Domestic and overseas coal price spread narrows down the second half of the import coal market

As of November 18, the spot price of Australian BJ coal stood at just $80.4 per ton, dropping approximately $1.0 per ton compared to the previous month. In October, the BJ coal spot price began to fall again, hitting yet another new low. With freight rates at $6.5 and an exchange rate of 1:6.3, the CIF price of BJ coal was around $547.5 per ton, which was roughly $89 cheaper than the Qinhuangdao coal price. This has widened the price gap between Qinhuangdao coal and other markets further.

On one side, this year, major coal producers like the United States have expressed intentions to sell more of their coal to China, contributing to a drop in international coal prices. On the other side, freight costs have remained relatively low, prompting several Chinese utility companies, including power plants, to import coal from American and Colombian suppliers. According to data from the U.S. Energy Information Administration (EIA), U.S. coal production reached 1.1 billion tons in 2011, with exports surpassing 107 million tons. It's projected that the U.S. will export around 125 million tons this year, breaking the 1981 record of 113 million tons, with most of this coal flowing into the Asian market.

Since the start of the year, under the influence of weak macroeconomic conditions, thermal coal consumption has continued to decline. Coal stockpiles at key power companies have been rising steadily and remaining high, while consumption and transit port inventories have also stayed at elevated levels. The influx of imported coal has further exacerbated the sluggishness of China's coal market, leading to continuous declines in coal prices. By August alone, China's cumulative coal imports had reached 185 million tons, a 46.3% increase year-on-year, surpassing the total coal imports of 182.4 million tons in 2011.

The surge in imported coal has been both a boon and a challenge for China's domestic power generation and steel industries. Although there is some demand during the private heating season, it is not expected to provide significant momentum. Before the end of the year, the domestic coal market should remain stable with minimal fluctuations. However, the substantial increase in imported coal could put pressure on domestic coal prices, reducing profits for domestic coal mining companies. Yet, it could also help curb coal prices when they rise excessively.

Looking ahead, as domestic coal prices have plummeted sharply since the second half of the year, the gap between domestic and international coal prices has narrowed. The imported coal market has weakened accordingly. Since July, coal imports have continued to decline. In September, they fell below 20 million tons, reaching 18.63 million tons, a year-on-year decrease of 18.6%. In October, imports remained below 20 million tons. Some analysts predict that the annual coal import volume might stabilize at around 240 to 250 million tons.

In contrast, China's coal exports have been declining. Customs data shows that in October 2012, the export volume of hard coal and lignite was 440,000 tons, a 17% decrease from the previous month. In October, coal exports totaled $68.527 million. From January to October this year, total coal exports amounted to 7.89 million tons, a cumulative decrease of 5.02 million tons from the same period last year, a year-on-year decline of 38.9%; the cumulative export value reached $136.955 million, a year-on-year decrease of 42.7%.

In October 2012, China exported 50,000 tons of coke and semi-coke, completing an export value of $18.714 million. From January to October, the cumulative export of coke and semi-coke was 910,000 tons, a significant drop of 2.2 million tons compared to 3.11 million tons during the same period last year, a year-on-year decrease of 70.8%. The total export value for coke and semi-coke this year reached $401.774 million, a year-on-year decrease of 71.4% compared to the cumulative export value from January to October last year.