China is set to overtake Japan as the world’s largest importer of thermal coal as soon as this year, only three years after China became a net importer of the mineral used to fire power stations, according to an emerging industry consensus.
The speed at which Chinese coal imports are growing is surprising mining companies, traders and policymakers, who had previously not expected China to overtake Japan before 2015.
The closely watched Australia Bureau of Agriculture and Resource Economics this week put China’s net thermal coal imports this year at 98m tonnes, still below Japan, but above South Korea, until now the second-largest importer.
Coal prices in the Australian port of Newcastle, the benchmark in Asia, have risen again to $100 a tonne on the back of buying by China, India and other countries. In Europe, coal prices in Rotterdam for delivery in three months – the benchmark – rose last week to $96 a tonne, the highest since November 2008.
Beijing’s appetite for imported thermal coal bodes well for mining companies such as Xstrata, the world’s largest coal exporter, PT Bumi Resources of Indonesia, Anglo American or US-based Peabody Energy. Commodities traders such as Glencore and Hong Kong-based Noble are particularly well positioned to cash in, executives said.
Greg Boyce, chief executive of Peabody, told investors recently that the world economy was at “the early stages of a long-term supercycle for coal”.
Policymakers are concerned about the impact of rising buying on global energy prices and carbon emissions. Mr Birol said China’s buying would underpin global coal prices, adding: “The increase in coal prices will increase electricity prices and increase the cost of manufacturing.”
The surge in coal imports comes on the back of rising power demand. China relies on coal to produce 80 per cent of its electricity, double the world’s average, according to IEA. The western countries’ energy watchdog forecast that China would add 500 gigawatts of new coal-fired electricity generation capacity between now and 2020, almost double Japan’s current total power generation capacity.
Yingxi Yu, commodities analyst at Barclays Capital Singapore, said that even though China was moving towards more renewable energies, “coal will remain as a primary source of fuel for the foreseeable future, simply because of the stability of supply and the fact that China is pretty rich in coal resources”.
China is already the world’s largest coal producer but domestic supplies can’t meet the growing demand. China’s efforts to consolidate small coal mines may be “keeping a lid on Chinese domestic production”, Ms Yu said.
