China turns to stranded Australian coal to combat power crunch

Written by on October 6, 2021

China is releasing Australian coal from bonded storage, despite a nearly year-long unofficial import ban on the fuel.

It comes as the nation scrambles to ease a power crunch stemming from a coal shortage, according to traders familiar with the matter.

The power crisis in the world’s top consumer of coal is due to strong demand from manufacturers, industry and households, which has pushed prices to record highs and triggered widespread curbs.

An estimated 1 million tonnes of Australian coal had stayed in bonded warehouses along China’s coast, uncleared by customs, since Beijing’s unofficial ban was imposed last October, a trading executive said.

“Some of the Australian coal stuck at Chinese ports started to be released at the end of last month … though many of those [cargo loads] had already been diverted to markets like India,” the trader, based in eastern China, said.

A second trader said the release from bonded storage would start this week.

Top economic planner the National Development and Reform Commission did not immediately respond to a request for comment.

While China has urged top miners to boost output and told power operators to step up coal imports in “an orderly manner” to ease the supply squeeze, it has refrained from directly resuming imports from Australia, formerly its number two supplier after Indonesia.

However, at 1 million tonnes, or the equivalent of just one day of China’s coal imports, the stock’s release would do little to quench the market’s thirst for coal.

“Without resuming Australian coal imports, the supply shortage will be here to stay for some time, as it takes time to boost domestic production after nearly five years of output curbs,” a third Beijing-based trader said.

“I am not optimistic. The shortage will last at least through the fourth quarter and possibly till after February or March, when the heating season ends.

Exports from other key suppliers, such as Russia and Mongolia, had been curtailed by limited rail capacity, while shipments from Indonesia had been hindered by rainy weather, traders said.

That led utility operators such as eastern China’s Zhejiang Energy to bring in the first thermal coal imports from Kazakhstan on Monday, following its first imports of US thermal coal in June and July.

China imported 197.69 million tonnes in the first eight months of 2021, down 10 per cent for the year. But August coal imports rose by more than a third on tight domestic supplies.

To ease the supply strain, China State Railway Group pledged on Tuesday to allot more freight capacity to ensure coal inventories were sufficient for 14.4 days of use at 363 power plants with direct rail access, state media said.

Abhinav Gupta, a dry bulk shipping analyst at Braemar ACM Shipbroking in Perth, said his company could confirm the discharge of Australian coal in China.

“Based on our cargo-tracking system, we can see about 420,000 metric tonnes of Australian coal discharging in China in July and August 2021, which was loaded in 2020. In addition, another 55,000 metric tonnes was discharged in July 2021, which was loaded in May 2021,” Mr Gupta told the ABC.

However, Mr Gupta said it was unclear how the Australian coal had been used, adding that China was looking at multiple sources overseas.

“It is unclear if it has been sent to warehouses for stockpiling or being released to end users, such as power plants,” he said.

“China has been pushing other suppliers to meet its demand. However, there are challenges, such as rains in Indonesia, and Russian coal being more in demand in Europe.”

SOURCE: MSN


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