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China coal imports slump further in May as policies bite

 China's coal imports slumped 41 percent in May from a year earlier to 14.25 million tonnes and were down sharply on April despite industry expectations of a pick-up in seasonal demand, data showed on Monday.

Total imports in the first five months of the year reached 83.26 million tonnes, down 38.2 percent compared with the previous year, according to preliminary data from China's General Administration of Customs.

May's imports were down 28.6 percent on April, according to the data, while Reuters calculations showed that imports were down 40.6 percent compared to May 2014.

Imports normally improve over summer, but analysts said any upturn would be limited despite relatively low inventory levels at thermal power plants, with hydropower likely to meet a large share of the increase in power demand.

"Imports are constantly decreasing compared to last year due to new policies, and the use of new (renewable) energy," said Zheng Nan, an analyst with China's Shenyin Wanguo Securities.

The import data includes lower-grade lignite, a type of coal with lower heating value that is largely supplied by Indonesia.

In previous summers, southern coastal power plants would often turn to foreign markets because of severe transportation bottlenecks, but weaker demand and improved rail capacity means that is unlikely to be a factor this year.

With domestic coal consumption expected to fall around 5 percent this year as a result of the slowing economy, China has been trying to prop up prices by tackling oversupply.

It has urged big domestic producers to cut output and tightened quality inspections at ports with the aim of limiting low-grade foreign supplies.

Benchmark 5,500 kcal/kg spot prices at the port of Qinhuangdao SH-QHA-TRMCOAL inched up 5 yuan ($0.80) to 415 yuan per tonne last week, but they remain 20 percent lower than at the start of the year. ($1 = 6.2035 Chinese yuan)

source: http://af.reuters.com