TAS sees bigger demand for tugboats from surging coal demand
KUCHING: Shipbuilder TAS Offshore Bhd is hoping that the surging global demand for Indonesian thermal coal due particularly to the energy crisis in Europe will spur the construction of more tugboats, which will in turn benefit the company.
TAS has focused on the construction of tugboats, which are required to transport coal, other minerals and bulk cargo, in recent years.
Global coal demand is set to return to its all-time high this year based on an International Energy Agency (IEA) report, according to TAS chairman Datuk Mohammed Sepuan Anu.
“The global coal demand is being propped up this year by rising natural gas prices, which have intensified gas-to-coal switching in many countries as well as economic growth in India.
“Indonesia, as the world’s largest coal exporter by tonnage, has gained most in the global scramble for coal,” he said in the company’s 2022 annual report.
The European Union (EU), which gets about 40% of its coal supplies from Russia, is reported to have fully banned coal imports from Russia starting last month due to the latter’s invasion of Ukraine while the United Kingdom will follow suit by end-2022.
Japan and South Korea have also announced they will take a similar step.
The mass cancellation of Russian coal imports has caused supply shocks and put the world into an energy crisis.
The Energy and Mineral Resources Ministry of Indonesia said Spain, Italy and the Netherlands have joined Germany in exploring options to purchase a large amount of coal from Indonesia.
India, which is Indonesia’s second-largest coal export destination, has also approached the country to acquire more coal to meet its domestic needs.
“The IEA sees coal consumption in Europe rising by 7% in 2022 on top of last year’s 14% surge. Demand for coal in India, the world’s second-biggest coal importer, is expected to rise almost 10% in 2022 as the country’s economy expands and electricity use increases.
“Markets were tight even before the Russiaukraine war as soaring natural gas prices in Europe and Asia in late 2021 intensified gasto-coal switching in many countries,” said TAS in a separate management discussion and analysis report.
TAS said the Indonesian Coal Mining Association had disclosed that the Indonesian government has given approval to increase coal production amid surging demand and persistent supply disruptions exacerbated by the war in eastern Europe.
Mohammed Sepuan said Indonesian coal producers are looking to seize this opportunity to take advantage of rising demand and surging prices of coal to increase their production volume.
“The bright outlook for the coal mining industry in Indonesia is expected to spur demand for more tugboats, which are essential in transporting coal. Our group is looking forward to reaping further benefits from this development,” he added,
According to the latest market research report by Technavio, the tugboat market’s growth momentum is expected to accelerate at a compound annual growth rate of 13.61% during 2021-2025. About 37% of the market growth is expected to originate from the Asiapacific.
The increasing seaborne trading and the expansion of ports are creating significant growth opportunities for tugboat manufacturers operating in the region.
Mohammed Sepuan said TAS has signed four shipbuilding contracts, including three units of tugboats and one unit of harbour tug, with clients from Indonesia and Iraq, respectively, in financial year 2022.
During the financial year under review, the group completed and delivered six units of tugboats, two units of retrieval craft and one unit of harbour tug with total contract value of about Rm59.1mil to shipowners in Indonesia, Singapore and Iraq, respectively.
He said the customer from Iraq was the first for TAS in the new market segment, which the group hopes to maintain a longterm relationship to secure more shipbuilding contracts going forward.
TAS said besides coal, there is also a rise in Indonesia’s nickel supply.
Quoting Macquarie analyst Jim Lennon, by 2025, Indonesia could reach 60% of global nickel supply as compared to 30% in 2020, as nickel demand for batteries used in electric vehicles is growing rapidly.
“Wood Mackenzie estimates the world will need an additional 1.65 million tonnes of nickel between 2026 and 2038, most of which is expected to come from Indonesia.
“Hence, we foresee the demand for tugboats will be sustainable as tugboats are essential for inter-island transportation of bulk materials in Indonesia,” it added.
In the short to medium term, TAS said it will focus on the transportation, port operation and mining industries for its shipbuilding business.