Bloomberg China’s Coal at Discount, Signaling Import Drop: Energy Markets

May 7 (Bloomberg) -- Coal prices in China are their cheapest in 20 months against the benchmark Australian grades, signaling shipments to the world’s second-largest energy user are poised to fall.

Power-station coal from Qinhuangdao, China’s largest port for the commodity, sells for $23.30 a metric ton less than coal delivered from Newcastle, Australia, the widest gap since September 2008, according to CLSA Asia-Pacific Markets. Prices of supplies from Newcastle reached a 19-month high of $152.90 a ton on April 30.

The price discount “suggests a slowdown in Chinese coal imports” this quarter, Andrew Driscoll, head of resources research at CLSA Asia-Pacific Markets, said by telephone from Hong Kong. “Last year was an exceptional year. In the first half, competing demand for coal in the seaborne market was low and prices at a premium in China provided an incentive for more imports.”

China, the world’s biggest user and miner of coal, boosted purchases from overseas and stepped up domestic production as economic growth of 11.9 percent in the first quarter led to a surge in power demand. The nation’s output reached a record 289 million tons in November, up from 227 million tons a year ago, the National Bureau of Statistics said.

Production climbed to 280 million tons in March, 12 percent more than the 2009 monthly average, according to the bureau’s most recent data.

Qinhuangdao’s coal cost $129.60 a ton upon delivery to southern China, the nation’s manufacturing hub.

Buying Less

European benchmark coal futures for May delivery at Rotterdam have risen 48 percent in the past year to yesterday’s $91.10 a ton. Prices for the June contract on the New York Mercantile Exchanged reached this year’s high of $64.22 on May 4. Prices have gained about 28 percent this year.

China planned to cut imports as of last month as the cost of overseas supplies climbed and domestic output rose, the government said on April 23.

Imports from Australia fell 67 percent to 767,268 tons in February from a record 2.32 million tons in June 2009, according to data compiled by the Australian Department of Foreign Affairs and Trade. Average monthly imports in 2008 were 190,239 tons.

China increased purchases last year to take advantage of lower prices as the global recession sapped demand for commodities worldwide and cut shipping charges. The average Baltic Dry Index, a global benchmark for dry-bulk freight rates, had fallen 59 percent in 2009 from a year earlier. more...