China Is Not Short Of Coal Why coal importers Still Import Steam Coal? 1/2

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China is the world's largest coal producer, why do they still import coal?

China is the world’s largest coal producer, why do they still import coal? China’s annual coal consumption is about 4 billion tons, of which 3.7 billion tons are produced domestically, and 300 million tons are imported by coal importers, achieving a balance between supply and demand. Regarding collection, China mainly relies on domestic coal production, and coal imports from coal importers are only supplementary.

Current import status: China is the world's largest coal importer

 Coal importer China is the world’s top coal producer and top coal importer. From 2017-2019, the coal imports of Chinese coal importers are 270 million tons, 280 million tons, and 300 million tons, respectively. It can be seen from the data that coal imports have been rising year by year in these years. 

On the one hand, imported coal can protect domestic demand during the supply and demand from tight times (peak summer, winter coal storage), calm down coal price fluctuations, ease transportation bottlenecks, and solve regional supply and demand imbalance and other problems. Still, on the other hand, a large number of coal imports can also cause the domestic market supply to a certain extent than demand, affecting the benefits of coal producers. 

Therefore, China has increased the regulation and control of imported coal since 2016. Currently, China implements coal import restrictions, strengthens the quality supervision of imported coal, limits the annual coal imports to quotas, and does not allow off-site customs clearance.

  From January to November 2020, Chinese coal importers imported 260 million tons of coal, down 10.8% year-on-year. However, the relevant authorities have liberalized coal ports due to the recent cold weather in China, the coal supply and demand imbalance, and crazy coal prices. It is expected that the annual chinese coal imports in 2020 should be less than 300 million tons in 2019.

Coal import channels: 3 major routes and seven major ports

Chinese coal importers import coal mainly from Indonesia, Australia, Russia, Mongolia, and other countries. China’s coal import primarily relies on three major routes and seven essential ports.

  The first route coal buyers import coal from Indonesia (including the Philippines), taking the Far East – Southeast Asia route.

  The second route coal buyers import coal from Australia, taking the Far East – Australia and New Zealand route.

  The third route is for coal importers to import coal from Russia. Russia imports coal mainly by sea, from the Far East’s

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 Eastern and Nakhodka ports to China’s eastern ports via the Sea of Japan and the Strait of Korea; in addition, a small portion relies on railroads, mainly from Manzhouli, Suifenhe port, through Binzhou Railway and Binsui Railway into China.

  China’s coal import from Mongolia relies on road transportation,

 mainly from Ganchimaudu port and Cek port, followed by Manchuria port, Takshiken port, and Zhunga Dabchi port.

 Steam coal import: the growth rate of Steam coal import slowed down under the policy regulation

Coal is divided into Steam coal and coking coal according to its primary use. The coal used for Steam generation, locomotive propulsion, boiler combustion, etc., to produce Steam is called Steam coal. The coal used as a raw material to produce coke (for steel making) is called coking coal.

  Chinese coal buyerChina’s Steam coal imports are mainly concentrated in the coastal areas of East China and South China. Imported coal has been an essential choice for Steam plants in coastal provinces because of its superior quality and low price. Some coastal Steam plants rely on imported coal for 60% to 70% of their electricity. Under the influence of factors such as the transformation of the domestic energy consumption structure and strict policy regulation, the growth rate of China’s Steam coal imports has been slowing down in recent years. 

Since 2017, the country has strengthened the regulation and control of coal imports. It has introduced policies such as prohibiting the operation of coal import business at the second-class ports approved by provincial governments, controlling the quantity of imported coal at some of the first-class ports, and prohibiting off-site customs clearance at local customs, etc. However, under the influence of factors such as the strong dependence of some users on imported coal in the southeastern coastal region, the quantity of Steam coal imports is still running in a stable and increasing trend, and the growth rate is slowing down.