totals.
Diminished industrial production and consumption in China, South Korea’s top market, was especially damaging to Korean manufacturers last year, as China is a major consumer of Korean cars, chemicals and electronics, and a key link in South Korea’s supply chain for intermediate goods.
China’s imports from South Korea averaged around $18 billion to $20 billion per month in late 2021 and early 2022, but dropped to $14.3 billion by December 2022, data from Refinitiv shows, as Chinese factories curtailed output and buyers tightened belts.
This drop in purchases from South Korea’s top consumer stung manufacturers throughout the economy, and resulted in a 0.4 percentcontraction in the country’s gross domestic product (GDP) in the final quarter of 2022.
Much of the weakness from late 2022 has extended into 2023, with South Korean semiconductor exports dropping by 43 percent in February, according to investment bank ING.
However, exports of automobiles climbed by 9.6 percent last month, and shipments of mobile phones and camera components have shown some strength so far in 2023, revealing an uneven landscape for Korean factories and production lines.
With global consumption levels set to remain weak over the near term, and China’s economic recovery still in its early stages, Korean manufacturers are expected to remain cautious about output expansions even as the government urges them to “put every ounce of energy” into expanding exports.
That caution is likely to extend to managing operating costs, which surged in 2022 as global natural gas and coal prices spiked in the wake of Russia’s invasion of Ukraine.
Power costs remain sharply above long-term averages in 2023, even after the steep slumps seen in recent months as Europe’s gas stockpiles swelled to record levels and use from industry remained stunted. – Reuters
