China's surging coal imports not good news for coal exporters

China's coal imports were astonishingly high in December 2012 at just a shade under 30mt, which is the highest on record.  Thermal coal was the big driver, with coal classified as steam and "other" at incredible 18mt in the month, up from the previous record of 14.4mt in November.  Australian shipments to China were particularly strong at a whooping 6.1mt.

Lignite is not captured with the other categories for some bizzarre reason, but this was also very strong in December at 6.1mt. This bought totally thermal imports to a staggering 161mt in 2012 ( including anthracite from Vietnam and North Korea).  Lignite was an additional 50.4mt on top of this number.

This is bad news from the seaborne thermal market as it suggests that supply is actually strengthening rather than moderating due to low prices. The positive spin on the story is that Chinese thermal coal stocks are still coming down despite massive imports, but this really seems to be a function of extraordinarily cold weather rather than anything sustainable.  So it seems likely that thermal coal prices will not rise from current levels anytime soon.

Coking coal imports were also stronger although not as dramatically as thermal coal.  Given the degree of weakness in the key coking coal importers ex. China, it is perhaps good news that China isn't having to absorb more supply than it currently is.  Seaborne coking coal imports were up from 27.5mt in 2011 to 35.6mt in 2012, which is a good result given the recovery in supply following the Australian floods last year. Supplies from Mongolia were surprisingly down 2mt YoY to 17.9mt, with problems between the Mongolian government and miners causing big problems for producers.

An improvement on coking coal prices vitally depends on a improvement in key buyers ex China, like Japan, Korea and Europe.  While no one is particularly bullish on steel in any of these countries, there are signs that things aren't getting any worse, which may help swing stocking decisions to be more positive for pricing.

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