China’s coal prices have soared this year due to domestic supply issues as the country tried to cut overcapacity, but new analysis suggests China’s coal demand will stabilize at around 4 billion tonnes, demand which will be able to be met easily with domestic supply, leading to the eventual phase-out of coal imports.
According to new research from the Coal Strategic Planning Research Institute, part of the China Coal Research Institute, Chinese demand for coal will settle at around 4 billion tonnes per year, which will be well within the range of domestic supply. As a result, the country will begin to start phasing out coal imports altogether over the next few years. This will have massive implications for offshore coal exporters like Australia, who are already feeling the pinch of China’s declining interest.
According to the authors of the report, there was no obvious growth in coal demand or production costs which would explain the recent price increase, rather, government policies intended to combat overcapacity which eliminated more than 200 million tonnes of supply, while cutting annual work days for coal companies from 330 to 276, saw coal output drop 10% subsequently creating a 222 million tonne gap between production and consumption throughout the first three quarters of the year.
High temperatures and transportation issues also added to underlying issues.
But there is a much larger issue at play in China, with coal consumption steadily declining over the past several years. In the first three quarters of 2016 coal consumption decreased by 68 million tonnes, or 2.4%. This is unsurprising considering all that China is doing to ramp up its renewable energy capacity and mitigate the pollution from its coal sector.
The report’s analysis claims that China’s current supply of coal can meet China’s projected 4 billion tonnes of consumption demand, leading to declines in imported coal.
Press release provided courtesy of RenewEconomy