Chinese thermal coal imports, primarily in electricity production, continued their steep decline in the 12-months to August, dropping 17.7% according to analysis conducted by CBA.
Reflective of the broader trend, import volumes between January to August collapsed by 37% compared to the same period a year earlier, with all major thermal exporters supplying China seeing demand decline.
China’s thermal coal imports from Mongolia fared the best of all major nations, falling 2% over the last 12 months, while Australia, Indonesia and Russia recorded steeper contractions of 17%, 42% and 31% respectively.
“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 Vivek Dhar and Kofi Mensa, commodity researchers at CBA.
“China’s thermal coal industry remains in structural oversupply with both state-owned companies, China Coal and China Shenhua, asked to reduce coal output.”
Vivek and Dhar believe stricter environmental regulation on coal imports will likely pressure China’s thermal coal imports further, suggesting that the outlook for spot coal prices will remain subdued until thermal coal export supply is reduced.
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