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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, 29 June 20
ULTRAMAX: A 58,000 FIXING DELIVERY SINGAPORE TRIP, VIA EAST COAST INDIA, REDELIVERY CHINA IN THE LOW $12,000S - BALTIC BRIEFING
Capesize
As the halfway mark of 2020 arrives, the capesize market is making new highs for the year. From persistent lows earlier caused by a ba ...
Saturday, 27 June 20
CHINA'S BENCHMARK POWER COAL PRICE REMAINS FLAT - XINHUA
China’s benchmark power coal price remained flat during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Friday, 26 June 20
WHAT TODAY'S BAILOUTS CAN DO FOR TOMORROW'S ECONOMIES - WORLD ECONOMIC FORUM
The COVID-19 crisis provides an opportunity for governments to build fairer, more sustainable and more resilient economies.
Governments a ...
Thursday, 25 June 20
ALL YOU WANT TO KNOW ABOUT COAL MINE AUCTIONS - THE HINDU BUSINESS LINE
Last week, Prime Minister Narendra Modi threw open the auction of 41 coal blocks for commercial mining. The decision, which was part of the announc ...
Wednesday, 24 June 20
MARKET INSIGHT - INTERMODAL
The World Bank estimates that the global economy will fall by 5.2% this year, underlining that the Covid-19 pandemic has had rapid and massive cons ...
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- Wilmar Investment Holdings
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- Coastal Gujarat Power Limited - India
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- MS Steel International - UAE
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
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- Dalmia Cement Bharat India
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- Thai Mozambique Logistica
- Karbindo Abesyapradhi - Indoneisa
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- Merrill Lynch Commodities Europe
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- Siam City Cement - Thailand
- Coal and Oil Company - UAE
- Karaikal Port Pvt Ltd - India
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- Renaissance Capital - South Africa
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- Parliament of New Zealand
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- TeaM Sual Corporation - Philippines
- Chamber of Mines of South Africa
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- Metalloyd Limited - United Kingdom
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Samtan Co., Ltd - South Korea
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- Petron Corporation, Philippines
- Madhucon Powers Ltd - India
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- Sakthi Sugars Limited - India
- Global Coal Blending Company Limited - Australia
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- AsiaOL BioFuels Corp., Philippines
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- Australian Commodity Traders Exchange
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- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Romanian Commodities Exchange
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Maharashtra Electricity Regulatory Commission - India
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- India Bulls Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Eastern Coal Council - USA
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- Energy Development Corp, Philippines
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- Minerals Council of Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
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- Ministry of Finance - Indonesia
- Central Java Power - Indonesia
- Neyveli Lignite Corporation Ltd, - India
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- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- Rashtriya Ispat Nigam Limited - India
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- Thiess Contractors Indonesia
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- Independent Power Producers Association of India
- Electricity Authority, New Zealand
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