December 5, 2017 / 12:19 AM / 12 days ago

China trims appetite for coal imports, but prices hold up: Russell

LAUNCESTON, Australia (Reuters) - There are indications that China’s appetite for imported coal may be starting to ease in line with Beijing’s efforts to limit the use of the fuel over winter in a bid to lower air pollution.

China’s seaborne imports were 18.26 million tonnes in November, down from 20 million in October, according to vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.

It’s the fourth consecutive monthly decline for seaborne coal imports, according to the data, and it comes as the authorities impose productions cuts on coal-consuming industries such as steel.

The vessel-tracking data doesn’t align exactly with official customs data given it excludes coal that is imported by rail or road, and also because of minor differences as to when cargoes are assessed as having been discharged.

However, it has proven a reliable indicator of China’s seaborne imports and the November data shows the decline to be fairly broadly-based.

Shipments from top supplier Indonesia declined to 9.13 million tonnes in November from October’s 10.11 million and 9.63 million in September.

Indonesia supplies mainly low-rank coal to China, which customs classifies as lignite, and this is mainly used as power-station fuel, often being blended with high-grade coal to boost the energy value.

China imported 6.47 million tonnes of coal from Australia in November, down from 6.87 million in October and 7.32 million in September, the shipping data showed.

About 38 percent of Australian supplies shipped to China are coking coal used to make steel, the rest being higher-grade thermal coal.

The vessel-tracking data suggests that China is importing less of both thermal and coking coal, given the drop in volumes from both Indonesia and Australia.

PRICES IGNORE FLOWS

The reduction in Chinese coal imports in recent months has yet to show up in prices for the polluting fuel.

The spot price of coal at Australia’s Newcastle port, the benchmark for thermal coal in the region, closed at $96.90 a ton on Dec. 1, up from the recent low of $89.80 on Oct. 2, and 36 percent higher than the low for the year of $71.30 in mid-May.

Coking coal on the Dalian Commodity Exchange ended at 1,392 yuan ($210) a ton on Dec. 1, up 27 percent since its recent low on Nov. 1, and almost 50 percent higher than its trough for the year of 950 yuan in early June.

It appears as if coal traders in China are looking beyond the winter curbs on coal consumption to hopes of a strong rebound in the second quarter of next year.

Margins for steel producers in China remain robust, suggesting a strong boost to production when output curbs are lifted in March, which will also boost demand for coking coal.

For thermal coal, the price for imported cargoes are tracking resilience in domestic prices, which in turn are being supported by measures to cut capacity.

The price of thermal coal at the port of Qinhuangdao, a domestic benchmark, was 615 yuan a ton on Dec. 1, down slightly from the recent high of 630 yuan in early October, but well up on the low for this year of 565 yuan in June.

While thermal power generation, which is mainly coal in China, did decline 2.8 percent in October from September, it was still 5.4 percent higher for the first 10 months of 2017 compared to the same period last year.

The growth in thermal power output is running at a faster pace than the increase in domestic coal output, which rose 4.8 percent in the first 10 months of the year.

Coupled with relatively high domestic prices, the rising thermal power generation is keeping the door open for imports.

While China’s winter restrictions on burning coal may temporarily lower import volumes, it’s also possible that prices hold up, given the current domestic market dynamics.

(The opinions expressed here are those of the author, a columnist for Reuters.)

Editing by Christian Schmollinger

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below