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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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- Kaltim Prima Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- PNOC Exploration Corporation - Philippines
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- Meralco Power Generation, Philippines
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Medco Energi Mining Internasional
- Rio Tinto Coal - Australia
- Orica Mining Services - Indonesia
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- Borneo Indobara - Indonesia
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Sree Jayajothi Cements Limited - India
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Vijayanagar Sugar Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- Leighton Contractors Pty Ltd - Australia
- Economic Council, Georgia
- Minerals Council of Australia
- Videocon Industries ltd - India
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Baiduri Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Miang Besar Coal Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Bharathi Cement Corporation - India
- Price Waterhouse Coopers - Russia
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Intertek Mineral Services - Indonesia
- Ind-Barath Power Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- Uttam Galva Steels Limited - India
- Siam City Cement - Thailand
- The University of Queensland
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Malabar Cements Ltd - India
- Electricity Authority, New Zealand
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- Kumho Petrochemical, South Korea
- Makarim & Taira - Indonesia
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Cement Manufacturers Association - India
- Australian Coal Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Formosa Plastics Group - Taiwan
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- MS Steel International - UAE
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Central Electricity Authority - India
- GMR Energy Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Indogreen Group - Indonesia
- Romanian Commodities Exchange
- ASAPP Information Group - India
- Independent Power Producers Association of India
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Samtan Co., Ltd - South Korea
- Kepco SPC Power Corporation, Philippines
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Carbofer General Trading SA - India
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Wood Mackenzie - Singapore
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- Straits Asia Resources Limited - Singapore
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Deloitte Consulting - India
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Planning Commission, India
- Wilmar Investment Holdings
- Australian Commodity Traders Exchange
- San Jose City I Power Corp, Philippines
- Eastern Coal Council - USA
- Renaissance Capital - South Africa
- OPG Power Generation Pvt Ltd - India
- Ministry of Transport, Egypt
- Bayan Resources Tbk. - Indonesia
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Larsen & Toubro Limited - India
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- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
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