China slashes coal imports as coal-generation slumps | RenewEconomy

China slashes coal imports as coal-generation slumps

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The assumption that China coal imports will continue to rise is being shattered by new data showing it has fallen by half, and domestic consumption has also fallen dramatically.

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A cool summer and increased levels of hydro generation has resulted in a significant reduction in coal-generation in China over recent months, but the biggest impact has been on coal imports, which have fallen by half.

New analysis from Deutsche Bank notes the precarious nature of the coal industry even in the world’s most voracious consumer. It notes that even in China, coal is on a downward trend, and it has written down the value of some coal companies in China by an astonishing 92 per cent.

This first graph shows how coal consumption in August was down 11 per cent from the previous year

china coal consumption

The second one is the killer graph of Australian coal exporters. It shows that coal imports into China fell by half in November, and nearly that much in October.

Deutsche Bank expects that could continue for all of 2015, as the government seeks to rebalance domestic supply and demand. “There is no defying the fall,” it notes.

China coal consumption may not rise at all over calendar 2015, and new domestic projects may not be encouraged. To address the plunging cost of coal, the government is likely to focus its measures on restricting imports, with a cut in half the most likely outcome in most of the scenarios mapped by Deutsche Bank.

coal imports

Astonishingly, this has resulted in Deutsche Bank slashing the earnings estimates of some Chinese coal producers by 92 per cent. That is what has happened to China Coal, a producer based in the north with high sulfur content. New environmental protection policies mean that it has to make its coal cleaner, and find new markets in the south.

“These actions will increase its unit cost and put more pressure on its profitability, especially when the coal price is in a downward trend,” Deutsche notes.

 

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7 Comments
  1. Maurice Oldis 6 years ago

    Hellooooo Tonyyyyy!!You have bet our economy on coal!!!!

  2. Ken Dyer 6 years ago

    What a nice graph that is! It seems that little Greggy Hunt’s Emissions Trading Scheme might just work, bailing out the bankrupt coal miners. It makes more sense to leave the coal in the ground than dig it out and plant trees in a vain attempt to capture the carbon the coal, when burnt, would have spewed into the atmosphere.

  3. Glen S 6 years ago

    I have an extremely strong feeling that our government has bet the farm on a sick old nag known as the coal industry. This does not bode well for the health of the economy in the future. We are the Poland of the Asia Pacific region.

  4. John Silvester 6 years ago

    I wonder what the Australian Minerals Council’s spin will be on these numbers.

    • michael 6 years ago

      probably that one year doesn’t make a trend, the previous year was increase yoy, so one year of fall can be extrapolated only if that is your desired outcome… a reasonable position

      • John Silvester 6 years ago

        You’re right to say that a few poor months on its own is in no way proof of a long term decline in imports, only time will tell.

        However, if you take into account recent announcements and initiatives made by the Chinese Government, make coal imports less attractive.

        These include:
        Introduction of a carbon tax in the industrial regions
        Introduction of tariffs on coal imports
        Introduction of restrictions on the import of lower quality coal
        Massive investment in renewable energy generation
        International commitments to reduce carbon intensity of the economy, of which coal is the major contributor
        Directives to reduce coal fired generation in densely populated regions

        In light of these policy changes, continued strong growth in coal imports seems overly optimistic.

        It’s quite probable that this fall in imports is an early indication that these policies are beginning to bite.

        Time will tell.

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