Why China's Apr coal imports stronger despite low expectation?

sxcoal.com Viewpoint,  Import & Export 2022-05-10 17:00:32

China's coal imports were once widely expected to remain low in the following months when the General Administration of Customs (GAC) issued March imports data, yet the April figure went against the forecast slightly.

China's coal imports totaled 23.55 million tonnes in April, rising 8.35% or 1.82 million tonnes year on year and jumping 43.39% or 7.13 million tonnes from 16.42 million tonnes in March, showed data from the GAC on May 9.

The coal import figure in April posted a large month-on-month growth, even though the growth from the year-ago level is relatively small. Compared with the imports for April in previous two years, the volume still presented an obvious increase.

The environment for coal imports worsened as the previous restraints remained and global coal trading landscape altered.

Total global coal transactions further declined with already limited supply increase worldwide, impacted by factors like lower Russian coal share in global market due to Westerns' sanctions, higher DMO share of 30% for Indonesian coal miners, flooding and pandemic in Australia, ineffective railway shipment in South Africa and railway worker strike in Canada. The multiple factors also greatly increased possibility of further coal trade reductions in the world.

But on the other hand, coal demand surged.

Developing countries like China and India have continuously posted rising demand for coal imports. Even though coal output by India's state-run miner Coal India Ltd. broke the record high in April and posted a 27.6% year-on-year growth, the firm still failed to meet domestic demand.

India's power ministry urged electricity producers to secure 19 million tonnes of seaborne coal imports by the end of June to avoid severer supply shortages and power outages. Coal imports through India's 12 state-run ports in April fell slightly from March but still hit a second highest level in the past year, data from the India Ports Association showed.

Some developed countries that are in the process of de-carbonization were forced to have higher coal demand given high energy prices and supply shortage. This, coupled with exacerbated geopolitical relations, further tightened coal available worldwide.

Since the European Union included Russian coal into sanction earlier April, Poland, the U.S., the British and Japan have declared ban on coal imports from Russia. Though they decided to put off the effective timeline to mid-August, over one month later than the original plan, countries started to seek alternative sources for supply shortage of natural gas and oil.

Data showed European countries have imported 809,000 tonnes of coal from the U.S. in March, 1.3 million tonnes from Colombia and 287,000 tonnes from South Africa, sending the total coal imports surging 40.5% year on year.

But what exactly is the reason for the deviation of China's actual coal imports in April from the widely-agreed expectation?

This may be directly linked with importers' panic buying amid thick risk hedging sentiment and concerns over supply cutoff of Russian coal due to its conflict with Ukraine.

Impacted by buoyant prices and shortage of natural gas and crude oil, some countries have to increase coal consumption, and a large supply gap was left for them to fulfill after energy products from the largest energy producer Russia were banned. A scramble for coal accordingly emerged.

Chinese buyers once halted purchases of coking coal for potential settlement issues after western countries excluded Russia out of SWIFT system. But several Chinese buyers settled trades in RMB yuan in March, according to sources, but the overall volume is probably not big.

Chinese domestic users once also made panic buys for fear of coal shortage, which resulted in both year-on-year and month-on-month growths of China's coal imports in April.

But for now, the estimates of low coal imports in the near term still make sense, and that's why China streamlines customs clearance procedure in late-April and then tentatively lifted coal import tariff to have more coal imported.

(Writing by Rebecca Liu  Editing by Tammy Yang)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

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