Severe drought and heatwave seem to have finally compelled Chinese power utilities to seek overseas coal as thermal coal imports witnessed an over 50% m-o-m rise to 6 mnt in August, 2022, customs data showed.
However, shipments from Russia made up the lion’s share of import volumes last month, followed by Indonesia and Mongolia.
A sharp decline in hydropower generation in the country following the unprecedented heatwave compelled coal-fired power plants to gear up production volumes to meet the spiking demand for air conditioning.
According to National Bureau of Statistics (NBS) data, hydropower generation dipped to 123 TWh in August, down by 16% m-o-m. Meanwhile, the thermal power output increased to a record high of 599 TWh in August, up by 8% m-o-m.
Russian share at 73% in total imports
About 4 mnt (73%) of Russian coal made its way to the country due to its cost-competitiveness vis-a-vis other sources. Imports from the country were higher by 45% m-o-m.
Russian 5500 kcal/kg NAR grade was sold at $155/t CFR basis in the country last month, as against domestic coal of similar grade at $162/t (RMB 1,155/t), CoalMint observed.
Imports from Indonesia were also higher at 1.2 mnt in August 2022, up by 35% m-o-m as lucrative prices encouraged utilities to place more orders.
Power utilities were more focused on lapping up low-CV Indonesian supplies as they have secured higher grades from Russia.
Among other countries, shipments from Mongolia were at 50,000 t, while that of Canada were at a meagre 20,000 t.
China’s thermal coal imports from South Africa were nil for the 7-straight month as expensive supplies flowed towards Europe.
Interestingly, China’s coal imports for the first eight months of the year (January-August 2021) are recorded to be down by 41% y-o-y at 30 mnt amid record-high domestic coal output this year.
Record-high coal output
The country’s raw coal output rose to 367 mnt during January-August 2022, up by 9% y-o-y.
The country has focused on improving its domestic coal production this year amid its broader efforts to improve energy security and reduce its dependency on imports.
China’s mine output was up by 332 mnt (13%) compared with the same period in 2021 and 520 mnt (22%) compared with the last pre-pandemic year in 2019.
Outlook
Despite the record-high coal output this year, power utilities in the country are expected to increase imports in October to replenish stocks ahead of the winter season with shipments taking place mainly from Russia and Indonesia.
However, a depreciating yuan may also cap any major rise in imported coal. China’s yuan touched a 28-month low against the dollar on Monday, despite the central bank taking steps to rein in the currency’s weakness.
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