Further tightening of coal import restrictions is necessary

sxcoal.com Viewpoint,  Import & Export 2020-05-13 12:06:25

In the case where China's domestic supply of thermal coal continues growing and the demand is generally sluggish, a series of measures to restrict coal imports have been implemented for a long time, but the import volume still registered robust growth.

The influx of import coal cannot be ignored, especially in the southeastern coastal areas, and under the current situation that domestic demand has not yet increased significantly.

The southeast is the main coal consuming area in China, but considering long distance and high transport cost from northern production areas, import coal is more economical and has become an important supplement to power plants in the area.

China has long been the largest coal producer and consumer in the world. Since 2003, coal exports have decreased significantly, while imports have increased year by year. By 2009, China had become a net coal importer.

In 2019, China's coal imports increased to 299.7 million tonnes, up 6.3% year on year, with growth quickening 2.4 percentage points over 2018.

Customs data showed China imported 30.95 million tonnes of coal in April, a 22.3% increase year on year, bringing the total import to 126.73 million tonnes in the first four months, up 26.9% compared with the same period in 2019.

Coal imports have been strong this year, with the year-on-year growth reaching 33.1% in January-February, 28.4% in January-March and 26.9% in January-April.

The substantial increase in coal imports will squeeze the demand for domestic products, and to a certain extent, dampen the bonus brought by the structural-side reform in 2016-17.

In the short term, it will seriously squeeze the living space of domestic mining, trading, transport and other industries in the supply chain, resulting in the mismatch of coal supply and demand, and then make the profits of coal production, sales and transportation enterprises decline sharply.

Data showed coal shipments of the Daqin railway from January to April was 117 million tonnes, a decrease of 18% year-on-year, and its capacity utilization dropped from 95% in the same period last year to current 77%.

In January-April, 163 million tonnes of coal were transported from the four northern ports (Qinhuangdao, Caofeidian, Jingtang and Huanghua) , falling 23.7% year on year, and the capacity utilization rate dropped from about 81% in the same period last year to about 62%.

So far this year, affected by weakened demand and slumped prices triggered by the Covid-19 outbreak, China's coal companies have significantly weakened their profitability, especially in old mining coalfields. Some companies even have to struggle with cash flow disruption.

If the import of coal further increases, the profitability of domestic companies will worsen and the loss-making situation will expand in the sector.

In the long run, if coal imports keep flooding into China, it will offset the de-capacity efforts in previous years and again hand the benefits over to foreign mining companies, which is not conducive to the development of domestic coal industry.

In the current pattern of low demand and loose supply, it is necessary to further restrict coal imports.

(Writing by Alex Guo  Editing by Alex Guo)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

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