This is China’s ‘staggering’ (in the words of the analysts who put it together) appetite for coal imports:
In fact China’s massive demand for coal imports is almost making up for falling demand in other parts of the world – especially Europe, where ML-BAS analysts note that coal storage “has now become a rare commodity”, as some of the material going there is contracted and cannot be cut back. This, they add, is “keeping a lid” on API2 coal prices; though less so on API4.
However, China’s future coal production capacity could be the longer-term restraint to future coal price growth (as Bloomberg noted earlier this week, a Chinese benchmark has already fallen in the past few weeks):
How sustainable is the trend of sharply rising coal imports into China? Ultimately, China is still the world’s largest producer of coal and it continues to ramp up output. Last year, coal production accelerated by 15.4%, the third highest growth rate since 1970. This is despite Shanxi, the nation’s key coal producing region, cutting back on output. Due to industry consolidation, aimed at improving production efficiency and safety, the region merged all small coal mines with less than 300 thousand mt in output. As the process has now concluded, output in Shanxi is ramping up again, rising by 19% and 32% YoY over the past two months. In our view, this will allow aggregate production to continue to grow, at an estimated rate of 9-10% for this year.
The big picture is still fairly dramatic, however. Going back earlier than 2007 in BP’s Statistical Review, we can see there that China has moved in and out of being a net coal importer over the past 10 years, but net imports never reached the scale that more recent data implies.