China is expected to carry out a coal supply guarantee campaign through the whole year of 2022 since the supply shortage may continue and imported coal replenishment was also in tightness.
Domestically
Confronted with the still hot thermal coal market, Chinese top economic planner NDRC has put forward a more detailed production lifting plan in a video meeting on March 11. The authorities aim to add effective coal production capacity by 300 million tonnes per annum, with daily coal production surpassing 12.6 million tonnes (Mt).
NDRC also allocated the 12.6 Mt of coal production to different provinces, namely Inner Mongolia (3.9 Mt), Shanxi (3.6 Mt), Shaanxi (1.9 Mt), Xinjiang (950,000 t), Guizhou (350,000 t), Henan (340,000 t), Shandong (340,000 t), Ningxia (280,000 t), Hebei (150,000 t) and Heilongjiang (150,000 t).
The targeted daily production of 12.6 Mt adds the annual volume up to 4.6 billion tonnes, which presented a huge pressure on a combined effective production capacity of 4.8 billion tonnes per annum (Btpa).
The 12.6-Mt target indicates to some degree only by doing so, the coal supply and demand can strike a balance in China. Sxcoal once elaborated this opinion that China’s daily coal output target of 12.6 Mt may be challenging.
Once the government ends the campaign, miners are likely to cut production to push up coal prices, which would dampen the stable supply of power coal and then the steady electricity generation.
Globally
Uncertainties over the global coal market were fueled by Ukraine-Russia conflicts, and some Chinese buyers also put aside coal import orders with Russian miners, due to the settlement worry of U.S. dollars for Russian coal.
On the other hand, the global coal supply was in tightness as well, boosting coal prices. Including Russia, major coal exporters around the world may cut their shipment, with an estimated total reduction in 2022 worldwide at 30-55 Mt.
Most coal buyers from South Korea, Japan and Europe turned to coal suppliers such as Indonesia for alternatives to Russian coal, after countries issued sanctions against Russia due to the Ukraine-Russia conflict and economic sanctions.
This came along with buoyant prices of oil and natural gas pushed more buyers to increase coal imports and boosted prices.
Indonesia’s Ministry of Energy and Mineral Resources (ESDM) has set the reference coal price (HBA) at $288.4/t for April 2022, up 41.59% or $84.71/t from $203.69/t a month earlier. The above-mentioned tight supply is one reason for the jumping prices, and another one is China’s stronger power demand.
Accordingly, most Chinese coal buyers have to swing to domestic coal to fill in the gap caused by the weaker replacement of imported coal.
Though China’s industrial production is not desirable enough amid the severe pandemic situation, social power consumption is likely to increase with economic stimulus policies after the epidemic eased. Electricity usage will also surge during the summer peak season.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
Leave a Reply