Coal imports mystery shows China’s firm grip on foreign cargoes

China’s coal imports were astoundingly low in December, signaling the government’s insistence on maintaining a tight grip on overseas cargoes and potentially setting the stage for an annual decline in 2020.

Shipments plummeted 73% from a year ago to the lowest in a decade, bucking expectations that import curbs would loosen as the world’s largest buyer looks to cheaper foreign coal to help it battle an economic slowdown.

While some mainland ports delayed cargo clearance to meet annual import quotas, there was little evidence in the run-up to the data of a strict nationwide clampdown similar to the one in 2018, when imports were shut out almost entirely in the final weeks of the year.

“We are surprised by the degree of reduction in China’s coal imports last month, and suspect that cargo timings were deliberately delayed,” said Commonwealth Bank of Australia analyst Vivek Dhar. The risk that imports will now fall from 2019’s levels could weigh on seaborne prices this year, he said.

Global miners track China’s import policy closely as it has a huge influence on demand and prices given that the country uses and produces half of the world’s coal. The strength of its curbs typically vary depending on the government’s objectives of supporting domestic miners or protecting power plants from higher costs.

Analysts had at first predicted that the government would tighten controls on inbound cargoes at the end of the year just as it did in 2018. They then changed course as monthly imports consistently exceeded year-ago levels, forecasting instead that curbs on the country’s most-consumed fuel would be relaxed as economic growth weakened.

The December trade data defied those expectations, with imports sinking to 2.77 million tons, a level not seen since 2008. A customs official on Wednesday confirmed the figure is accurate, and said questions on coal import policy should be addressed to the National Development & Reform Commission, China’s top economic planner. The NDRC didn’t respond to a fax seeking comment.

Clearing Customs

“Two million tons is indeed too low,” said Hui Heng Tan, a Singapore-based analyst at commodities broker Marex Spectron. He had forecast imports at about 16 million tons. “I expect the numbers to move up much higher in the coming months” as the landed coal clears customs, he said.

Wood Mackenzie Ltd. estimates that 15 million to 20 million tons of coal arrived in China last month, suggesting that the accounting for as much as 17 million tons has been delayed to the new year. The extra coal should show up in January or later months, depending on how long it takes to clear customs, said senior consultant Zhai Yu.

Despite a likely rebound this month, Chinese coal imports may shrink 7.9% over 2020, according to Bloomberg Intelligence. Key drivers include the outlook for rising domestic supply as China promotes bigger and more efficient mining operations.

A senior official at China’s top coal association said in November that annual imports of between 200 million and 300 million tons are necessary to support local miners and maintain a trade balance with exporters. At 299.67 million tons, volumes crept in just under that cap last year.

The low December number reflects China’s intent to show that overseas purchases are still under control, said Zeng Hao, an analyst at Fenwei Energy Information Services Co., an independent consulting firm in Shanxi.