BLBG: China's Coal Import Growth Rate to Slow as Floods Boost Prices
China, the world’s largest coal user, will slow the growth rate of imports of the fuel this year because of higher prices after floods shut mines in Australia and as the domestic economy cools, a Bloomberg survey shows.
The nation’s overseas purchases may rise 9 percent to 180 million metric tons this year, according to the median estimate of seven analysts in a Bloomberg survey conducted between Jan. 26 and Jan. 28. China boosted shipments into the country by 31 percent to a record 165 million tons in 2010.
Global prices surged after the worst flooding in Australia’s Queensland state since 1974 hampered output from the world’s biggest coal exporter. China’s economy may expand 8.7 percent this year after a 10.3 percent gain in 2010, the quickest in three years, as the government tries to limit increases in asset prices and unwind fiscal stimulus, the World Bank said Jan. 13.
“The import momentum will weaken gradually if global prices stay high,” said Henry Liu, regional head of commodity research at Mirae Asset Securities Ltd. in Hong Kong. “We have been notified by traders that there hasn’t been much real transaction on the market, and there are few bids.”
Fuel shipped from Qinhuangdao, China’s largest coal port, was $22.90 a ton less than deliveries from Newcastle, Australia, on Dec. 31, the biggest discount since the end of April, according to Andrew Driscoll, the Hong Kong-based head of resources research at CLSA Asia-Pacific Markets.
Newcastle Price
Newcastle prices may climb 34 percent on average this year as floods cut supplies and Asian demand soars, Societe Generale SA said in a Jan. 20 report. The Asian benchmark dropped to $125.25 a ton for the week ended Jan. 28, compared with $138.50 a ton, a 28-month high, on Jan. 14, according to data from Petersfield, England-based IHS McCloskey.
Prices in China may rise 11 percent this year, according to the average estimate of five analysts in the Bloomberg survey. Gains in Qinhuangdao weekly coal were limited after the state government capped the price under annual contracts to curb inflation. Prices reached $117 a ton Jan. 24.
Supply may exceed consumption this year, the National Energy Administration said Jan. 28. Demand will slow as the nation takes measures to tackle inflation, boosts renewable energy consumption and improves energy efficiency, it said.
Electricity use may increase 9 percent to 4.5 trillion kilowatt-hours, slowing from a 15 percent gain in 2010, according to the energy administration. China uses coal for about 80 percent of its power generation.
Steelmaking
Steel production may rise 6.4 percent to 665 million tons this year compared with a 9.3 percent gain in 2010, as the nation’s steel industry has “entered an era of low growth” amid slowing capacity expansion and higher production costs, according to estimates from China International Capital Corp., the nation’s largest investment bank.
The increased coal purchase will mainly come from Indonesia and Mongolia because of cheaper prices, said David Fang, a director at China Coal Transport and Distribution Association.
China boosted imports from Indonesia, its largest supplier, by 81 percent to 55 million tons last year at $79 a ton, compared with $147 a ton on a delivered basis from Australia. Purchases from Mongolia almost tripled to 16.6 million tons last year at $61 a ton.
China’s coal imports may shrink as stockpiles increased after purchases rose to record in December on cold weather, according to Commodore Research & Consultancy.
The nation’s coal exports may stabilize at 19 million tons this year, unchanged from 2010, according to the median estimate of five analysts in the Bloomberg survey.
Flooding may reduce Queensland’s combined output of steelmaking and power station coal by between 18 million and 23 million tons, Bank of America Merrill Lynch forecast Jan. 25.
“The import-arbitrage opportunity has disappeared and the situation may last for the most of the year, so we don’t think China’s surge in imports will be repeated this year,” said Wu Jie, a Shanghai-based coal analyst at Orient Securities Ltd.
--Winnie Zhu. Editors: Jane Lee, Clyde Russell.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
