China’s thermal coal imports drop 28% in Jan-Jul’21 amid Australia ban

China’s total non-coking coal imports during Jan-Jul’21 fell to 44.18 mn t, against 61.46 mn t seen in the same period last year, according to customs data.

Indonesia and Russia overtook Australia as the highest exporter of thermal coal to China during Jan-Jul’21 as coal imports from Down Under were unofficially banned from the latter half of 2020. Imports from Indonesia stood at 17.4 mn t in CY’21, up by 29% y-o-y, while that of Russia were at 18.45 mn t during the same period.

The Australia ban was also the key reason for the drop in China’s coal imports in the first seven months of CY’21, despite its escalated coal demand due to extreme weather conditions.

China’s coal imports from Australia this year have dropped to virtually zero, as against 35.62 mn t during Jan-Jul’20.

Interestingly, to compensate for the shortfall in Australian coal supplies, China this year started buying coal from South Africa (despite the issue of trace elements) after a hiatus of five years and also increased imports from unconventional origins like the US and Russia.

China’s imported a total of 3.90 mn t of South African coal during Jan-Jul’21 period.

China’s country-wise coal imports

*Qty in mn t

Nevertheless, the increased imports from the above-mentioned countries were not enough to compensate for Australian thermal coal which led to an escalation in imported coal prices to new highs in CY’21 amid surged Chinese demand.

The average price of the Indonesian 4,200 GAR in Jul’21 stood at $71/tonne (t) against $65/t in the same period last year. Similarly, South African 5,500 NAR in Jan-Jul’21 stood at $75/t, up 36% y-o-y and the Australian 5,500 NAR price moved up by 30% y-o-y during Jan-Jul’21.

Higher power demand keeps imports up in Jul’21

China’s power consumption has been on a phenomenal rise since the last few years and coal continues to occupy a pivotal position in its energy structure.

In Jul’21, China’s thermal coal imports stood at 7.83 mn t, up 12% y-o-y.  The country’s coal-fired power accounts for 75% of the total power generation.

During Jul’21, the country faced an unprecedented power supply shortage as soaring summer temperatures resulted in overloaded energy grids and power outages at several provinces.

China’s power consumption witnessed a significant rise as it reached 775.8 bn KWh in July, up 10.3% m-o-m and 13% y-o-y, with industrial usage contributing 65.3% to the total consumption, according to data from the National Energy Administration.

Further, heavy floods last month that had disrupted mining operations at the major coal producing province of Henan, also supported coal imports.

Devastating floods in central China last month not only disrupted the transport of coal from major coal-producing provinces, but several power plants also were left with less than a week’s coal stock, which further forced companies to use electricity judiciously and cut down consumption.

China’s hydropower generation drops in Jul’21

A drop in China’s hydropower generation also contributed to a rise in its coal imports. China’s hydropower generation fell by 4.3% y-o-y to 142.2 TWh in Jul’21, data from the National Bureau of Statistics showed.

Owing to relatively lower rainfall in the southwest province of China last month, the country’s hydropower generation recorded a sharp fall with Shanxi and Guangdong provinces recording a decline of 67% and 24% y-o-y, respectively.

Summer rains typically boost hydro-power generation and reduce reliance on thermal coal. However, heavy rains in several parts of the country this year hampered China’s hydro-power generation.

Way ahead?

Coal supply scenario in China has been improving of late as the state planner, National Development and Reform Commission (NDRC), has relaxed conditions for coal mine capacity hikes alongside extending trial operations of 15 mines.

The government also plans to add almost 110 mn t/year of coal production capacity in H2CY’21 to meet the rising demand. Several coal miners in the country have already raised their production.

However, frequent accidents at mines and stringent safety checks could disrupt the country’s domestic coal supply. Along with this, the upcoming winter procurement season would raise the country’s prospects of coal imports in the remaining months of CY’21.