SHANGHAI, Feb 6 (Reuters) - Chinese coal imports will fall for the first time in five years in 2013, dropping 10 percent from the year before due to rising domestic supply and an improved transport network in the country, a Reuters poll showed.
The world’s top coal importer accounts for about a third of Pacific seaborne thermal trade and has a growing influence on regional markets for the commodity.
Any reduction in the amount of coal it ships in would weigh on Asian prices, although they would likely be supported by stronger demand and reduced supply elsewhere in the region.
Total imports are expected to stand at 210.8 million tonnes in 2013, according to the median estimate of the poll of 12 analysts. Imports surged by about 30 percent to a record 234.3 million tonnes last year as users gobbled up cheap foreign supply after steam coal sank to a three-year low of $84 per tonne.
“Chinese coal prices will be soft this year because of the increased supplies coming onstream and weak power demand growth. That will keep the arbitrage window for (most) imports closed,” said Karen Li, an analyst at Nomura Research in Hong Kong.
Thermal coal imports are expected to fall 15 percent from the year before to 154.5 million tonnes in 2013. And while coking coal imports are seen climbing 5 percent to 56.3 million tonnes, that is still a far cry from last year’s 20-percent jump.
Mine consolidation in recent years in the top coal producing provinces of Shanxi and Shaanxi has bolstered their output, while the expansion of mines in Inner Mongolia is also boosting supplies.
Analysts at Macquarie Bank expect Chinese coal production to grow 5 percent, or 192 million tonnes, to 3.9 billion tonnes in 2013. Coal demand, however, is only expected to rise 4.3 percent this year, even as economic expansion gradually gathers pace, it said in a report last month.
With high inventories of around 20 days at power plants and the off-peak demand season starting next month, there is scope for a protracted period of destocking. That means Chinese spot steam coal prices will stay weak for most of the first half, before rebounding around May-June as utilities buy ahead of summer demand.
The median price estimate for spot thermal coal with a heating value of 5,500 kcal/kg NAR at Qinhuangdao port was 655 yuan ($110) a tonne, down 6.4 percent from 700 yuan last year. Prices on the state-backed Bohai-Rim Steam Coal Index are currently at 628 yuan a tonne.
Improvements to China’s coal rail capacity should reduce bottlenecks in bringing supply from coal fields to key customers such as utilities powering huge coastal cities.
Analysts said boosted capacity on the key Daqin, Shenhuo and Houyue railroads, which link coal-rich provinces in the north and northwest regions to eastern coastal ports and coal-consuming provinces in southern China, should ease supply constraints by the second half of 2013.
Capacity will increase by 136 million tonnes in 2013 from the year before to 1.4 billion tonnes, according to estimates by CLSA-Asia Pacific Markets.
But even as China retreats from the seaborne market, economic improvements in Japan, South Korea, Taiwan and India should support international prices. Reduced seaborne supplies, after a slew of mine closures abroad and the shelving of expansion plans in Australia, will also soften the impact on the market of less Chinese buying.
Growth in imports of coking coal to China, which accounts for about 18 percent of seaborne trade, will ease on the back of abundant domestic supplies, as weak steam coal prices prompt some miners to switch to produce more profitable semi-soft coking coal.
Sluggish demand growth for steel, hampered by a clampdown in the real estate market, will also curb appetite for coking coal.
Still, the rise in imports of coking coal to China, albeit at a slower pace than last year, and to other big steel producing countries will tighten the market and buoy international prices.
“As global steel demand recovers in 2013, this should drive an improvement in coking-coal prices back to $180 a tonne over the second half of 2013,” CLSA analyst Ian Roper said in a report late last month.
Hard coking coal is currently trading at about $170 a tonne. ($1 = 6.2328 Chinese yuan) (Editing by Joseph Radford and Simon Webb)