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China's coal exports increase in January and February despite the risks to outlook

China's coal exports increased 2.1% in the past year, according to official data released on Friday. The import arbitrage was still open, despite the risks that could affect the outlook of imports.

China releases data for both months together to reduce the impact of Lunar New Year which can fall in either month.

Data from the General Administration of Customs shows that imports from January to February were 76.12 millions metric tons. This is up from 74.52million tons the previous year.

Two major industry groups last week called for limits on coal imports from China, especially low-quality coals, due to an oversupplied marketplace. A warm and unseasonably dry winter has affected both the demand for coal as well as domestic prices.

Shenhua, a major coal miner, also suspended its spot imports in order to protect domestic sales from port stocks.

The plan of Indonesia, a major supplier, to begin using its government-set benchmark prices for international transactions on March 1 will create uncertainty for buyers and could cause further imports this month.

Analysts at Guosheng Securities stated in a report that the requirement to use government index – which ranges between $1.5 and $14 higher than the ICI index based on the grade coal – is expected to raise the cost of China’s coal imports.

In a recent note, LSEG analysts stated that this will likely reduce China's coal demand and lead buyers to switch to domestic coal.

Analysts at the China Coal Transportation and Distribution Association predict that imports of coal will drop by 1.9% this year to 525 millions tons, down from a record high in 2024.

Guosheng Securities reported that thermal coal imports fell even more dramatically, falling 4.9% to 385 millions tons due to a weaker yuan as well as a narrowing of import arbitrage.

China has also imposed 15% tariffs on U.S. imports of coal as tensions in trade between the two largest economies increase. Analysts say that shipments from the U.S. make up only a small part of imports, and could be replaced by other foreign suppliers.

According to the Statistics Bureau, China's coal consumption will increase by 1.7% annually in 2024. (Reporting and editing by Christopher Cushing; Colleen howe)

(source: Reuters)