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Chinese coal imports on the rise despite lower demand

14 Oct 2013 18:30:54 | csd

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Chinese thermal coal imports are expected to reach 235m tonnes in 2013, up 40% from 168m tonnes imported in 2011, consultants Wood Mackenzie said in a report published last week.

Despite the lower Chinese economic growth, the country’s import demand will not be affected, even though the overall coal demand will be lower. “This is due to lower seaborne coal prices compared to domestic coal prices in coastal China,” the report said.

In 2013, Wood Mackenzie expects imported coal to cover for about 25% of overall coal demand in coastal China, up from a 17% share held in 2011.

“The trend of increased coal imports has been aided by weak coal prices in the international market. This means that Chinese coal import demand is almost entirely driven by the competitiveness of imported versus domestic supply. As such, large Chinese mines are adopting volume strategy by producing more to bring down operating costs and pricing lower to maintain market share,” senior analyst Prakash Sharma said in the report.

At the moment, imported coal is not attractive to Chinese power companies as it remains more expensive than domestic coal and freight rates are high.

Sources told ICIS imported coal is expected to become more attractive, particularly if domestic prices continue to rise – a trend observed over the past three weeks, as Chinese producers are no longer trying to sell their coal as aggressively. However, the upside potential for domestic coal was seen as limited last week, because power companies have already finished restocking, Chinese market sources said.

With a production glut and low Asian demand currently keeping a lid on prices in the three main coal hubs, market participants said future global coal demand will be driven mainly by China and India alone. Manca Vitorino

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