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China shuns low-grade coal from Indonesia as imports collapse

by Riah Marton
in Technology
China shuns low-grade coal from Indonesia as imports collapse
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[BEIJING] Indonesia bore the brunt of a sharp fall in China’s coal imports last month, underscoring how Chinese power plants have shifted away from lower-quality fuel due to persistent domestic oversupply.

China’s coal purchases in June plunged 26 per cent from last year to 33 million tonnes, the least since February 2023. The decline was led by a 30 per cent drop from top supplier Indonesia, whose shipments include a higher proportion of low-calorie lignite.

Although record local production has slashed China’s import requirements, the size of the decrease is striking given that electricity demand for air conditioning usually rises at this time of year. Moreover, the figures include relatively resilient purchases of steelmaking coal, indicating an even steeper drop-off in demand for the fuel used in power generation.

“Imports are likely to remain on a downtrend as Chinese power plants have to prioritise long-term trade commitments to domestic miners,” said local pricing agency cqcoal.com, which cited faster adoption of renewables and flagging industrial demand as dragging on prices.

That’s a particular problem for Indonesian exporters. Over the past three years, China has stepped up imports of lignite, or brown coal, from the South-east Asian nation, blending it with higher grades for use in power stations. But the collapse in domestic prices to four-year lows has allowed utilities to source better-quality supplies more cheaply.

Moreover, the government in Jakarta is considering export levies on coal, which will only weaken the fuel’s attractiveness for buyers in China.

Some relief on domestic oversupply could be due. Beijing has warned it may shutter coal mines guilty of producing above permitted levels, in the latest sign that regulators are getting serious about reining in overcapacity across industries.

China’s imports of coking coal for steel, meanwhile, dropped 7.7 per cent year on year to 9.1 million tonnes, although that figure was 23 per cent higher than the previous month. With Australian shipments affected by weather disruptions, the relatively steady demand benefited China’s other big suppliers of higher-grade fuel, notably Mongolia and Canada.

The outlook for China’s beleaguered steel industry remains uncertain, though. While margins have improved at mills, supporting consumption of inputs such as iron ore and coal, government-mandated efforts to shrink steel capacity would ultimately undermine the markets for blast furnace ingredients. BLOOMBERG

Tags: ChinaCoalCollapseimportsIndonesialowgradeshuns
Riah Marton

Riah Marton

I'm Riah Marton, a dynamic journalist for Forbes40under40. I specialize in profiling emerging leaders and innovators, bringing their stories to life with compelling storytelling and keen analysis. I am dedicated to spotlighting tomorrow's influential figures.

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