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CRU: tight coal supply in China to continue this year

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World Coal,


According to CRU, China is incapable of meeting its burgeoning national power demands without resorting to burning more coal, undermining the country’s attempts to improve air quality.

Following a visit in May this year to coal infrastructure sites in China, CRU has concluded that environmental policies are in reality supporting the increase in coal prices by restricting output growth and increasing costs of transportation. Chinese coal prices have continued to increase from the start of this year, following strong prices in 2017.

The sites included coal railway stations in Shanxi, a Bohai Rim port in Hebei and a coal wharf in Nanjing. The trip indicated the impact capacity closures, supply-side restructuring and stricter environmental standards are having on the ability for coal producers to lift coal supply during spells of higher coal demand.

The National Energy Administration (NEA) has set a raw coal production target of 3.7 billion t for 2018, which CRU believe will be tricky to achieve. In order to meet this target, monthly output would need to be approximately 330 Mt/m during the remaining months of the year, while production in all of the first five months of 2018 was <300 Mt/m. There is no apparent indication of a large supply increase due to on-going safety and environmental restrictions. CRU believe a growth rate of 4% y/y in 2018 is likely and this will mean coal production will be 2%, or 70 Mt, below the aforementioned production target.

CRU argue that while it is certainly the case that mine capacity cuts during the past two years have been effective in controlling overall production and increasing the profitability of the coal industry, the cuts have not been evenly distributed around the country and most of the new capacity is located in Northwest China.

Recent data reflects this structural change: from 2015 to 2017, total raw coal output in China dropped by 6.5%, however, falls of between 30 – 70% have taken place in central, southern, and eastern provinces such as Chongqing, Jiangxi, Hubei, Hunan and Jiangsu.

Read the article online at: https://www.worldcoal.com/power/23072018/cru-tight-coal-supply-in-china-to-continue-this-year/

 

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China coal news