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Monday, 29 June 20
CHINA COAL IMPORT OUTLOOK: MANY MOVING PARTS, FORECAST TO FALL 10% YOY - GHEE PEH | IEEFA
China’s coal demand declined in the first quarter of 2020. According to the China National Coal Association, the country consumed 870mt in the first quarter of 2020, down 6.8%year-on-year. The power sector’s coal consumption fell 6.8%year-on-yearto 507mt,while construction sector usage fell 24.7% year-on-year to 65mt. Although the coal market remains volatile, industry observers estimate an average decline of 8% to 12% year-on-year in China’s coal demand. IEEFA currently estimates a 10% year-on-year fall in China’s 2020 coal imports, based on the following four key variables:
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Coal imports: From January to April2020,imports rose 27%year-on-year, but we note this is a function of lower prices.
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Domestic coal production: After declining year-on-year in January and February, output in March and April rose 6.4%and 6.0%year-on-year, respectively.
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Power generation: Thermal power generation declined 8.2%year-on-yearin the first quarter but rose 1.5%year-on-yearin April.
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Steel output: This increased 1.3%year-on-yearfor the first four months of 2020.
A detailed examination of China’s data, together with press commentary on the Chinese Government’s policy on coal imports, reinforces our view that caution is merited. According to media reports, China’s coal imports grew 22% year-on-year in April, and January to April 2020 imports increased 27% year-on-year, but the growth was boosted by lower prices for coal imports from Indonesia and Australia. The average April Newcastle benchmark price of US$56.2/tonne is 35% lower year-on-year.
According to media reports, China’s coal production experienced year-on-year growth of 6.4% in March and 6.0% in April. This growth is unsurprising as the National Energy Administration announced that China’s production had reached 83.4% of total coal mining capacity as of 3 March. The COVID-19-related disruption to China’s domestic coal output appears limited to January–February2020,when output declined 4.8%year-on-year, which is bad news for coal exporters to China. Additionally, 12 Chinese coal companies have called for a 10% cut in output from current levels to support domestic prices. The year-on-year growth in China’s domestic coal production would also tie in with government policy to impose an import quota this year that is set at 2017 levels, which are 10% below 2019 levels.
From January to April 2020, total Chinese power output fell 4.7% year-on-year, while thermal power output fell 5.9% year-on-year. In April, total power output grew 2.0% year-on-year, and thermal power output was up 1.5% year-on-year. From January to April 2020, 87 % of China’s thermal power capacity was from coal-fired plants, with the remainder from gas-fired facilities, according to the China Electricity Council. We note that even with the slight uptick in thermal power output for April, it is too early to suggest a sustained recovery in coal usage and imports.
China’s steel output serves as an indicator of economic activity. It rose1.3%year-on-yearfor January to April2020, indicating some stability. According to Mysteel Global, blast furnace capacity utilization rates at 163 mills rose to 85.6%, the highest rate in nearly 11 months, as of 15 May. However, against the backdrop of an increase in domestic coal production, this level of economic activity would still present downside risks for Chinese coal imports.
The outlook on government policy remains negative for exports to China, thanks to the coal import quota that seeks to maintain 2020 coal imports at the 2017 level of 270mt compared with 300mt in 2019. However, according to media reports, Guangdong and Fujian provinces used up the quota in the first four months of 2020. One positive sign for Indonesia’s exporters is the suggestion in media reports that China may reduce coal imports from Australia from July because of political tensions. Meanwhile, China’s coal producers have also been calling for government help. The China Coal Transportation and Distribution Association (the state-run representative body for domestic miners) has asked the National Development and Reform Commission to help restrict imports of cheap fuel. Additionally, 12Chinese coal producers have called for a 10% reduction in domestic coal output. Industry observers have estimated a year-on-year decline of 8–12%for China coal imports. This is in line with IEEFA’s conclusion that Chinese coal imports could decline 10%year-on-yearin 2020.
About IEEFA
The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. www.ieefa.org
About the Author Ghee Peh
Financial Analyst
Ghee Peh has worked in investment research since 1995, including at Jefferies, BNP Paribas, and UBS. He has covered Asian coal, cement and metal companies.
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Monday, 04 March 24
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Thursday, 22 February 24
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- Directorate General of MIneral and Coal - Indonesia
- Bharathi Cement Corporation - India
- Deloitte Consulting - India
- The University of Queensland
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Interocean Group of Companies - India
- Ceylon Electricity Board - Sri Lanka
- Meenaskhi Energy Private Limited - India
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- Eastern Energy - Thailand
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- Ind-Barath Power Infra Limited - India
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
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- PowerSource Philippines DevCo
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- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- GN Power Mariveles Coal Plant, Philippines
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Barasentosa Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
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- Kohat Cement Company Ltd. - Pakistan
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- TeaM Sual Corporation - Philippines
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- Aditya Birla Group - India
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- Siam City Cement PLC, Thailand
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- Bulk Trading Sa - Switzerland
- Sakthi Sugars Limited - India
- Intertek Mineral Services - Indonesia
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Simpson Spence & Young - Indonesia
- Mercator Lines Limited - India
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- Sindya Power Generating Company Private Ltd
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- The State Trading Corporation of India Ltd
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
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- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- Economic Council, Georgia
- Kaltim Prima Coal - Indonesia
- Kumho Petrochemical, South Korea
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- Merrill Lynch Commodities Europe
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- Vizag Seaport Private Limited - India
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- Global Coal Blending Company Limited - Australia
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- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
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- Pipit Mutiara Jaya. PT, Indonesia
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- Lanco Infratech Ltd - India
- Romanian Commodities Exchange
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- Heidelberg Cement - Germany
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- Bukit Makmur.PT - Indonesia
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- Ministry of Mines - Canada
- Planning Commission, India
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- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
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- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Cement Manufacturers Association - India
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Renaissance Capital - South Africa
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
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- Energy Development Corp, Philippines
- Coal and Oil Company - UAE
- Antam Resourcindo - Indonesia
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
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- Vedanta Resources Plc - India
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- Samtan Co., Ltd - South Korea
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- Attock Cement Pakistan Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
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- Jaiprakash Power Ventures ltd
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