China's coal consumption to fall y/y in second quarter, improvement expected in second half - industry body

BEIJING (Reuters) - China’s coal consumption is expected to decline in the second quarter from a year earlier, but will see an improvement in the second half of 2020 as Beijing’s stimulus efforts boost demand, an industry body said on Thursday.

FILE PHOTO: Workers operate loaders unloading imported coal at a port in Lianyungang, Jiangsu province, China December 5, 2019. REUTERS/Stringer

The China National Coal Association said industrial and economic activities were unlikely to fully restart in the current quarter due to coronavirus control measures, which would weigh on demand for coal.

“The decline of coal consumption will be narrowed in the second quarter but the oversupply situation in the market will not change, and the downward pressure on coal prices will increase,” the association said in a report.

Chinese authorities have reported dozens of new coronavirus cases since Sunday and have reclassified a city in the northeastern province of Jilin as high-risk, stoking fears of a new wave of infections.

The world’s largest coal consumer used around 870 million tonnes of the fuel in the first quarter, down 6.8% from the same period last year, the report showed.

The power sector’s coal consumption fell 6.8% to 507 million tonnes, while that of the construction sector plunged 24.7% to 65 million tonnes.

Coal production, however, only dipped 0.5% in the first three months of the year to 830 million tonnes, as miners cranked up output in response to Beijing’s call for ensuring fuel supply.

Spot prices of benchmark thermal coal with energy content of 5,500 kilocalories per kg was 481 yuan ($67.78) a tonne on Wednesday, below the “green zone” prices set by the state planner of 500-570 yuan.

The coal association also warned of replacement of coal-fired power with non-fossil fuel sources in the second quarter, as increasing rainfall in southern China will boost hydropower generation.

“In the second half of the year, total coal consumption will see improvement from the first six months as China will implement the policies to boost domestic demand and bring industrial and economic growth to a normal level,” said the coal association, without giving detailed numbers in the estimation.

The National Development and Reform Commission said on Wednesday the country will firmly expand domestic demand and step up investment in both traditional and new infrastructure projects.

Reporting by Muyu Xu and Shivani Singh; Editing by Aditya Soni