China’s Importing So Much Coal That Local Miners Are Suffering

China’s coal buyers should slow purchases from abroad to avoid hurting domestic suppliers, the China Coal Transport and Distribution Association has recommended.

(Bloomberg) — China’s coal buyers should slow purchases from abroad to avoid hurting domestic suppliers, the China Coal Transport and Distribution Association has recommended.

Asia’s largest economy imported 182 million tons of the fuel in the first five months of the year, almost 90% more than the same period in 2022, customs data show. The purchases were driven by the prospect of a hotter-than-usual summer, Beijing’s determination to minimize blackouts, and a drop in seaborne coal prices.

Profits at local coal miners, meanwhile, fell by almost a fifth in the first five months from a year earlier, data from the National Bureau of Statistics show. That could worsen in coming months, given that Chinese prices peaked in early September last year amid global energy shortages following Russia’s invasion of Ukraine. 

The CCTD is concerned about the growing impact on domestic coal miners, suggesting in a statement on the weekend that companies “control the scale and pace” of imports after an industry summit last week. Power plants, sitting on high inventories, have turned down some term volumes from local miners, suggesting that overall supply may remain ample in the second half, the association said. 

The price of coal at Newcastle in Australia, the benchmark for seaborne supplies, is now about a third of what it was in early September. While prices of Chinese coal have also fallen, the premium buyers must pay for seaborne fuel dropped to around $13.50 a ton a month ago, making the imports more attractive. It can take up to a month for coal to be shipped to China, depending on where it’s coming from.  

The jump in imports has also been driven by geopolitical factors. China is taking more of the fuel from Russia, and also from Australia after an informal ban on buying was lifted earlier in the year following an easing of diplomatic tensions.

And, while sweltering temperatures will boost demand from electricity generators, that may be partially offset by less industrial consumption as the post-virus recovery continues to disappoint. Heavy rain in southern China is also boosting hydropower output.

The Week’s Diary

Monday, July 3

  • Caixin’s China factory PMI for June, 9:45am

Tuesday, July 4

  • Nothing major scheduled

Wednesday, July 5

  • CCTD’s weekly online briefing on Chinese coal, 3pm
  • Caixin China PMI Composite, 9:45am
  • Caixin China PMI Services, 9:45am

Thursday, July 6

  • Nothing major scheduled

Friday, July 7

  • China foreign reserves for June, incl. gold
  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, ~3:30pm

On the Wire 

China’s manufacturing activity expanded at a slower pace in June as companies turned more cautious about their output outlook, according to a private survey.

Chinese President Xi Jinping’s elevation of a long-serving technocrat as the central bank’s top Communist Party official signals policy makers will avoid any drastic shifts for now as the world’s second-biggest economy struggles to regain momentum. 

China is on a natural gas shopping spree, and officials are happy for importers to keep striking deals even after a global energy crisis has eased.

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