China sucks up seaborne thermal coal, but domestic output caps prices: Russell
Repeats column published earlier. The opinions expressed here are those of the author, a columnist for Reuters.
By Clyde Russell
LAUNCESTON, Australia, Nov 26 (Reuters) -China's seaborne imports of thermal coal are on track to surge to an all-time high in November as the world's biggest buyer of the power station fuel ramps up electricity generation.
But the strong appetite for imports isn't driving up the prices of seaborne grades, which are being kept low by falling prices for China's domestic supplies.
Imports of thermal coal are estimated at 37.5 million metric tons for November, up from 32.12 million in October and the highest in data compiled by commodity analysts Kpler going back to 2017.
The spike in seaborne thermal coal imports comes ahead of peak winter demand and as the world's second-biggest economy increases coal-fired generation amid weaker output from hydropower plants.
However, the strength in China's demand for seaborne thermal coal isn't being matched by the rest of Asia, with other top importers such as India and Japan showing steady to slightly weaker arrivals in recent months.
Top thermal coal exporters Indonesia and Australia are also having to compete against China's domestic supplies, and the local price has been trending lower as production rises.
The price of thermal coal at China's Qinhuangdao SH-QHA-TRMCOAL, as assessed by consultants SteelHome, dropped to 830 yuan ($114.64) a ton on Monday, down from 835 yuan at the previous close.
The benchmark grade has been trending lower since early October, and is now down 5.1% from the recent peak of 875 yuan a ton on Oct. 9.
The softer domestic price has meant that seaborne prices have been unable to move higher, despite the strong import demand from China.
Indonesian coal with an energy content of 4,200 kilocalories per kilogram (kcal/kg) IDIDX42GRW1=ARG, as assessed by commodity price reporting agency Argus, ended last week at $52.19 a ton, down from $52.34 the prior week.
The price has shifted slightly higher, gaining 4.2% since hitting a 41-month low of $50.08 a ton in late August.
The modest increase in the price contrasts with the strong gain in volumes, with China's imports of Indonesian thermal coal poised to hit a record 25.32 million tons in November, up from 22.24 million in October, according to Kpler data.
AUSTRALIAN COAL
China is also snapping up cargoes from Australia, the second-biggest exporter of thermal coal behind Indonesia, with November imports estimated at a record 7.84 million tons, up from 5.35 million in October.
China tends to favour Australian coal priced against the 5,500 kcal/kg benchmark API5IDXWKY=ARG, which fell to $87.60 a ton in the week to Nov. 22, down from $88.12 the prior week and down 3.7% since the recent peak of $90.97 in early October.
It appears that Indonesian and Australian exporters are choosing to keep their prices competitive in the China market in order to ensure strong growth in export volumes.
China may well continue to import high volumes of thermal coal given rising electricity output, with thermal generation, which is mainly coal-fired, gaining 1.8% in October from the same month in 2023, according to official data released on Nov. 15.
The increase in thermal power output came as hydropower slid 14.9% in October year-on-year, the second straight month of decline.
China's output of coal also increased in October, gaining 4.6% from the same month in 2023 to 411.8 million tons.
It's likely that coal miners will try to further lift production this month and next after the state-owned asset regulator urged higher output to meet winter demand.
The overall picture is one of strength for China's coal sector, with rising domestic production and surging imports being sufficient to meet demand and thereby prevent a rally in prices.
The views expressed here are those of the author, a columnist for Reuters.
GRAPHIC-China seaborne thermal coal imports vs Indonesia price https://tmsnrt.rs/3ZlLZ4I
Editing by Sonali Paul
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