This was the strongest first half in China’s historical past and places the world’s second-biggest financial system on observe for one more report yr for coal imports in 2024.
However there are some indicators that China’s urge for food for seaborne thermal coal could also be easing, elevating the likelihood that the second half of 2024 might be weaker than the primary.
July’s seaborne imports of thermal coal are forecast by Kpler to be 29.66 million tons, barely greater than June’s 29.44 million, however weaker by 2.5% on a per day foundation.
The expansion price for the primary seven months of the yr is anticipated to slide to 7.1% from the 8.5% seen within the first half.
The query turns into what are the components which will drive a moderation in China’s demand for seaborne thermal coal.
The principle driver is a restoration in China’s home output, which had been softening amid ongoing mine security inspections in key coal-producing areas.
China’s coal manufacturing rebounded in June, with output of all grades of the gasoline leaping to a six-month excessive of 405.38 million tons, which was additionally 3.6% above the identical month in 2023, based on official information launched on July 15.
The comfortable begin to 2024 meant year-on-year manufacturing was nonetheless down 1.7% within the first half, however this was an enchancment on the three.0% drop recorded within the first 5 months of the yr over the identical interval in 2023.
One other issue is that coal’s share in China’s electrical energy manufacturing is slipping, with official information displaying thermal technology fell for a second straight month in June, dropping 7.4%, including to the 4.3% decline in Might.
Thermal technology does embrace some small quantities of pure gas-fired energy, however it’s primarily coal.
Coal’s share in China’s electrical energy combine is being eroded by hydropower, which is rebounding from a weak, drought-affected 2023, and likewise by rising output from renewables corresponding to wind and photo voltaic.
Hydropower rose 44.5% in June following a rise of 21.4% in Might, whereas wind output gained 10.4% within the first half of 2024 from the identical interval a yr earlier and photo voltaic jumped 39.4% over the identical interval.
If hydropower can keep its current power and renewable deployment continues at tempo, it will increase the probability of coal-fired technology declining within the second half of the yr.
This in flip means China could also be much less reliant on imported thermal coal, particularly if home output continues its upward pattern.
Worth pattern
Going one step additional, the query turns into whether or not decrease Chinese language demand will lead to considerably softer costs for Asia’s principal seaborne thermal coal grades.
The reply just isn’t essentially, as any coal not taken by China tends to be purchased by different nations, particularly if there may be some retreat in costs.
Indonesia is China’s greatest provider of thermal coal, and the favored 4,200 kilocalories per kg grade , as assessed by commodity value reporting company Argus, has been in a declining pattern in current weeks.
It ended at $52.72 a ton within the week to July 19, which was marginally up from the prior week’s $52.70, however that was the bottom value since September final yr, and the grade is down 9.4% from its peak thus far this yr of $58.17 in early March.
The softer value, which has been mirrored in competing Australian coals, has led to different Asian nations ramping up imports of seaborne thermal coal.
Vietnam’s imports for the primary seven months of 2024 have been 26.48 million tons, up 44% from the identical interval final yr, based on Kpler information.
India, the world’s second-biggest coal importer, noticed arrivals of thermal coal of 104.81 million tons within the first seven months of this yr, up 14.9% from the identical interval final yr.
Japan, the third-biggest purchaser, noticed thermal coal imports leap in July to 10.89 million tons, up from June’s 7.05 million and the best since January, based on Kpler.
(The opinions expressed listed below are these of the creator, Clyde Russell, a columnist for Reuters.)
(Modifying by Jamie Freed)