LAUNCESTON, Australia (Reuters) - China’s coal imports have grown strongly so far this year, but this may be about to change, assuming Beijing takes steps to ensure that growth for the whole of 2019 is more or less zero.
Total coal imports rose 8.1% in the first eight months of the year to 220.8 million tonnes, a gain of 17 million tonnes, according to official customs data.
Looking specifically at seaborne imports, which exclude overland shipments from countries such as Mongolia, the growth looks even more impressive.
Seaborne imports were 191.3 million tonnes in the January-August period, up 11.4% from 171.8 million tonnes in the same period last year, according to vessel-tracking and import data compiled by Refinitiv.
While the growth in volumes may be something of a silver lining for coal miners in major exporters Australia and Indonesia, the chances are the fourth quarter of 2019 will mirror the same period last year: Imports taper off.
Last year, the authorities in Beijing made it clear to coal importers that they didn’t want imports to show any growth in 2018 from 2017. This resulted in a sharp drop-off in cargoes in the fourth quarter.
In December last year, seaborne coal imports dropped to 15 million tonnes, the lowest for any month in almost two years, while imports for the fourth quarter of last year were 53 million tonnes, down 15.7% from the third quarter.
In the end, total imports as measured by customs did rise in 2018, reaching 281.2 million tonnes, up 3.9% from the prior year. But that was down from growth of 14.7% at the end of August.
If 2019 imports were to end the year at the same level as for last year, that would leave a gap of only 60.4 million tonnes available for the last four months of the year.
To meet that target, imports would have to average around 15 million tonnes per month from September to December - a very sharp slowing from the August customs figure of 32.95 million tonnes after 32.89 million tonnes in July.
In fact, September seaborne imports for the first 23 days were 15.6 million tonnes already, according to Refinitiv data, which had been filtered to show only cargoes already unloaded.
This could mean total imports in September, including those that come by rail or road, are likely to well exceed 20 million tonnes - a number that would put further pressure on China’s importers to reduce volumes in the final quarter of the year.
While it’s likely that 2019 imports will exceed last year’s total, the question is by how much.
In other words, what is the tolerance of the authorities for coal imports exceeding 2018’s level?
While the coming months will show how determined the authorities are to keep a lid on coal imports, early signs are that the campaign to reduce pollution over the northern winter will step up a gear this year.
China’s environment ministry said on Sept. 20 that the anti-pollution campaign for this year’s autumn-winter heating season will set stricter emissions targets for cities that had higher concentrations of damaging particles last time around.
This may result in stricter controls on industries that use coal, such as steel and cement, and also on residential heating, where efforts are being made to switch from coal boilers to systems that use natural gas.
If China does reduce coal imports for the last three months of 2019, it’s likely to place downward pressure on seaborne prices, which have struggled in recent months amid good supply and limited demand growth outside of China.
The benchmark weekly thermal coal price at Australia’s Newcastle port, as assessed by commodity price reporting agency Argus, stood at $62.97 a tonne for the week ending Sept. 20.
While this was up from the three-year low of $60.74 a tonne from Aug. 30, it’s still little more than half the $119.74 level seen in July last year, which was a seven-year high.
The price of lower energy Indonesian coal, which is popular in China as a blending feedstock given its low sulphur content, has also struggled this year.
Indonesian coal with an energy value of 4,200 kilocalories per kilogramme, as assessed by Argus, was at $32.69 a tonne in the week to Sept. 20.
This was up from $30.96 a tonne in the week to Aug. 23, but down 19% from its peak so far in 2019 of $40.32 on March 8.
Although both Australian and Indonesian thermal coal prices have lifted from recent lows, they are likely to come under pressure again if China does start to restrict coal imports for the rest of the year.
The opinions expressed here are those of the author, a columnist for Reuters.
Editing by Kenneth Maxwell