China May coal imports fall on tepid demand, high inventories

9th June 2023

By: Reuters


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SINGAPORE - China's coal imports dipped 2.7% in May from the previous month, customs data showed on Wednesday, as weak demand from the power and steel sectors and high inventory led buyers to scale back shipments.

The world's top coal consumer brought in 39.58-million tonnes of the fossil fuel in May, almost double the low base of 20.55 million tonnes in the year-ago period, data from the General Administration of Customs showed.

Still, the tally was down from the 40.68-million tonnes of coal shipped into the country in April.

Over the first five months of 2023, China brought in 182 million tonnes of coal, up 89.6% from the same period a year ago, customs data showed.

Coal imports faced a slowdown as Chinese utilities grappled with lacklustre power demand and mounting inventory, largely owing to a weaker-than-expected recovery in industrial sectors.

Key Chinese coal-fired power plants witnessed record-high stockpiles of about 113-million tonnes by end-May, 24% higher than the same period last year, according to people close to China's power association.

The high inventory, sufficient for nearly 26 days of usage, gave fewer incentives for power plants to place new purchase orders, weighing on domestic coal prices and the economics of imported coal.

Domestic thermal coal with energy content of 5 500 kilocalories (kcal) at Chinese northern ports was traded at about 770 yuan ($108.14) per tonne. Imported coal of similar quality was around $99 per tonne at southern Chinese ports on a cost-and-freight (CFR) basis.

China's steel industry, a key driver of coking coal demand, continues to struggle amid persistent weakness in the country's property and construction sectors, with steel rebar prices falling to their lowest levels in three years at the end of May.

While May usually sees lower levels of thermal coal demand from utilities, the second half of the month saw record temperatures across the country, increasing electricity demand for air conditioning.

The southern manufacturing hub of Guangdong saw small-scale power cuts in late May, with state media reporting that daily loads on the Shenzhen grid were up as much as 17.7% on the previous year.

While increased utilities' consumption has largely drawn on inventories so far, Chinese buyers have been "active in buying imported coal on fears of shortages later in the year as extreme weather boosts electricity demand," said analysts at ANZ Bank in a client note.

Edited by Reuters


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