November 6, 2019 / 12:03 PM / 8 days ago

RPT-COLUMN-China's seaborne coal imports slide in October, but not by enough: Russell

(Repeats with no changes in text. The opinions expressed here are those of the author, a columnist for Reuters.)

* GRAPHIC: China seaborne coal imports vs. Indonesia price: tmsnrt.rs/2oPxGqv

By Clyde Russell

MELBOURNE, Nov 6 (Reuters) - China’s seaborne coal imports slumped 19% in October from September, but the world’s biggest buyer of the polluting fuel is still on track to record an unwanted annual increase.

Seaborne imports were 19.9 million tonnes in October, according to vessel-tracking and port data compiled by Refinitiv, down from September’s 24.5 million - the lowest monthly total of seaborne arrivals since February.

That shows Beijing’s aim of limiting 2019 imports to the same level as those in 2018 is having some effect. But even with the drop in October imports, China is well on track to comfortably exceed 2018’s total of 281.2 million tonnes.

Official customs data showed imports for the first nine months at 250.6 million tonnes, a gain of 9.5% over the same period in 2018.

Add the October seaborne imports of 19.9 million tonnes, plus around 7 million tonnes more in overland arrivals from Mongolia and Russia, and it’s likely that imports for the first 10 months of the year will be around 277 million tonnes.

Even if imports for November and December are severely curbed, it’s still likely that the 2019 total will exceed 300 million tonnes. Imports may even approach the annual record of 327.2 million tonnes from 2013.

The rise in imports has been accompanied by increasing domestic output, with production totalling 2.74 billion tonnes in the first nine months of 2019, up 4.5% from the same period a year earlier.

The robust coal import and domestic output data show just how difficult it is for an economy the size of China to wean itself off the fuel.

The world’s second-largest economy has had some success in reducing coal’s share of its energy, with it dropping to 59% of the total last year from 68% in 2012, largely achieved by switching residential heating to natural gas and boosting both renewable and hydro power generation.

But given the overall increase in China’s energy demand, coal consumption has still been increasing, even as its overall share declines.

COAL PIPELINE

China still has more than 200 gigawatts of coal-fired power generation capacity in the pipeline, and has approved new mines with a capacity of 196 million tonnes in the first nine months of the year alone.

Given they supply power plants and steel mills that are difficult for local producers to service, imports are expected to remain robust, despite higher domestic output.

The breakdown of October’s seaborne imports illustrates that dynamic, with much of the decline being borne by Australia, which supplies coking coal for steel-making and higher-grade thermal coal.

China’s imports from Australia dropped to 6.3 million tonnes in October, from 8.3 million in September and 10.1 million in August, the Refinitiv data showed.

The drop is likely concentrated in coking coal, given winter pollution restrictions will curb demand from steel mills in certain provinces, including those in the north-east coastal region.

In contrast, China’s imports from Indonesia held up better in October, coming in at 10.4 million tonnes, down slightly from 11.1 million in September and 12.5 million in August.

Much of Indonesia’s imports are used in southeastern power plants as a blending fuel with domestic coal, meaning demand for fuel from the Southeast Asian nation tends to be more resilient.

Overall, it appears that Beijing will have to do more than just arm-twisting if it seriously wants to limit annual coal imports.

Editing by Kenneth Maxwell

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