China’s coal imports have reached a record high during the January-February period, rising 2.1% year-on-year to 76.12 million metric tons, according to data released by the General Administration of Customs. This increase, compared to 74.52 million tons during the same timeframe last year, comes as arbitrage opportunities remain available.
The combined data for the two months helps to mitigate the impact of the Lunar New Year on the figures. Despite the impressive numbers, various factors suggest that risks to future coal imports are growing.
An analyst from Galaxy Futures noted that domestic coal prices declined significantly during January and February, narrowing import profits and leading to high port inventories. Consequently, there may be a reduced enthusiasm among domestic enterprises to continue importing coal, especially as increases in imports are expected to slow in March and April.
Industry bodies are expressing concerns about the oversupply in the coal market and have called for limits on imports, particularly for lower-quality coal. An unexpectedly warm winter has diminished demand for coal and contributed to lower domestic prices.
Major coal miner Shenhua Energy has opted to suspend spot imports to safeguard its domestic sales amid rising port inventories. Additionally, Indonesia’s new government-regulated benchmark price for international coal transactions, effective March 1, adds another layer of uncertainty for Chinese buyers and could influence import levels.
Analysts anticipate that this move will escalate the cost of coal imports for China, leading to a shift toward domestic coal in the face of rising expenses. The China Coal Transportation and Distribution Association projects an overall decline in coal imports by 1.9% for the year, while Guosheng Securities predicts an even steeper drop for thermal coal imports, estimating a 4.9% decrease.
The introduction of 15% tariffs on U.S. coal imports amid ongoing trade tensions further complicates China’s coal market, although shipments from the U.S. represent only a small portion of total imports.