China’s Coal Imports to Slip Towards End of Year

China’s coal imports are forecast to drop significantly in September-October, with domestic demand set to cool off during the period while international prices have been higher than domestic levels in August.IHS Coal has the details.
By: IHS Energy Publishing
 
BRISBANE, Australia - Sept. 15, 2013 - PRLog -- The increase in international coal prices has sharply reduced purchasing interest at Chinese power groups, with major power groups indicating that they would not consider imports in the near future as they are more expensive.

The latest South China CFR Marker for imported materials, co-released by IHS McCloskey and Xinhua Infolink, showed that the imported price of 5,500kc NAR material had risen to $77.50/t CFR in southern China on August 23, up from $76.80/t CFR on August 9.

The price is equivalent to $90.68/t inclusive of tax, which is higher than Qinhuangdao (QHD) prices available at RMB530-540/t ($85.90-87.52/t) FOB.

Chinese buyers will be reluctant to book imports if CFR prices are not $1.60/t lower than the QHD level, insiders have indicated.

Because of this, contract signings have become increasingly difficult in August, which is expected to hit arrivals in September hard, with the prediction that they will dip below 20mt, according to insiders.

Few Chinese users do business on a term deal basis, instead preferring spot tonnages delivered over the following month or so.

Looking from the external side, imports from Indonesia, which capture roughly 40% of China’s total imports, are expected to weaken as well, though the likelihood of China implementing the ban on low quality coal is almost zero this year.

Indonesian products are no longer as cost-effective as they used to be, due to a tight supply in the local market and because a large portion of producers’ output was sold out early this year, the sources said.

The Indonesian government has made repeated announcements that it is seeking export cuts in future months, which has also dampened interest in the Chinese market.

And the Indonesian government has raised its quota for domestic demand to 25.7% from the 24% set earlier this year. Meanwhile, safety checks on small mines also tend to be stricter in South Kalimantan from mid-August.

This will underpin prices in the region and discourage Chinese buyers. South Kalimantan mainly produces brown coal, which Chinese power plants used to be keen on using.

Despite this, August arrivals at Chinese ports are thought to be reasonably high, with the figure estimated at around 23-25mt, while for September-October, tonnages may hit 18-20mt, the insiders said.

Domestic prices, which are the dominant factor for imports, are predicted to be virtually stable in Q4 if no extreme weather is seen, according to market participants.

However, with the projected pick up in international demand, thermal coal prices into China may stay above the domestic FOB level for most of Q4, which means the low import level may continue for a considerable period of time.

More information can be found in the McCloskey China Coal Report which presents regular updates on both the producer and consumer sides of the Chinese coal market.  With information on trade, transport and policy updates, the McCloskey China Coal Report provides comprehensive coverage for anyone dealing with the Chinese coal market.

For more information or for a free trial subscription, please contact epi.coalinfo@ihs.com, call +61 7 3020 4000 or visit http://www.coalportal.com/.
End
Source:IHS Energy Publishing
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