China’s coal policies may slow import growth

2014-11-17

Australia has warned that China’s recent coal policy announcements, including measures to protect its struggling domestic industry, may reduce the growth in coal imports over the remainder of the year.

However, the policy changes did not mean a decline in coal use, the Bureau of Resources and Energy Economics (BREE) and Westpac said in the latest China Resources Quarterly report, published on Thursday.

The report stated that China imported 13.4-million tonnes of metallurgical coal during the third quarter, down 26% on the previous quarter and down by 31% on the previous corresponding period.

“Weaker steel prices and tighter access to credit have prompted several metallurgical coal producers to shift their focus to other markets as Chinese steel mills reduced their reliance on imported coal,” the report stated.

Metallurgical coal imports from Australia declined by 24% compared with the previous corresponding period, to 5.9-million tonnes. Australia exported 11-million tonnes of metallurgical coal to China in the quarter, which is an 11% decline in volume terms. In value terms, exports declined by 21% to A$1.22-billion.

In terms of thermal coal, China has made several policy announcements that may affect the import of coal for power generation. The BREE and Westpac report stated that the September announcement of restrictions on the consumption of thermal coal with high ash and sulphur content from January 1, 2015, was expected to have a limited effect on that country’s imports and was more likely to affect domestic coal. In mid-October, China also implemented a tariff of 6% on thermal coal imports to support the domestic industry.

China’s imports of thermal coal (including lignite) declined by 18% year-on-year during the third quarter, to 49.7-million tonnes. Imports from Australia increased by 2.7% compared with the previous corresponding period, to 17.5-million tonnes. Australia’s exports to China increased by 1.3% year-on-year to 11.8-million tonnes. While the volumes increased, thermal coal export values declined by 17% year-on-year to A$744-million.

Meanwhile, China imported a record 242-million tonnes of iron-ore in the third quarter, which was a 12% improvement on that of a year earlier. Iron-ore imports from Australia increased by 34% to 149-million tonnes during the three months under review.

The value of China’s iron-ore imports declined by 17% year-on-year to $22-billion, as the decrease in prices offset the higher volumes.

“There are reports that Chinese iron-ore mines are closing in response to lower prices with estimates ranging from 30-million tonnes to 50-million tonnes of capacity already cut,” BREE and Westpac stated.

The fall in the iron-ore price had forced Australian producers to focus on cost cutting and improving efficiencies in order to remain competitive.

Australia’s third-quarter iron-ore exports increased by 33% year-on-year to 151-million tonnes, with earnings decreasing by 2% to A$13.4-billion.

The BREE and Westpac report noted that the Chinese economy grew at a rate close to, but slightly below, its potential in the first three quarters of 2014.

Real gross domestic product (GDP) expanded by 7.3% year–on–year in the September quarter alone. That pace compared to 7.5% year–on–year in the June quarter and 7.7% 
in calendar year 2013. Nominal GDP, which has historically exhibited significantly more cyclical amplitude than the volume measure, slowed to 8.5% in the third quarter, versus 9% in the second quarter and the extremely weak 7.9% outcome for the first quarter.

Source from : Mining Weekly

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