Imports Sliding as China’s Domestic Coal Prices Slump

BRISBANE, Australia - Aug. 13, 2013 - PRLog -- China’s coal imports in June stood at 22.31mt, slipping roughly 5mt from 27.57mt in May and 27.19mt in June last year, according to preliminary figures from customs officials.

YTD tonnages came to 158.39mt, an increase of 13.3% from the same period of last year. The growth rate has narrowed from 20.79% in the first five months following strong imports in Q1.

Imports in the near term will follow the downtrend in recent months, as price falls on the domestic market are set to continue for some time, while major importers are planning significant import reductions, according to various market sources.

China Shenhua, one of the top import players, is to cut down tonnages sharply to ensure sales of its own products improve.

The company received 0.3mt of imports in June, 50% down from the previous month and 70% down from the same month of last year. The company imported 10.7mt in 2012, while Shenhua Group imported 21.54mt, out of China’s import total of 289mt.

More traders are expected to withdraw from the import business, although the number of players has already shrunk nearly one third to 560, from some 800 last year.

It’s understood that imported products are already uncompetitive following sharp price cuts in late June and continued price declines up to mid-July.

By mid-July, the prices from major mines had weakened to RMB570/t ($92.38/t) FOB, basis 5,500kc NAR equivalent to $78/t FOB excluding VAT tax. Prices from smaller producers could be even lower at RMB550/t ($89.14/t) FOB, or $76/t FOB exclusive of tax.

However, the same quality imports from Australia stood at $66-67/t FOB, down from $70/t at the end of June. The Australian cargoes will arrive at $78.50-79.50/t CIF if shipped in panamax vessels, slightly higher than for domestic material.

Import interest is understood to be low if prices are not lower than the domestic FOB by at least $1/t, insiders said.

It’s predicted that international suppliers will have to cut prices continuously to keep in line with the domestic market movement, if they want to continue selling into China.

By mid-July, rumours were spreading that a number of defaults on imports may have emerged amid the price falls and anticipation of further slides. Some of the cancelled cargoes were from Indonesia, which normally uses revocable letters of credit, the sources said.

Under the low market sentiment, traders possessing strong links with power groups were able to lock in deals with them for supply in future months. With the contracts on hand, the players are searching for lower prices on the international market, or simply waiting for their desired prices to emerge.

However, it’s projected that China’s macroeconomic performance may pick up by the fourth quarter, by which time domestic prices as well as imports may see an improvement.

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