Falling coal prices could drive Chinese imports to all-time highs, as fuel unwanted elsewhere in the world is diverted to the biggest consumer.
China’s purchases may hit 360 million to 380 million tons in 2023, according to its top industry association. That compares with 293 million tons last year, and a record of 327 million tons set in 2013.
The nation’s buying spree, particularly for the higher grades that its own miners struggle to produce, coincides with easing energy prices in the European Union after last year’s spike caused by Russia’s invasion of Ukraine. That’s luring cargoes at discounted rates from as far afield as South Africa and Colombia.
While Beijing is keen to stock up on its mainstay fuel as air-conditioning demand soars heading into the summer, the extra volumes would land in a market that’s contending with disappointing industrial consumption and already well-supplied by record domestic production.
“Global prices have been hammered by weak EU demand, and more cargoes are coming to China instead of the EU or India,” Su Huipeng, an analyst at the China Coal Distribution and Transport Association, told a briefing on Wednesday.
“Suppliers have slashed prices to seize selling opportunities in China after demand faded elsewhere,” said Su. The extra long-haul shipments could take a while to arrive and “might not factor into May’s imports, which could be lower than last month, because the voyage takes one to two months,” she said. China publishes its latest trade data on Wednesday.
Imports in the first four months of the year were already running at a breakneck pace, rising 89% year-on-year to 142 million tons. The surge came after China lifted its ban on Australian shipments and more Russian coal became available following sanctions by other buyers on Moscow.
Prices Plunge
The benchmark price for thermal coal at China’s key transport hub of Qinhuangdao has fallen 28% this year and stockpiles at northern ports are at historic highs. International prices have plunged 63%. China’s own output is also expected to break records by rising to as much as 4.7 billion tons this year, according to Hou Jian, another CCTD analyst.
“The worst may not yet have arrived and we are in the middle of a downward cycle in prices,” said Hou.
A raft of dismal economic data, including a second straight contraction in manufacturing activity in May, have amped up fears over China’s growth outlook, replacing the optimism that accompanied the reopening of its economy after the pandemic. But rising temperatures are now lifting power consumption, which should help absorb the additional imports in coming months, Hou said.
A weaker coal market in the world’s top consumer of the dirtiest fossil fuel could also be bad for the climate. “A protracted downward trend in coal prices might prompt a resurgence of carbon emissions” in the second half of the year, Bloomberg Intelligence said in a note.
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