Bloomberg has an article
here about a Deutsche Bank report claiming that China could become a net exporter of coal by 2015 as the government slows coal fired generation in an effort to curb pollution. I disagree with this, not because of assumptions about coal demand, but because analysis misses a crucial point about China's interaction with seaborne markets.
The big problem is that the Deutsche assumes that imports are the most marginal part of coal supply are imports, when its in fact high cost domestic supply. A simple illustration of this is the experience of 2012. Coal demand was weak, but imports were incredibly strong as seaborne coal
displaced high cost domestic production. The chart of this shows this through the aggregate of domestically shipped coal and imports, with imports gaining share last year.
The analysis is also hugely fraught with risk by using total Chinese domestic supply and demand numbers. First, a marginal error in demand means that large exports is sudden giant imports. The second problem is that the total supply numbers are not very reliable. For that reason I like to stick with the domestic coastal supply, as the data makes sense and is the most relavent part of the Chinese supply chain for imports.
