Clyde Russell is a Reuters columnist. The views expressed are his own.
LAUNCESTON, Australia – Aug 25 (Reuters) – Something doesn’t quite add up with China’s rising steel production, but falling coal output and imports so far this year.
China’s raw steel output was 480.76 million tonnes in the first seven months of 2014, up 2.7 percent from the same period a year earlier, according to data from the National Bureau of Statistics.
However, imports of metallurgical, or coking, coal used to make steel were down 12.6 percent to 36.01 million tonnes in the first seven months of the year, according to customs data.
Given that imports only meet roughly 10 percent of China’s coking coal needs, it’s essential to look at domestic coal output.
Total coal production in China in the first seven months of the year was 2.163 billion tonnes, a decline of 1.45 percent on the same period in 2013, with July’s output down 1.63 percent from the same month last year, according to data from the China Coal Transport and Distribution Association.
What isn’t clear is the breakdown of thermal to coking coal within those broader production figures.
This means that while overall coal output is lower in 2014, it may be that coking coal’s share of this has risen relative to thermal coal, which would offer an explanation for the mismatch between rising steel output and lower domestic coal output and imports.
However, a closer examination of the figures shows that coking coal output would have to have made major gains to account for the discrepancy.
To produce the 480.76 million tonnes of steel would take about 370.2 million tonnes of coking coal, using the World Coal Association’s average of 770 kilograms of coking coal to one tonne of steel.
Taking away imports of 36.01 million tonnes, this means that domestic coking coal would have to have supplied about 334.2 million tonnes to the steel sector.
China has for the past two years produced coking coal to thermal coal at a ratio of close to 1 to 7.
If this ratio is applied to the 334.2 million tonnes of coking coal the steel industry would have needed from domestic sources in the first seven months of the year, it would suggest total coal output of 2.339 billion tonnes.
This is 176 million tonnes more than has been reported, implying that the ratio of coking coal to thermal coal has dropped to around 1 to 6.5.
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