China’s transport bottlenecks boost coal imports
China’s huge appetite for coal to power its booming economy is racing ahead of its capacity to transport the fuel and helping to boost imports.
Exports are about 20pc lower than last year as high prices and strong demand keep coal within the China’s borders.
This is putting renewed pressure on China’s already hard-pressed coal transportation infrastructure. In the first nine months of this year, the volume of coal shipped south along China’s massive eastern seaboard increased by 15.8pc to 348mn t. This has caused a large increase in the cost of shipping coal from the resource-rich north to the energy-hungry south.
Average freight rates between China’s major coal port of Qinghuangdao in Shandong province and Shanghai have risen from 58 yuan/t ($7.76/t) in October 2006 to Yn83/t ($11.11/t) in October 2007.
“There has been a massive increase in the volume being moved,” said a shipbroker based in China. “The total volume being shipped south is now above 300mn t and its set to keep growing,” he added. Southern regions from Shanghai to Guangdong province are the economic power houses of China and are seeing the fastest gross domestic product growth, and associated growth in demand for power.
As demand soars, prices have seen an inexorable rise. Average thermal coal prices in China have climbed from Yn340/t in 2004 to more than Yn520/t today, according to a Shanghai-based coal analyst. The main reason for the increasing price of coal is the transportation bottlenecks and huge demand.
As domestic shipping costs increase, coal in the south has become especially expensive, which increases the incentive to import from Australia or Indonesia. Imports in 2006 increased by about 30pc from 38mnt to 50mn t. For the first seven months of this year, China’s imports exceeded exports by 2.1mn t. The government is playing a clear role in encouraging imports over exports. In January the government cut the export tax rebate and in May Beijing announced that it was removing the 1pc coal import tariff.
Beijing is anxious to secure its own coal as its crude oil reserves are running dry and gas exploration is stalling. Some analysts suggest that the government is actually happy to keep coal prices high in order to encourage exporters to sell to the domestic market. Coal is being positioned to play an even greater part in powering China as the government gives its support to coal-to-liquids, gasification and chemical projects around the country.
Exports of Chinese coal between January and August fell by 19.8pc from a year earlier to 33.53mn t. Most analysts predict that China may be looking at 50mn t of coal exports this year against 63.3mn t in 2006.
Tags: coal, exports