China to be a Net Importer of Coal

The fact that coal contributes to air pollution and global warming is undisputed. What is worrying is the sheer amount of coal currently being used and how much will be needed in the future. China remains a serious challenge to the West's desire to see global emissions reduced.

ANALYSIS - China May Swing to Net Coal Imports by Year End

HONG KONG - China, the world's top coal producer and consumer, may swing sooner than expected into a net importer of the fuel by the end of 2007, a move that will boost prices and step up competition among Asian energy importers.

Chinese coal output is not growing fast enough to power an economy expanding at an annual rate of more than 10 percent, especially as oil prices are high and Beijing is closing small mines for safety and environmental reasons, analysts say.

"China will be a net importer of coal this year," said Paul Markowski at Global Research Partners.

That view was echoed by international coal traders and producers although some in China were more cautious.

"In the long run, we do believe China will be a net importer, but not this year," said an official at one of the country's top coal producers. "The economy is still very strong. We need enough coal to fuel the economy."

China is also rushing ahead with an ambitious programme of port expansions, to be able to take in larger vessels from overseas coal producers.

This suggests China will be able to absorb some of the huge growth in low quality Indonesian coal output projected for 2007, bullish news for the global coal market and for rival producers in countries such as Australia and South Africa.

South African producers have already benefitted from the drying-up of Chinese exports over the past few months. Indian buyers who rely on Chinese or South African coal told Reuters recently there is no Chinese coal available this year.

Chinese demand is growing as its power capacity expands and generators burn more coal. The trend is likely to continue despite growing domestic worries over the environment as coal remains readily available with a third of world reserves in the Asia-Pacific region.

"Coal is cheaper than oil on a btu (British thermal units) basis...Many companies have dual power generation equipment. With oil prices above US$40 per barrel, they are switching from diesel to coal," Markowski said.

Official data showed Chinese raw coal output climbed 11.9 percent to 2.07 billion tonnes last year -- but Chinese total coal-fired power generating capacity jumped 23.7 percent to 484.05 gigawatts.

Markowski told Reuters Chinese monthly net coal imports might reach as much as 2 million tonnes by the end of this year, partly due to the deficiences of the railway systems in moving coal from the producing north to the consuming south.

Indonesia should be able to supply more coal to China in the near future, partly offsetting smaller anthracite exports from Vietnam following the introduction of export taxes there.

Indonesia plans to boost thermal coal production by about 10 percent in 2007 to 196 million tonnes.

Asia's demand for coal is rising as high oil and gas prices spur more coal-fired plants.

"China will have to buy from everywhere else, competing with India or Japan. I think it is going to be a big problem," a further analyst said.

"Now they will not just stop exporting to Japan and Korea, but they will be competing with Japan and Korea," he said.

Now stop and imagine the environmental implications.