Chinese thermal coal imports tumbled last year, mirroring the decline seen in coking coal imports over the same time period.
According to analysis released by Vivek Dhar, mining and energy analyst at the CBA, thermal coal imports fell to 108 million tonnes in 2015, representing a decline of 35% on 2014.
The chart below, courtesy of CBA, reveals the weakening trend seen over the past two years.
“The fall in China’s thermal coal imports reflects slowing economic activity, and a preference away from thermal power as pollution concerns grow amongst China’s coastal cities,” said Dhar in a research note released earlier today.
“Rising Chinese thermal coal supply and a 6% import tariff are also displacing the need for thermal coal imports.”
Dhar also offers a sobering outlook for Chinese thermal coal demand, hence prices, for the period ahead.
“China’s thermal coal industry remains in structural oversupply with both state-owned companies, China Coal and China Shenhua, asked to reduce coal output,” says Dhar.
“This is despite both companies being the country’s lowest-cost producers, highlighting the influence of small private coal operators who are not paying environmental compliance costs and taxes. Improving local coal railway infrastructure and stricter environmental regulation on coal imports will likely pressure China’s thermal coal imports even lower.”
“With demand slowing and traded thermal coal markets well supplied, we could see thermal coal prices remain subdued until we start seeing thermal coal export supply reduce.”
Australia, China’s largest external source of thermal coal supply, saw export volumes decline 28.5% over the course of 2015.