Dry Bulk Market: China’s Coal Imports A Major Factor in the Market

China’s seaborne coal imports have grown by 97.3% during the first five months of 2023, marking a significant shift in cargo flows and demand for dry bulk carriers. In its latest weekly report, shipbroker Intermodal said that “anticipation are high that the current downward momentum in the market will be reversed by the recovery of Chinese demand, however, when we examine the numbers, it becomes evident that Chinese demand for both iron ore and coal is far from weak. The negative trade activity can be primarily attributed to various factors, including the decline in European coal demand, reduced grain export activity, as well as congestion levels returning to normal. Despite these challenges, the overall Chinese demand during Jan-May was positive and resilient”.

According to Mr. Yiannis Parganas, Head of the Research Department with Intermodal, “Chinese steel manufacturers saw a 7.7% increase in iron ore imports during January-May 2023 compared to the same period last year, reaching a total of 480.75 million tons. These figures, provided by the China Iron and Steel Association (CISA), indicate a positive trend in the import of iron ore. In May 2023, Chinese steelmakers imported 96.17 million tons of iron ore, reflecting a 6.3% growth from the previous month and a 3.9% increase year-on-year. However, the average monthly import volume of China in 2023, which stands at 96.15 million tons, is slightly lower compared to the record high averaged imports of 97.5 million tons per month in 2020. Nonetheless, it is still higher than the import level seen in 2021, which averaged 90.7 million tons per month”.

“Looking ahead to the remaining months of 2023, there are certain factors to consider. In the short term, there is a possibility of increased imports due to low stock levels, boosting sentiment in the market. Additionally, the economic recovery may receive further support from additional stimulus measures, which could have a positive impact on overall iron ore demand. However, it’s important to note that if there is a cap imposed on steel production, it could lead to a more cautious approach from buyers in the last quarter of the year. Such a measure may create uncertainties that impact the demand for iron ore, potentially influencing buyer behavior”, the shipbroker said.

Mr. Parganas added that “China’s total seaborne coal imports in the first five months of 2023 amounted to 142,26 million tonnes having reached a record high of 34.32 million tonnes in March. This represents a substantial year-on-year increase of +97.3% compared to 2022 when 72.1 million tonnes were imported. It also marks a significant growth of +45.29% compared to 2021 (94.3 million tonnes). The recent surge in temperatures across the country has led to a substantial increase in electricity demand, necessitating a corresponding rise in power generation. Concurrently, the southern region of China has been adversely affected by a significant decrease in rainfall, resulting in a decline in hydroelectric power generation. Notably, the period from January to May has witnessed the lowest levels of hydroelectric generation since 2015. This circumstance further reinforced the necessity for heightened coal consumption within the region. Recognizing this, the government has actively encouraged stockpiling efforts. Consequently, power plants in the area have accumulated a stockpile of approximately 113 million tonnes as of the end of May. This reserve is deemed sufficient to sustain the region’s energy needs for nearly 26 days”.

“In conjunction with these developments, seaborne thermal coal prices in Asia have experienced a downturn despite the rising Chinese demand. This decline can be attributed to a combination of factors, including diminished demand in Europe and declining prices of liquefied natural gas (LNG). Particularly, Indonesian coal with a calorific value of 4200 kcal/kg (a grade imported mainly from China) has witnessed a significant decrease in price, dropping from $52.5 per tonne on June 12th to the current assessment of $54 per tonne. This stands as the lowest recorded price since April 2021”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide