Coking coal has become the latest example of China shooting itself in the balance sheet by banning Australian coal imports (both coking and thermal types).
Chinese imports of Australian coking and thermal coals have been banned since late in 2020 (officially from December, but the bans and so-called customs inspections started last August).
The ban on barley imports early last year has seen the industry look for other markets with Saudi Arabia becoming a major market. Wine exports are slowly being diverted to other markets, meat exports are continuing to China, despite claims they have been banned.
Coal shipments from Australia are now going elsewhere and coupled with continuing problems in china’s domestic industry (which is low quality and high cost) there is now a shortage in some parts of the country.
Domestically the shortage has come from some mines being closed for inspection for safety reasons, others not operating due to production problems and some not operating for official reasons (to limit emissions).
Chinese coking coal prices are now over $US100 more than the Asian basin price for similar coal from Australia and that is hurting the steel industry at a time when iron ore import prices have been at record levels and remain close.
In China, more private and a few large state-owned coal mines are now shut until July 5 in north and east China for further safety inspections and some coal mines are not sure of when they will re-open.
As well coal imports are banned until the end of this month in some Chinese provinces and there are no signs of that changing, despite the government trying to keep prices low.
Russian and Indonesian suppliers are reported by resource websites to be trying to boost prices well above the standard Australian level of just over $US75 a tonne for thermal coal shipped fob northern China.
At the same time strong demand from Taiwan, Japan and South Korea is absorbing Australian coal that would have gone to China.
The Australian Bureau of Statistics reported this week that May saw coking and thermal coal exports to South Korea increase by $120 million or 28%, and to Taiwan by $93 million or 35%.
In fact, total coal exports in May rose $342 million, a rise of 10% and showing that the Chinese ban is not having an impact, except on itself.
China imported 21.04 million tonnes of all types of coal in May, down by 4.6% on the year. This took its total January-May imports to 111.17 million tonnes, down by 25.2% from the first five months of Covid-restricted 2020.
China imported 3.41 million tonnes of coking coal in May 2021, down 30% from the corresponding period last year and down 2% from April, the latest data from China Customs data this week showed.
This followed a 44% year-on-year drop and a 29% month-on-month decline in imports in April.
The United States exported the largest volume of coking coal to China in April followed by Russia, Canada and Mongolia.
China imported 974,700 tonnes of coking coal from the US in April, up more than 10-fold from 91,661 tonnes a year earlier and an increase of 47% from 663,442 tonnes in March.
Russia shipped 761,287 tonnes of coking coal to China in May and over January-May 2021, China imported 18 million tonnes of coking coal, down 43% from the same period in 2020 and reflecting the absence of shipments from Australia.
Chinese premium hard coking coal of the type exports from Queensland by BHP was selling around $US296 a tonne and ordinary hard coking coal was around $263 a tonne (that’s on a cfr basis northern China, the same shipping and pricing basis for iron ore).
According to CME Group, the June Australian hard coking futures price was $US174 a tonne on Wednesday.
Chinese media reports say there have been rolling power supply interruptions because of a drought in southwest China with hydro power supplies falling short and coal-fired power stations unable to make up the difference.
Part of the problem is insufficient coal supplies as well as fears of boosting already bad smog problems by restarting existing power stations that have been idled to cut emissions in early summer.
As well at least five Chinese provinces – including the biggest, Guangdong – have warned of power shortages this summer which is already underway.
