As India promotes domestic usage of coal to cut dependence on imports, China’s imports are on the rise in a contrasting trend. But a billion dollar question is, will China be able to pick up the slack left by India in the world coal demand?
Energy experts are already puzzled over the hardening trend in the global coal market given that China’s imports have not risen enough to make up for the decline in India’s purchase of the fuel from the international market.
Although the market is cheering revival of Chinese coal demand in the short term, how long the rally will hold is anybody’s guess.
China overtook India to become world’s largest coal importer last year as the latter shifted focus to meeting demand of the fuel from domestic sources.
India’s imports dropped 13.4 percent in the first seven months of the year to 105.36 million tonnes, with top supplier Indonesia dropping 9.7 percent to 47.29 million.
The gain in China’s imports in the first seven months of 2017 of 13.6 million tonnes has not been enough to offset the decline of 16.3 million in India’s seaborne purchases.
The different dynamics in the world’s two largest importers of the polluting fuel are largely a reflection of juxtaposing domestic policies, say analysts.
China is curbing domestic coal output and closing down inefficient mines, which, coupled with a decline in hydropower output, has boosted demand for imports.
India is working on a stated policy of reducing coal imports to zero and is boosting domestic production and efficiency of distribution toward that end.
China’s coal imports were 20.8 million tonnes in July, up sharply from 17.9 million in June.
The July data may be slightly revised in coming days as cargoes that arrived in the last few days of the month are factored in, but this won’t change the underlying message that China’s imports are strong, said .
July will be the third month this year where seaborne imports have exceeded 20 million tonnes, taking the year-to-date total to 135.2 million tonnes, up 12 percent from the first seven months of 2016.
The the front-month Newcastle contract reached a high of $102.50 on August 1, its best level since December.
Experts explain that the rise in Chinese demand has largely been for higher grades of thermal coal, such as those most commonly loaded at Newcastle port in Australia, the world’s largest export harbour for the fuel.
Analysts say it is because much of the reduction in India’s imports have been for lower-quality Indonesian coal, which would struggle to find buyers elsewhere. This makes watching China’s imports key for the outlook for prices, since this appears to be driving the market more than India’s slumping appetite for coal, analysts added.
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