Due to the domestic production decline, hydropower difficulties, and increased demand for thermal power generation, China's coal imports in August are expected to rise slightly.
Data compiled by the commodity data company Kpler indicates that around 28.95 million tons of thermal coal are expected to arrive at Chinese ports this month, not only higher than the 28.8 million tons in July but also the highest level since May.
As the largest coal importer, producer, and consumer globally, China has increased its coal imports this year due to domestic production decline, hydropower difficulties, and increased demand for thermal power generation. Kpler's data shows that, except for June's 27.63 million tons, China's maritime thermal coal imports have exceeded 28 million tons each month since March. In contrast, during 2022, the imports were below 20 million tons for eight months, with only November surpassing 24 million tons.
The robust demand for imported coal reflects an increase in thermal power generation. The data reveals that China's thermal power generation reached a record 600 billion kilowatt-hours (kWh) in July, higher than the 556 billion kWh in the same period of 2022. However, hydropower generation declined from last year's 146 billion kWh to 121 billion kWh in July.
Besides the increased demand for thermal power generation, a decline in domestic coal production due to coal mine safety inspections is also a primary reason for China's increased coal imports this year. The data shows China's daily coal production dropped to a nine-month low of 12.18 million tons in July, with total coal production decreasing by 6.3% to 375.4 million tons compared to June.
Due to the decline in coal production and rising demand for thermal power generation, domestic thermal coal prices in China have been steadily increasing. SteelHome's assessment of the benchmark price for thermal coal at Qinhuangdao port on August 28 was 835 yuan per ton (about $114.54), which is an 8.4% increase from the low of 770 yuan per ton on June 5.
Recently, after ending the ban on Australian coal imports, China has resumed purchasing Australian thermal coal. Low-energy Australian thermal coal has always been favored by Chinese utility companies. Kpler data shows that since April this year, China has imported over 4.8 million tons of thermal coal from Australia.
According to the commodity price reporting agency Argus, the price of coal from Australia's Newcastle port with 5,500 kcal/kg dropped to $84.35 per ton during the week ending on August 25. This price is not only lower than the previous week's $85.19 per ton but also much lower than the peak of $135.29 per ton at the end of January this year.
Besides, China has been massively importing Indonesian coal in recent months. Indonesian coal, known for its low ash and sulfur content, is often blended with domestic coal in China. Kpler expects China's coal imports from Indonesia in August to reach 18.81 million tons, setting a new high since May.
