World Coal Rally is at Risk from Lower China Imports in August - 2016

Coal and Related Carbon Resources / Exploration, Production, Coal Ash, & Rare Earths

Date posted: 08/19/16

Clyde Russell reports that if you believe that the thermal coal rally this year has been largely on the back of rising Chinese imports, it follows that any sign of moderation in demand in the biggest buyer would raise a red flag of caution. That banner may be in the process of being hoisted, with shipping data suggesting August imports of the fuel used mainly for power generation may be the lowest for six months. Ship-tracking data compiled by Thomson Reuters Commodity Research and Forecasts estimate that 13.07 million tonnes of coal will arrive in China in August, down substantially from the 18.92 million tonnes in July, which was the most so far this year. It is worth bearing in mind that the August figure will likely rise somewhat over the next few days, as ships leaving Indonesia will still have time to reach China by the end of the month. It is possible that some vessels could still depart from Australian ports and make China by the end of August, but they would have to leave by today and steam faster than normal, as the usual voyage time from Newcastle port, the largest export harbor for thermal coal, to southern China is around 18 days. It is also worth noting that the Thomson Reuters data does not exactly match up with Chinese customs data, largely because the Thomson Reuters data is for seaborne coal imports and therefore excludes rail and truck cargoes from countries such as Mongolia and North Korea. But even allowing for some more cargoes to be added into the August arrivals, it does appear likely that China seaborne imports will drop substantially in August, possibly by as much as 5 million tonnes from the July figure. If this is the case, it will hardly be positive for the main Asian coal price benchmarks, which have enjoyed strong gains this year. The Newcastle Weekly Index, the main thermal coal marker, has rallied almost 42% since its year-low in late January to end last week at $67.13 a ton. Read on...