China’s June coal imports slump as traders shun expensive overseas cargoes

China’s coal imports fell 33% in June from a year ago, with traders turning down expensive overseas cargoes in favor of domestic ones with capped prices as COVID-19 restrictions and higher renewables output dented demand for coal-fired power.

China imported 18.98 million tonnes of coal last month, compared to 28.93 million tonnes in June 2021, data from the General Administration of Customs showed on Wednesday.
Over the first half of 2022, China imported 115 million tonnes of the fuel, 17.5% lower than a year ago.

The decline in coal imports came after Beijing’s rigorous regulation of domestic coal prices. It capped thermal coal with a heating value of 5,500 kilocalories (kcal) at northern Chinese ports at 770 yuan ($114.60) a tonne under long-term contracts and at around 1,200 yuan for spot shipments.

In contrast, benchmark Newcastle 5,500 kcal thermal coal traded at an average of $402.50 a tonne on a free-on-board basis in June, boosted by a global fuel shortage in the wake of the Ukraine crisis.

“Chinese traders don’t have many incentives to buy seaborne coal given the unfavorable prices, and the rise of dollar makes imported cargoes even more expensive,” said a Singapore-based coal trader.

Thermal power generation, mostly from coal-based utilities, plunged 11% in May from a year ago because of surging hydropower output and a drop in total power production during COVID-19 lockdowns.

With temperatures rising in China, however, utilities have increased coal tender issuances for late-July and August arrivals, to prepare for a pick-up in power demand as households turn on air conditioners. But most of the tenders are seeking lower priced and lower quality coal from Indonesia.

Daily coal consumption has climbed to about 2 million tonnes in early July, similar to the same period last year, according to data compiled by the China Coal Transportation and Distribution Association (CCTD).
Source: Reuters (Reporting by Muyu Xu; Editing by Muralikumar Anantharaman and Jamie Freed)