China is expected to press down harder on imports of foreign coal to balance the country’s supply and demand, believing that the fast growth of coal imports in Q1 was a trigger though the rationale could be the campaign to reduce air pollution and carbon dioxide emissions, according to Mysteel Global — a China-centric insight and global metal markets intelligence providing company.
“The coal China consumes is largely domestically supplied – and imported coal serves to adjust the market – but the COVID-19 pandemic has markedly impacted demand”, said a Shanghai-based analyst. “This has forced some domestic miners to work out production reduction plans in an attempt to keep prices steady, yet over the past three months both imported coal volumes and the number of coal ships arriving at Chinese ports were high”.
According to Mysteel’s survey of ten ports spanning North to South China, some have already tightened coal import controls since March. Besides the existing 40 day-delay in Customs clearance, the ports have started to ban imported coal clearance for enterprises that are not registered in the region where the Customs operate.
“Some inland steel plants have been notified of reduced quotas for seaborne coal this year”, said an industrial watcher in East China. “The impact on their operations will be limited, however, as the plants have convenient access to domestic coking coal as a replacement”.
Coal imports volumes from Mongolia have not been significantly impacted yet, as the Mongolian authorities have ordered controls placed on coal truck transportation to China to contain COVID-19, Mysteel Global noted. For example, the number of trucks transporting coal via the Ganqimaodu checkpoint in North China’s Inner Mongolia remained at about 200 trucks/day on April 23, or less than half the normal volume of traffic.
As the world’s largest coal consumer, China’s total energy consumption in January-March quarter slid 2.8% on year, while the country’s domestic raw coal output for all uses was only 0.5% lower at 830 million tonnes. By contrast, coal imports surged by 28% on year to 96 million tonnes, as reported.
The import controls also match Beijing’s plan to reduce the country’s reliance on coal in energy consumption. Although China last year met the target to reduce the percentage of coal in all energy generated to below 58% one year ahead of its 2020 target, the country stayed active in cutting excess coal capacity and developing new energy alternatives, Mysteel Global noted.
By March 31, Mysteel’s thermal coal price for 5,500 kcal/kg Shanxi blended coal was 14% or Yuan 87/tonne ($12.3/t) lower on year at Yuan 535/t at Qinhuangdao port in North China, while the composite price for domestic coking coal was 10% lower or Yuan 117.9/t down at Yuan 1,121.3/t, both including the 13% VAT.
“The tougher controls on coal imports will weigh on imported coal prices”, said another Shanghai-based analyst. “But at the same time, cheaper imported coal prices will also attract Chinese buyers with quotas, thus it remains unclear how far the restrictions will go to help balance domestic supply and demand”.
Note: This article has been published under an article exchange agreement between Mysteel and CoalMint.
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