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Chinese coal imports from Australia reach three-year highs just months after ban lift

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2023-08-21

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Two months after the removal of bans on Australian coal, Chinese imports of coal from Australia surged to their highest levels in three years during July. China had imposed these bans in 2020, but they were lifted on May 18 this year. In this short span, inbound shipments have seen a remarkable increase, with China also boosting its purchases of Russian and Indonesian coal.

China's coal imports remained close to record levels in July, amounting to 39.26 million tonnes, just slightly below June's 39.87 million tonnes but significantly above the average of 37 million tonnes for the first seven months of 2023.

July saw Chinese thermal coal production decline by 6.3% to 377.5 million tonnes, marking a nine-month low. Despite this reduction, China's imports of Australian coal surged to 6.31 million tonnes last month, a notable increase from June's 4.83 million tonnes. These figures, revealed by the General Administration of Customs, highlight the highest imports from Australia in three years. Of these imports, Australia supplied 6.15 million tonnes of thermal coal for power plants and 161,619 tonnes of coking coal for steelmaking.

The demand for high-quality Australian thermal coal has been driven by China's need to cater to heightened electricity consumption during summer, particularly in coastal regions like Guangdong where air conditioning usage surges.

A report from Reuters indicated that the trade value of Australian thermal coal with an energy content of 5,500 kilocalories dropped by over $9 per tonne, matching the price of equivalent quality Chinese coal in Guangdong during July.

Analysts anticipate that Australian coal imports will continue to remain robust throughout the year, assuming no policy changes. This trend is supported by healthy import profits and reduced domestic production due to stringent safety inspections in mines.

Russian coal imports fell to 8.99 million tonnes in July from the record 10.65 million tonnes in June. On the other hand, imports from Mongolia, primarily consisting of coking coal, increased by 13% from June to 5.94 million tonnes.

Despite a slight dip, Indonesian coal imports remained substantial, amounting to 15.83 million tonnes in July compared to 16.32 million tonnes in June.

China's coal imports for the first seven months of the year totaled 261.2 million tonnes, nearly double the amount during the same period in 2022. This increase reflects the necessity for ample coal supply to keep power stations operational, particularly during a hot and humid summer.

S&P Global Commodity Insights projected in June that China's coal imports could potentially reach a record high of 375 million to 385 million tonnes in 2023. Factors contributing to this surge include a base effect from last year's strict COVID-19 restrictions and ongoing heatwaves in China, especially in the southern region impacted by El Niño. These conditions drive higher cooling demands and disruptions in hydropower generation.

The decline in coal production during June and July has intensified China's coal demands at a time when the government has prioritised energy security.

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