In this list

Near-term seaborne thermal coal market in limbo as China plays its cards

Energy | Coal | Thermal Coal | Electric Power | Emissions | Nuclear | Renewables | Energy Transition | Natural Gas | Oil | Crude Oil | Refined Products | Gasoline

China's climate conundrum: Carbon neutrality 2060 and its implications for fossil fuels


Platts Global Coal Alert

Coronavirus | Coal | Coking Coal

Singapore Coking Coal Conference 2021

Electricity | Coal | Emissions | Electric Power | Renewables

Global renewables grow at fastest pace in 20 years in 2020: IEA

Energy | Coal | Electric Power | Emissions | Renewables | Energy Transition | Natural Gas

Global thermal, coal-fired generation rebound at odds with accelerating net zero pledges

Near-term seaborne thermal coal market in limbo as China plays its cards

Uncertainty looms in the seaborne thermal coal market as suppliers await for any positive indications from China on loosening its policy on imports during the seasonally strong fourth-quarter.

Thermal coal suppliers are a worried lot, especially as there are no other alternative markets which can potentially absorb the excess tonnages.

Seaborne thermal coal prices have been holding strong since the second-half of 2016 mainly due to policy changes in China. Earlier in 2016, China tried to shore up its own ailing domestic market, but things quickly spiraled out of control when Chinese domestic thermal coal prices more than doubled, and end-users began to bear the brunt of high prices.

China has since introduced fresh policies aiming to cool domestic prices, but looks like that has not met with enough success.

Thermal Coal Platts PCC 1 FOB Qinhuangdao 5500 kcal/kg NAR 7-45 day (VAT) Yuan/mt

The price of Chinese 5,500 kcal/kg NAR, which was at Yuan 365/mt FOB Qinhuangdao in January 2016, was assessed by S&P Global Platts on Monday at Yuan 668/mt, well above the Yuan 500-570/mt range Chinese authorities want to maintain.

And even if Chinese utilities want to tap the seaborne market for cheaper cargoes during the winter restocking period, they are deterred by the so-called import quota system in place.

The price of FOB Kalimantan 4,200 kcal/kg GAR, a grade popular across consumers in Asia, has slumped from a high of $51.50/mt seen in February this year to about $37.90/mt as on Monday, according to Platts data. Compared with October last year, the price has slumped by more than 17%.

Yet by the end of Q3, several Chinese importers had fully used up their import quotas, leaving little room for more seaborne trades to take place in Q4.

In the first nine months of 2018, China imported a total of 228.96 million mt of coal, including thermal, coking coal and anthracite, up 11.8% on the year, Chinese customs data shows.


As we enter into the peak winter-restocking period, Chinese authorities are still unrelenting on the import restrictions.

That might spell bad news for seaborne coal suppliers, but can China make do with what they have in terms of domestic production or will they have to eventually tap the seaborne market?

That's a big question, especially when China is also fighting its own battle to curb pollution levels and looking to venture into the cleaner energy space. There have been several inefficient coal mines that have been shut during stringent safety checks and that has curtailed production to a certain extent.

"Chinese thermal coal market should remain largely tight in Q4, as environmental crackdowns, safety checks and potential re-imposition of import restrictions should limit supply," Citi said in its research note.

Last year, China also tried to reduce pollution levels by shifting to cleaner LNG in Q4. LNG imports in the fourth-quarter of last year shot up year on year, but China was still not able to source enough clean fuel to cater to the strong winter demand.

The result: Not only did they have to clamour back to the coal market much sooner than anticipated, but they also had to work through their Lunar New Year holidays to ensure sufficient coal production at their domestic mines.

Will history repeat itself or does China have a better plan this year, learning from their previous decisions?

While most of the Indonesian coal suppliers are confident that China will enter the seaborne market in November, several Chinese buyers are emanating pessimistic views.

Another factor that has helped drive coal prices in the past couple of years has been the supply disruption in Indonesia due to unseasonal rains. Several major producers have said that rains have dented their production in the past few quarters.

The Indonesian government is also taking the coal production numbers quite seriously this year as their currency takes a hit against the strong US dollar and the archipelago looks to boost its export numbers to shore up its revenues.

The government has allowed production of an additional 25 million mt in 2018, taking the actual production target to 507 million mt for the year, but as rainy season usually begins in Q4, will we see another bout of supply disruption?

There are a lot of factors which play a role in dictating the seaborne coal price movements in the near term, but China definitely holds the key.