China’s Coal Buyers to Cut Shipments as Weak Conditions Persist

(Bloomberg) -- Chinese coal importers are looking to reduce shipments after they lost money on the trade this year. 

Buyers are talking to overseas miners with a view to booking fewer cargoes on long-term contracts from 2025, according to the China Coal Transportation and Distribution Association. Buyers made losses on imports of thermal coal, used by power plants, from their biggest suppliers in Indonesia, Russia and Australia, and from as far afield as Colombia, China’s top trade body said at a briefing on Wednesday.

Record domestic production and imports have created a glut of coal in China that’s proving hard to shift because of the weak economy. Prices have barely budged for months, despite the pressure of peak air-conditioning demand over the summer and the need to stock up for winter heating fuel. The economic uncertainties thrown up by a tight US election, including the threat of trade clashes with an incoming Trump administration, are also fraying nerves among importers.

“We don’t see much fundamental improvement to support prices rising next year,” said CCTD analyst Li Xuegang. 

The association did acknowledge upside risks to its bearish view, though, including the impact of Beijing’s recent efforts to jumpstart the economy. 

The weather is also a wild card, and La Niña-led cold fronts could lift prices in the near-term to 900 yuan ($126) a ton, from their current value of around 850 yuan. How long they remain at that level will depend on the duration of any cold snap, said Li.

Hydropower is also worth watching as the climate becomes more volatile. Production of the key coal substitute plunged in September, after heavy rains over the summer helped generators extend output growth to 11 consecutive months.

And while China’s coal stockpiles are plentiful, the inventory held at coastal power plants is still below the highs seen last November, according to CCTD’s data. That suggests utilities will want to replenish their stocks, although bad weather could hinder the effort. 

“Landlocked mining provinces are likely to slow sending coal to other regions to prioritize local needs,” said Li. 

Other observers expect China’s imports to moderate in 2025. Chinese consultancy Fenwei Energy Information Service Co. is forecasting a year-on-year decline of 4% to 490 million tons, according to analyst Amy Xu.

On the Wire

Markets have priced a significant upgrade to China’s growth in recent weeks after policymakers began to announce monetary and fiscal stimulus measures, but there is some evidence of overshoot, according to Goldman Sachs Group Inc.

The National People’s Congress meeting — expected in the second half of October — has become the next market focus for potential big headline fiscal spending, according to Bloomberg Economics, which continues to rule out additional stimulus for the rest of the year.

Time is running out for China to avoid another debacle in one of its most important markets. Starting Oct. 31, Chinese electric vehicles exported to the European Union will be hit with additional tariffs ranging from 7.8% to 35.3%. 

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