China's July coal imports drop 23% due to abundant domestic supply

Data from the General Administration of Customs showed that China's coal imports in July fell by 23% compared to a year ago, due to a limited demand for imports.

The imports of coal in July were 35.61 millions metric tons. Although down on the previous year, this was a rebound from June's two-year-low as the hotter weather prompted higher air conditioning demands, which supported electricity consumption.

The market will be watching to see if China takes concrete steps in the future to reduce production and curb oversupply at home.

The National Energy Administration issued a document on July 20 calling for inspections of coal mines located in eight provinces. This led to the coking coal price rising by the limit each session, as traders hoped that these inspections would cause supply disruptions.

LSEG coal analyst said that if the NEA were to take such a step, it would present a substantial risk for domestic coal prices, given the possibility of a decrease in local production.

This in turn presents upside risk for seaborne coal prices due to the import price arbitrage dynamics, which is the primary determiner of China's desire for imports.

In a recent report, analysts at the data analytics firm Kpler stated that the NEA Directive had only temporarily boosted imports and prices while the broader fundamentals were pointing in the opposite direction.

The outlook is still negative due to the continued growth of domestic production, increasing renewables and the weakening demand for steel.

Customs data revealed that coal imports for the first seven month of this year were down by 13%, at 257.3 millions tons. (Reporting and editing by Colleen Schmollinger; Christian Schmollinger is the editor)

(source: Reuters)