A Brief Discussion On The Current Situation And Development Trend Of Chinese Coal Imports
1. Overview of Chinese coal imports
China is a country where coal is the primary energy source, and the proportion of coal in China’s disposable energy production and consumption has been above 60% for a long time. This pattern will not fundamentally change shortly. In 2017, China produced 3.52 billion tons of raw coal, up 3.3% yearly.
1.1 Analysis of Chinese coal imports
1.1.1 Analysis of Chinese coal imports volume
With the increase in demand for coal in economic development and the significant adjustment of national industrial policy, international coal prices are relatively and comparatively advantageous; Chinese coal imports have been increasing since 2012, and Chinese coal imports have experienced a fluctuating development in 2013. Chinese coal imports reached the highest peak in recent years, 327 million tons; since then, coal imports have declined for two consecutive years, and in 2015 reached The lowest point of Chinese coal imports in recent years, 204 million tons.
Since then, Chinese coal imports have gradually picked up, and in 2017, Chinese coal buyers imported a total of 271 million tons of coal, an increase of 0.15 million tons or 6.1% year-on-year. Among them, the first quarter coal imported 64.71 million tons, up 33.8%; the second quarter coal import 68.55 million tons, up 15.07%; the third quarter coal import 71.59 million tons, down 0.38%; the fourth quarter coal import 66.04 million tons, down 12.39%.
1.1.2 Regional Distribution of Chinese Coal Imports Trade
China’s coal production and consumption occupy a significant share in the world; according to statistics, in 2016, China’s coal consumption and production accounted for 50.6% and 46.1% of the world, respectively. China’s coal consumption is significant. In 2017, Chinese coal imports mainly originated from Indonesia, Australia, Mongolia, Russia, and Canada – the five mentioned countries together exported Chinese coal, accounting for more than 90% of all Chinese coal imports.
2.1 As for Chinese coal imports
In Chinese coal imports, coal tariff rates have gradually decreased, and all coal import tariffs were adjusted to zero in 2008. Although the policy was promulgated in October 2014 to abolish the zero import tariff rate for anthracite imports, coking coal imports, other bituminous coal other than coking coal, other coal, briquettes, and other fuels, the corresponding coal types resumed the implementation of 3%-6% MFN tariff rate. However, Indonesia, one of the central sources of imported coal, still enjoys a zero tariff policy due to the free trade agreement with China.
As for Australia, another major source country, since January 1, 2016, the implementation of the “China-Australia Free Trade Agreement” began, the import base rate of unmanufactured other bituminous coal was reduced to 4% in the first year, decreasing to 2% in the second year, and zero tariffs in the third year; unmanufactured anthracite, coking bituminous coal, other coal, and lignite goods were implemented from the effective date of the agreement. Implementing these measures is conducive to reducing the price of imported coal, thus promoting the growth of coal imports.
2.2 High demand for coal in China's domestic market
With the accelerated industrialization and urbanization in China, the rapid development of heavy industries such as electric power, iron, steel, metallurgy, etc., has driven a significant increase in coal consumption. Moreover, the structural reform on the supply side of coal continues to advance, and under the pressure of multiple regulations such as capacity removal, environmental protection, and safety supervision, the release of China’s coal production capacity is somewhat inhibited.There is a gap in China’s coal supply, and the market demand for imported coal is rising.
According to the latest statistics, the combined supply and demand gap for steam coal in the first half of 2018 was 7,923.73 million tons. As for coking coal, its demand fluctuated as the downstream coking industry was under pressure from environmental restrictions, and its supply-demand gap totaled 4,673,400 tons. And in the first half of 2018, China imported a total of 146 million tons of coal, up 9.9% year-on-year.
The growth rate of imported coal is higher than the growth rate of national production, and the import volume accounts for 8.84% of the output in the same period; all these data fully indicate that imported coal is still an essential supplement to the supply of China’s coal market, and the demand for imported coal in the Chinese national market is still great.
3 Imported coal has comparative advantages
All along, the price of imported coal has had a comparative advantage over the cost of Chinese domestic coal; according to statistics, in the second half of 2017, Chinese domestic coal prices continued to maintain high levels, and overseas coal prices encountered import restrictions encountered price pressure, which led to the price difference between Chinese domestic and imported coal floating in the range of 50 yuan — 70 yuan, and since then, with the rapid decline in Chinese domestic coal prices, the price difference narrowed, and according to March 2018 statistics, the price difference between Chinese domestic and imported coal still exists around 30 yuan.
The price advantage of imported coal appears, and not only coastal power plants, including some inland enterprises, will tend to purchase imported coal.
3.2 Quality aspect
Taking the fastest growing coking coal in 2017 as an example, coking coal imports of 69.35 million tons, up 17.1% year-on-year, mainly from Australia and Mongolia, 30.98 million tons and 26.27 million tons, respectively, accounting for 44.7% and 37.9% respectively, which is inseparable from the excellent coal quality and high-cost performance of imported coal. China’s coking coal sulfur has been relatively high, and the market demand is inseparable from Australia and Mongolia’s low sulfur main coke, so the growth of coal imports is rather significant.
4 The market demand of some domestic industries and regions
From the industry perspective, as an example, domestic power plants have a relatively great demand for imported electric coal and steam coal import imports. Their consumption tends to be Australian and Indonesian coal.
From the regional perspective, some southern cities in China purchase coal resources from domestic far away, with high transportation prices and more transportation links. The railroad transportation volume is lower than the sea transportation volume of imported coal; compared with imported coal, China’s domestic coal cost is higher from the cost perspective analysis.
5. Coal trade prices will continue to rise steadily
Chinese coal, in terms of production or the number of coal imports in the world, occupies a large proportion of the dominant position, so changes in China’s policy or economic environment and the fluctuations in the global coal market will have an impact. Combined with the analysis of China’s current coal situation, the future coal trade prices will continue to run high.
Analysis of China’s national conditions, the main factors affecting the cost of the coal trade are as follows: First, the coal trade is subject to environmental requirements, and the promotion and application of clean coal technology are more expensive, which will inevitably increase the elimination of backward production capacity, coal supply declined, resulting in prices tend to rise; Second, the imbalance between supply and demand for coal will also lead to price increases, since 2015, by the supply-side reform and demand improvement, etc.,
Coal Prices bottomed out and rebounded, and in 2017 China’s coal prices repeatedly went up, closely related to the imbalance between supply and demand, and the surge in downstream demand led to a tight supply of coal in China in the short term, which led to higher coal prices;