RUSSIAN, AUSTRALIAN COAL FOR CHINA

BLOOMBERG - Sep 21, 2023 - China’s booming coal imports include more high-grade cargoes from Australia and Russia, as users offset the worsening quality of coal mined at home with fuel from abroad.

Australia’s exports of thermal coal for power plants and coking coal for steelmaking rose to 6.69 million tons last month, the highest since July 2020, according to the latest data from Chinese customs. The endorsement represents a sharp turnaround in trade relations: Australian shipments were banned by Beijing from late 2020 to the start of this year after political ties soured.

Russian coal has also found favor after the invasion of Ukraine, with Moscow turning to its strategic ally to offload commodities shunned by other buyers, often at discounted rates. Imports from Russia in August hit their second-highest level this year at 9.96 million tons.

China’s coal imports, including low-grade lignite, climbed to an all-time high of 44 million tons in August, while domestic production of 382 million tons was also a record for the time of year. Imports over the first eight months have nearly doubled to 306 million tons, more than the country usually takes in a whole year.

The increases in supply come as the government seeks to avoid the power shortages that have crippled the economy in recent years. China’s rush to extract more coal has also degraded the quality of its domestic output so that more fuel is needed to generate the same amount of heat.

“Russian and Australian coal shipments are taking market share from China’s biggest exporter Indonesia this year,” said Amy Xu, an analyst at Fenwei Energy Information Service Co. Power plants, as well as downstream sectors like chemicals, construction and metals smelting, are looking for higher grades to meet their needs, she said.

Mongolian cargoes, which are mostly coking coal, also rose to a record 6.84 million tons in August, relegating Indonesia’s 5.89 million tons of thermal and coking coal into fourth place. The Southeast Asian nation remains China’s biggest overseas supplier in total as its shipments include large quantities of lignite, which is cheaper but much poorer quality.

Fenwei is forecasting China’s total annual imports at 446 million tons. That would obliterate the previous record of 323 million tons set in 2021, although it also implies that shipments will slow through the end of the year. Fenwei’s prediction comprises 359 million tons of thermal and 87 million tons of coking coal.

Citic Securities Co. expects annual imports to rise to 400 million to 420 million tons, according to a webcast on Tuesday.

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