COLUMN-Pain of drop in China coal imports isn’t evenly shared – by Clyde Russell (Reuters U.S. – July 29, 2013)

Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, July 29 (Reuters) – The sharp drop in China’s coal imports in June helped to finally bring growth in imports closer to that for power output and was validation of the view that inbound cargoes had been unsustainably high.

While a pullback in imports had been expected for several months, the breakdown of the customs data shows the pain hasn’t been evenly spread amongst China’s major suppliers. Total imports in June were 18.037 million tonnes, down 22 percent from May and 19.6 percent from the same month a year earlier.

This was enough to drag the year-to-date growth in coal imports down to 13.9 percent in June from May’s 22.3 percent. The rate is also less than half the 28.7 percent jump in imports achieved in 2012 over 2011.

Part of the reason imports had been strong in the first five months of 2013 was that prices were competitive with domestic producers. Falling domestic prices as demand for power generation eased caught up with imports in June. But it’s not necessarily the higher-cost suppliers that are being squeezed out of the market.

Of China’s major suppliers Australia is still managing to post impressive gains in volumes.

China bought 4.928 million tonnes of coal from the world’s biggest exporter in June, a gain of 31 percent on the same month in 2012, and taking the year-to-date total to 38.362 million tonnes, a gain of 46.5 percent over the same period last year.

Australia has overtaken Indonesia as the top supplier of coal to China, with shipments from the Southeast Asian nation totalling 35.263 million tonnes in the first half, a gain of just 8 percent on the same period last year.

The landed cost of Australian coal was $108.90 a tonne in June, while Indonesian was $80.93.

However, almost 35 percent of the coal shipped by Australia to China in the first half was higher value coking coal, used in steel-making.

But even looking at the customs category of non-coking, bituminous coal, which is mainly used for power generation, and Australia was still a clear winner.

First-half shipments of this type from Australia totalled 21.921 million tonnes, a gain of 35.9 percent, while those from Indonesia were 18.565 million tonnes, up 32 percent.

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