China’s September coal imports decline amid uncertainties on curbs

China’s total coal imports have decreased by 9.6% to 18.68 mn t in September against 20.66 mn t in August, according to the country’s latest statistical data.

More importantly, China’s coal imports in September have fallen by 38.3% as compared to 30.29 mn t in the same month last year.

The declining state of Chinese coal imports substantiates Beijing’s longstanding pledge to curtail coal usage to tackle severe pollution in the world’s top energy market. Drastic measures implemented to cap inbound shipments, such as halting clearances of coal cargoes at major ports, has resulted into imports plunging down.

Coking coal imports fall for third month in row despite record imports from Mongolia—

China’s coking coal imports have contracted in September, continuing the falling trend for the third consecutive month, as higher Mongolian imports failed to offset curbs on Australian imports.

China imported 6.72 mn t of coking coal in September, down by 6.3% from 7.17 mn t in August and down by 15.7% from 7.97 mn t in the same month last year. January-September imports have decreased by 3% to 59.38 mn t.

A country wise breakup of the monthly data reveals that the major proportion of China’s coking coal imports originated from Mongolia constituting the highest share of about 58%, following Beijing’s ban on Australian coal.

—Chinese coking coal imports from Mongolia have risen to a record 3.89 mn t in September, up 26.6% month on month and 8.4% year on year, surpassing the previous high of 3.73 mn t in August 2019.

Mongolian imports increased for six consecutive months from April as its daily volume of coal trucks through its highway ports gradually returned to pre-pandemic levels and stabilized at above 1,000 per day. Mongolian imports are on track to exceed 4 mn t in October as truck crossings have hit 2,000/day this month.

Coal from Mongolia, which borders China to the north, is the most obvious replacement for Australian coal, particularly due to the inability of suppliers located further away – such as the United States, Russia and Canada – to meet a short-term increase in demand.

—Chinese coking coal imports from Australia declined by 38.8% to a 10-month low of 1.98 mn t in September from a year earlier. The contraction accelerated from August as custom clearances for Australian-origin coal vessels remained slow in the month, and trade was mostly subdued as most Chinese steelmakers have exhausted their import quotas.

—Chinese coking coal imports from Russia surged by 52.8% to 0.47 mn t in September against 0.31 mn t in the same month last year. China-based buyers consider Russian coking coal to be a safer substitute for Australian, even as tight import quotas and opaque government policies have created uncertainty for all market participants.

—Chinese coking coal imports from Canada fell by 39.6% to 0.31 mn t in September against 0.51 mn t in the same month last year, although Canada is now seeing stronger-than-expected met coal demand in China, after the recently rumored ban on Australian coals.

Thermal coal imports fall amidst ambiguity on quota availability—

China imported 8.23 mn t of thermal coal in September, down by 39.2% from 13.55 mn t in the same month last year.

In the past month, China’s thermal coal imports have seen a steep drop in Australian and Indonesia cargoes and a milder drop seen in those from Russia, against an uptick in imports from Mongolia.

China’s thermal coal imports in September 2020 by source are as shown in the table below.

Quantities in tonnes (t)

Chinese thermal coal imports have registered a fall in September amid lack of clarity on import quotas and increased availability of domestic coal.

Although there is no clarity on China’s coal import quotas for ongoing year, 2017 (270 mn t) can be taken as a reference point for the 2020 import quota. This is because from 2017 only, China had started enforcing various degrees of import tightening measures for coal with an intention to give a boost to the domestic coal sector.

Now as per the customs data, China imported about 239 mn t of coal during Jan-Sep’20, which means it has used up 89% of its 2020 quota, based on 2017 imports as the reference point.

Meanwhile on China’s domestic coal front, the country produced 33.1 mn t of coal in Sep’20, up 0.3% from Aug’20, latest data from the National Bureau of Statistics showed. Country’s output of raw coal for all applications remained largely unchanged over January-September at 2.8 billion tonnes.

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By Aditya Sinha